title
Presentation, discussion, and possible action regarding the adoption of Agreed Final Orders concerning TwentyFive25 (Bond # MF009, CMTS 2529) and Solaire (Bond # MF011, CMTS 2562)
end
RECOMMENDED ACTION
recommendation
WHEREAS, TwentyFive25 f/k/a The Grove at Trinity Mills (TwentyFive25), owned by 2525 Players Court LLC (2525 Owner), has uncorrected compliance findings relating to the applicable Land Use Restriction Agreement (LURA) and the associated statutory and rule requirements;
WHEREAS, Solaire f/k/a Heritage Square (Solaire), owned by 4753 Duncanville Road LLC (Solaire Owner), has uncorrected compliance findings relating to the applicable LURA and the associated statutory and rule requirements;
WHEREAS, The Finley f/k/a The Highlands (Finley) (Bond MF012 / CMTS 2535), owned by 2359 Highland Road LLC (Finley Owner), had uncorrected compliance findings relating to the applicable land use restriction agreement and the associated statutory and rule requirements;
WHEREAS, 2525 Owner, Solaire Owner, and Finley Owner are related entities, controlled by GVA Pro LLC (collectively known as “Owner”);
WHEREAS, Owner has a history of violations and previously signed an Agreed Final Order on November 24, 2020, agreeing to pay a collective $2,500.00 fully payable administrative penalty for file monitoring and physical noncompliance at TwentyFive25, Solaire, The Finley, and 600 East (Bond # MF014 / CMTS 2519);
WHEREAS, TDHCA identified new findings of noncompliance during its regularly scheduled 2023 file monitoring reviews at TwentyFive25, Solaire, and The Finley, and referred them for an administrative penalty when they were not timely corrected;
WHEREAS, unresolved compliance findings at TwentyFive25 include: failure to provide documentation that household incomes were within prescribed limits upon initial occupancy for 12 units; failure to provide tenant income certification documentation at recertification for one unit; failure to implement required veterans statements in the application form; and failure to post a customized laminated copy of the Tenant Rights and Resources Guide in a common area of the leasing office;
WHEREAS, unresolved compliance findings at Solaire include: failure to provide tenant income certification documentation at recertification for one unit;
WHEREAS, all noncompliance has been resolved for The Finley;
WHEREAS, an Enforcement Committee informal conference was held on May 21, 2024, and Owner agreed, subject to Board approval, to enter into two Agreed Final Orders;
WHEREAS, the Agreed Final Order for TwentyFive25 assesses an administrative penalty of $10,000.00, with a $5,000.00 portion due upon signature and the remaining $5,000.00 subject to subject to probation and forgiveness if 2525 Owner submits full corrections by July 15, 2024;
WHEREAS, the Agreed Final Order for Solaire assesses an administrative penalty of $100.00, and requires Solaire Owner to submit full corrections by July 15, 2024; and
WHEREAS, staff has based its recommendations for two Agreed Final Orders 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 two Agreed Final Orders, the first assessing an administrative penalty of $10,000.00, subject to partial forgiveness as outlined above, for noncompliance at TwentyFive25 (HTC # MF009 / CMTS # 2529), and the second assessing an administrative penalty of $100.00 for Solaire (Bond # MF011 / CMTS # 2562), substantially in the form presented at this meeting, and authorizing any non-substantive technical corrections, are hereby adopted as the order of this Board.
end
BACKGROUND
The three properties listed below (collectively, the Properties) were referred for an administrative penalty during 2024. All were originally acquired by Asmara Affordable Housing, Inc. in 1996, using proceeds from NHP Foundation - Asmara Project Series 1996A Bonds; there were no direct loan funds or tax credits issued by TDHCA. The bonds were then refinanced in 2003 using NHP Foundation - Asmara Project Series 2003 Bonds to refund Series 1996, and to finance capital improvements and necessary repairs. The Properties are each subject to LURAs that were amended and restated in 2003. TDHCA approved sales to the entities listed below in 2017:
|
Property |
Former property name |
Owner |
Units |
Location |
|
TwentyFive25 (Bond # MF009, CMTS 2529) |
The Grove at Trinity Mills |
2525 Players Court LLC |
320 |
Dallas |
|
Solaire (Bond # MF011, CMTS 2562) |
Heritage Square |
4753 Duncanville Road LLC |
112 |
Dallas |
|
The Finley (Bond # MF012, CMTS 2535) |
The Highlands |
2359 Highland Road LLC |
136 |
Dallas |
GVA Pro, LLC (GVA) currently controls three developments, all of which are listed above.
GVA used to control additional properties, but they are reducing their portfolio size, and sold their other TDHCA-monitored properties prior to 2024. Alan Stalcup is the Sole Member and Manager for GVA. He is the founder and CEO of GVA Real Estate Group, based in Austin. Laura Smith is the primary owner contact in CMTS for Solaire and TwentyFive25. Sheila Cruz is the primary owner contact in CMTS for The Finley. Lenette Proctor is the primary contact for the related property management company, GVA Property Management. GVA properties have a history of administrative penalty referrals, failing to submit complete corrective documentation, and failing to respond to Department correspondence. An informal conference was held September 29, 2020, and an Agreed Final Order was signed for a fully payable administrative penalty of $2,500.00 for file monitoring and physical noncompliance at TwentyFive25, Solaire, The Finley (Bond MF012 / CMTS 2535), and 600 East (Bond # MF014 / CMTS 2519). GVA submitted final corrections on October 6, 2020, and the Order was signed in November. A flat administrative penalty without a forgivable portion is unusual. However, the Enforcement Committee determined that an administrative penalty was appropriate despite full corrections because a warning letter was issued in 2018 for a prior penalty referral, and the 2020 referrals that they were considering represented 80% of the owner’s portfolio, all of which had failed to submit any reply to the Compliance Division during the corrective action period. During the 2020 informal conference, owner representatives discussed improvements intended to decrease the likelihood of future violations, including hiring new staff and district management with tax credit experience. All staff at the properties had attended income eligibility and compliance trainings after referral for a penalty, and management was searching for UPCS trainings and information so that they can perform self-inspections. Management had also implemented new software to improve tenant file tracking and recertifications, a biweekly supervisory review of new tenant files via the new software, and was regularly logging in to CMTS to check for TDHCA correspondence and deadlines. GVA made improvements after signing the 2020 Agreed Final Order; but they had one additional administrative penalty referral that was closed informally during the pandemic, and three referrals during 2024.
TDHCA identified new findings of noncompliance during a file monitoring review conducted at TwentyFive25 on February 28, 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 provide documentation that household income was within prescribed limits upon initial occupancy for nine units;
b. Failure to provide a complete Tenant Income Certification for two units; and
c. Failure to implement the 2023 utility allowance.
2. Findings that remain unresolved:
a. Failure to provide documentation that household income was within prescribed limits upon initial occupancy for 12 units. The Bond LURA requires 96 units that are income restricted at or below 50% Area Median Income (AMI), and the remainder must be Eligible Tenants at or below 140% AMI. Of the 12 uncorrected units:
i. Units 1316 and 1607 were designated as 80% AMI households, but this property only has 50% AMI and Eligible Tenant (140% AMI) designations. The 80% AMI level is not applicable, and the households were not screened for eligibility at initial occupancy. Both units are now vacant, and must be re-occupied by qualified households at 50% AMI, and full tenant files must be submitted;
ii. Units 1604, 1805, 314, 316, 514, and 708 had the same noncompliance as above, but these units remain occupied. Owner submitted partial corrections for some of the units, but failed to complete all necessary screening documentation. Owner also submitted corrective documentation re-designating two of the 80% units as market-rate units, but the correct designation is Eligible Tenant, not market-rate, and necessary screening documentation was not submitted;
iii. Units 1806, 913, 914, and 1810 were designated as market-rate units on the Unit Status report at the time of the monitoring review. During the monitoring review, the Department could only identify 89 units designated at or below 50% AMI. Market units are not permitted, and these units should have been occupied by 50% AMI households based upon the dates of move-in. Owner must submit full new tenant files demonstrating qualification for the program. Additionally, if one of these units is re-designated as an Eligible Tenant rather than 50% AMI, owner must submit a full tenant file for a new replacement 50% household;
b. Failure to provide a complete Tenant Income Certification for unit 1814. This unit was designated as a 50% AMI unit on the Unit Status Report at the time of the monitoring review, and the Owner failed to collect an annual recertification. The affected household moved out, and the new household does not qualify at 50% AMI, but can likely be classified as an Eligible Tenant. The Owner must submit a full tenant file for a new replacement 50% household;
c. Failure to implement required veterans statements in the application form; and
d. Failure to post a customized laminated copy of the Tenant Rights and Resources Guide in a common area of the leasing office.
TDHCA identified new findings of noncompliance during a file monitoring review conducted at Solaire on January 19, 2023. The TDHCA Compliance Division referred the following finding to the Enforcement Committee for an administrative penalty, and it remains unresolved:
1. Failure to provide Tenant Income Certification and associated documentation for one unit.
TDHCA identified new findings of noncompliance during a file monitoring review conducted at The Finley on February 14, 2023. The TDHCA Compliance Division referred the following findings to the Enforcement Committee for an administrative penalty, and they were resolved on April 4, 2024, after referral. Both findings related to the same unit.
1. Failure to provide documentation that household income was within prescribed limits upon initial occupancy for one unit; and
2. Failure to provide Tenant Income Certification and associated documentation for one unit.
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, and confusion about the designation of 80%, market-rate, and Eligible Tenant units. Furthermore, the impact of having over-income households or households that are not properly income qualified at TwentyFive25 is less serious than most other properties since its rents are not restricted under the Bond program. Since rents are not restricted, there is less economic impact than is normally the case.
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 at TwentyFive25 for failure to collect complete tenant files to prove eligibility, and for having market-rate households that may potentially exceed 140% AMI, however, as noted above, that economic impact is less serious in this instance because the property does not have rent restrictions. The units should be available for households at the appropriate income levels, however, so there is an issue of unit availability to the correct population. The 2003 LURA amendment made this development 100% income restricted as Eligible Tenants, with 96 of the units set aside for households that income qualify at or below 50% AMI. Per the LURA, the definition of ET is an individual or family with an annual income that does not exceed 140% of the area median income. The Unit Status Report for this property incorrectly designates multiple households as “market”, which is not permitted, and the required number of units at or below 50% AMI was not provided.
4. Efforts made to correct the violations: Owner timely submitted partial corrections, but they were incomplete. They submitted further corrections in response to the administrative penalty referral, but those corrections were also incomplete. Each unit was missing a significant amount of information, and multiple households appear to be leased to market-rate households, which is not permitted. This is a repeated problem, with the Owner submitting corrections, but not ensuring that corrections are fully responsive. During the conference, Owner representatives presented a plan to implement corrective action and prevent future noncompliance, stating that restoring full compliance is their top priority. The plan was short of specifics, and provided no detailed implementation plan to prevent future noncompliance. The primary plan is to sell the properties. GVA states that all three TDHCA properties in their portfolio will be sold this year; The Finley will be sold before this Board meeting, there is a pending Ownership Transfer Request (OTR) for TwentyFive25, and TDHCA staff anticipates receiving an OTR for Solaire soon. There are no additional properties controlled by GVA.
5. Any other matters that justice may require: There is a history of prior penalty referrals, and GVA signed an Agreed Final Order in 2020, as outlined above. The TDHCA Compliance Division asked the Enforcement Committee to move forward with the administrative penalty referrals for TwentyFive25 and Solaire due to a pattern of repeated noncompliance and administrative penalty referrals by the Owner. As noted above, The Finley will be sold prior to this Board meeting. The potential maximum administrative penalty for The Finley was low because there were only two referred issues of file monitoring noncompliance, both relating to the same unit, and both resolved in April 2024. The TDHCA Compliance Division considered that ownership transfer request in consultation with the TDHCA Asset Management Division, and determined that the low potential administrative penalty was not worth delaying an otherwise approvable sale since noncompliance was minimal and fully resolved. Accordingly, TDHCA closed the 2024 penalty referral for The Finley, but notified GVA that the referred noncompliance for The Finley would be considered as an additional factor when the Enforcement Committee deliberated an appropriate administrative penalty amount to recommend for Solaire and TwentyFive25. GVA 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 for TwentyFive25 and Solaire. Owner representatives indicated that they think all of the noncompliance can be corrected by the deadline in the proposed Orders; this suggests that the market-rate units have either been re-occupied by qualified households, or might qualify as Eligible Tenants.
6. Amount necessary to deter future violations: Enforcement Committee Members unanimously agreed that an administrative penalty should be paid for both TwentyFive25 and Solaire. There is a lot of noncompliance for TwentyFive25, but the seriousness is partly mitigated by the fact that there are no rent restrictions. Forgiving a portion of the recommended administrative penalty for TwentyFive25 will provide incentive to comply with the Order. The Enforcement Committee therefore recommends a $10,000.00 administrative penalty for TwentyFive25, with a $5,000.00 forgivable portion in light of these factors. They also recommend a $100 administrative penalty for Solaire, which is the maximum potential administrative penalty for that property. That amount is so small that a forgivable portion does not make sense. Since there are potential upcoming sales for TwentyFive25 and Solaire, both proposed Orders include clauses for how to handle a potential sale.
Owner has agreed to sign two Agreed Final Orders with the following terms:
1. For Solaire, a $100.00 administrative penalty, to be submitted on or before July 15, 2024;
2. For TwentyFive25, a $10,000.00 administrative penalty, subject to partial forgiveness as indicated below;
3. Owner must submit a $5,000.00 portion of the administrative penalty for TwentyFive25 on or before July 15, 2024;
4. Owner must correct all file monitoring violations as indicated in both Agreed Final Orders, and submit full documentation of the corrections to TDHCA on or before July 15, 2024;
5. If Owner complies with all requirements for TwentyFive25 and addresses all violations as required, the remaining administrative penalty in the amount of $5,000.00 will be forgiven; and
6. 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 $10,000.00 is recommended for TwentyFive25, and a $100.00 fully payable administrative penalty in the amount of $100.00 is recommended for Solaire. This will be a reportable item of consideration under previous participation for any new award to the principals of the Owner.