title
Presentation, discussion, and possible action regarding the adoption of an Agreed Final Order concerning Waters at Sunrise (HOME # 1002231 / HTC # 1002231 / CMTS # 5046)
end
RECOMMENDED ACTION
recommendation
WHEREAS, Waters at Sunrise, owned by Waters at Sunrise, LP (Owner), has uncorrected compliance findings relating to the applicable Land Use Restriction Agreement (LURA) and the associated statutory and rule requirements;
WHEREAS, Owner has a history of violations and previously signed an Agreed Final Order on April 11, 2018, agreeing to a probated and deferred administrative penalty, and requiring corrections of affirmative marketing noncompliance;
WHEREAS, the terms of the prior Agreed Final Order were met and the administrative penalty was fully forgiven;
WHEREAS, TDHCA identified new findings of noncompliance during its regularly scheduled 2023 file monitoring review, and referred them for an administrative penalty when they were not timely corrected;
WHEREAS, unresolved compliance findings include: failure to maintain the specific unit mix required by the HOME LURA, a tenant income certification violation for one unit, and household income violations for two units;
WHEREAS, an Enforcement Committee informal conference was held on May 21, 2024, and Owner agreed, subject to Board approval, to enter into an Agreed Final Order assessing an administrative penalty of $7,500.00, with $3,750.00 due upon signature and the remaining $3,750.00 subject to probation and forgiveness if Owner submits full corrections by July 15, 2024; and
WHEREAS, staff has based its recommendations for an Agreed Final Order on the Department’s rules for administrative penalties and an assessment of each and all of the statutory factors to be considered in assessing such penalties, applied specifically to the facts and circumstances present in this case.
NOW, therefore, it is hereby
RESOLVED, that an Agreed Final Order assessing an administrative penalty of $7,500.00, subject to partial forgiveness as outlined above, for noncompliance at Waters at Sunrise (HOME # 1002231 / HTC # 1002231 / CMTS # 5046), substantially in the form presented at this meeting, and authorizing any non-substantive technical corrections, is hereby adopted as the order of this Board.
end
BACKGROUND
Waters at Sunrise, LP (Owner) is the Owner of Waters at Sunrise (Property), an apartment complex composed of 300 units, located in Williamson County. Of the 300 units at the Property, 237 are restricted by the Housing Tax Credit (HTC) program, and 35 are restricted by the HOME program. Waters at Sunrise, LP is controlled by Housing Initiatives Corporation. Atlantic Housing Foundation, Inc. (AHF), a related entity, is the guarantor. Records of the Texas Secretary of State list the following members and/or officers for Housing Initiatives Corporation: Michael N. Nguyen (president and director), Daniel B. French (secretary and director), and JoAnn Gonzales. The property is self-managed by a related entity, Atlantic Housing Management, LLC. CMTS lists Michael Nguyen as the primary contact for the Owner and property management.
The Property is subject to two LURAs, in consideration for an interest free HOME loan and a HTC award to build and operate the Property. The LURAs were effective in 2015 and 2016, respectively.
AHF currently controls four developments. They have a history of administrative penalty referrals, failing to submit complete corrective documentation, and failing to respond to Department correspondence. During a 2018 informal conference, Owner representatives agreed to attend training, stated that they were hiring additional compliance staff, and stated that they were committed to improving internal processes and accountability to ensure future compliance. AHF made improvements after signing the following three Agreed Final Orders in 2018; however, problems started again in 2021 during the pandemic, and continue today.
1. The 2018 Agreed Final Order for Waters at Sunrise included an administrative penalty of $500.00, which was forgiven when the Owner submitted acceptable evidence of affirmative marketing;
2. The 2018 Agreed Final Order for Redbud Trail (HTF 92041B / Bond MF018 / CMTS 2515) included an administrative penalty of $1,500.00, relating to file monitoring noncompliance including: household income, written policies and procedures, utility allowance, affirmative marketing, and not implementing the Tenant Rights and Resources Guide. Redbud Trail violated that 2018 Order, but paid the full penalty upon demand and submitted final corrections a few days later; and
3. The 2018 Agreed Final Order for Stonebriar Village of Plainview included an administrative penalty of $500.00, which was forgiven when owner submitted acceptable evidence that it had completed exterior painting and driveway repairs.
TDHCA identified new findings of noncompliance during a file monitoring review conducted on October 11, 2023. The TDHCA Compliance Division referred the following findings to the Enforcement Committee for an administrative penalty:
1. Findings that were resolved after referral:
a. Failure to implement required veterans statements in the application form;
b. Failure to post a customized laminated copy of the Tenant Rights and Resources Guide in a common area of the leasing office; and
c. Failure to implement the 2023 utility allowance; and
d. Failure to annually submit HOME rents to TDHCA for approval.
2. Findings that remain unresolved:
a. Failure to provide a complete Tenant Income Certification for unit 6305. File was missing asset verifications;
b. Failure to maintain the unit mix required for the HOME program. Thirty-five of the 300 units at the property are restricted for the HOME program, including 11 one-bedroom units. At the time of the monitoring review, HOME households only occupied eight of the required 11 one-bedroom units. The restriction is not associated with specific units, and the number of required units can float;
c. Failure to provide documentation that the household income for one-bedroom unit 14105 was within prescribed limits at initial occupancy for a HOME household at or below 80% of Area Median Income (AMI); and
d. Failure to provide documentation that household income was within prescribed limits upon initial occupancy for unit 16205. The file did not include verification of employment income for the head of household.
Owner participated in an informal conference with the Enforcement Committee on May 21, 2024. The Enforcement Committee analyzed the required statutory factors for determining an appropriate administrative penalty as follows:
1. The seriousness, extent, and gravity of the violations: There were no health and safety violations, and no evidence of fraud, waste, or abuse. Accordingly, the referral is less serious when compared to other types of referred noncompliance, and most of the referred noncompliance relates to record-keeping and organizational problems. However, not maintaining the HOME unit mix and failing to occupy HOME units as required for an extended period is a serious violation for the HOME program, and a potential event of noncompliance under the loan documents.
2. Hazard posed to the health or safety of the public: There are no hazards posed for health or safety.
3. Hazard posed to the public’s economic welfare: There are potential economic impacts for failure to collect complete tenant files to prove initial eligibility. Additionally, there are serious economic impacts with not having enough units restricted at the correct levels. There were also potential economic impacts from not implementing a utility allowance, however, the actual impact was limited since the noncompliance is now corrected, and it did not cause gross rent overcharges.
4. Efforts made to correct the violations: Owner failed to submit a response to the Compliance Division for this monitoring review. This is a repeated problem, with the Owner not responding fully or timely to deadlines set by Compliance, but quickly submitting corrections after referral for a penalty. During the conference, Owner representatives stated that their policy was for a single staff member to be responsible for uploading corrections to TDHCA. That person failed to submit corrections in response to the corrective action deadline, and then submitted incomplete documentation in response to the administrative penalty referral. She is no longer with AHF. The Enforcement Committee noted that this is a risky strategy, and owner representatives admitted that there was no chain of supervision for reviewing corrections, or managerial oversight of the deadline. They have a new management team, all hired during the fall and winter of 2023, and they implemented changes this month, including a shared calendar for TDHCA deadlines to be handled by the management team, which includes the Director of Property Management for AHF, Associate Director of Property Management for AHF, and the Compliance Manager for AHF. They will share responsibility for ensuring timely responses to TDHCA deadlines, and will meet every Monday to discuss the calendar and upcoming deadlines. Additionally, the Compliance Manager for AHF will double-check all corrective documentation from the site prior to uploading corrections to TDHCA going forward. The Enforcement Committee thought the plan was adequate, however, they noted that the primary CMTS contact, Michael Nguyen, does not respond to any correspondence, and defers all responses to staff. Enforcement Committee members were concerned that if there is not strong supervision from ownership (i.e. Mr. Nguyen), changes discussed by the new management team may not succeed long-term, especially if there is additional staff turn-over.
5. Any other matters that justice may require: The property is required to comply with federal requirements, and has not occupied the required number of HOME units. There is a history of prior penalty referrals, and AHF signed three Agreed Final Orders in 2018, as outlined above. The TDHCA Compliance Division asked the Enforcement Committee to move forward with this administrative penalty referral due to a pattern of repeated noncompliance and administrative penalty referrals by the Owner. AHF currently controls fewer than five developments, so they are not eligible for debarment consideration based upon repeated violations in a portfolio, but an administrative penalty is appropriate. Owner representatives indicated that they think all of the noncompliance can be corrected by the deadline in the proposed Order.
6. Amount necessary to deter future violations: Members unanimously agreed that the administrative penalty needed to be high enough to get the owner’s attention so that they correct the noncompliance and make operational changes to prevent future noncompliance. There are multiple uncorrected file monitoring items, but members found it significant that there is no physical noncompliance, and that the property’s most recent physical inspection scored a 95 out of 100. Forgiving a portion of the recommended administrative penalty will provide incentive to comply with the Order. The Enforcement Committee therefore recommends a $7,500.00 administrative penalty, with a $3,750.00 forgivable portion in light of these factors.
Owner has agreed to sign an Agreed Final Order with the following terms:
1. A $7,500.00 administrative penalty, subject to partial forgiveness as indicated below;
2. Owner must submit a $3,750.00 portion of the administrative penalty on or before July 15, 2024;
3. Owner must correct all file monitoring violations as indicated in the Agreed Final Order, and submit full documentation of the corrections to TDHCA on or before
July 15, 2024;
4. If Owner complies with all requirements and addresses all violations as required, the remaining administrative penalty in the amount of $3,750.00 will be forgiven; and
5. If Owner violates any provision of the Agreed Final Order, the full administrative penalty will immediately come due and payable.
Consistent with direction from the Department’s Enforcement Committee, a probated and, upon successful completion of probation, partially forgivable administrative penalty in the amount of $7,500.00 is recommended. This will be a reportable item of consideration under previous participation for any new award to the principals of the Owner.