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Presentation, discussion, and possible action on recommendation to debar multiple parties for conduct relating to Plainview II Triplex (HOME 532315 / CMTS 2658)
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RECOMMENDED ACTION
recommendation
WHEREAS, Plainview II (Triplex) (Property), owned by Hale Center Housing Authority (Owner), has uncorrected compliance findings relating to the applicable land use restriction agreement and the associated statutory and rule requirements;
WHEREAS, Hale Center Housing Authority, a Texas public housing authority, and Cindy Carthel, its executive director (the “Responsible Parties”) control the Property;
WHEREAS, the Responsible Parties signed an Agreed Final Order on February 2, 2023, agreeing to correct noncompliance from the March 1, 2022, file monitoring review;
WHEREAS, the terms of the 2023 Agreed Final Order were violated, and the full administrative penalty due under that Order was paid;
WHEREAS, one event of noncompliance remains unresolved, relating to a household in unit 306 that exceeds the income limit;
WHEREAS, Tex. Gov’t Code §2306.0504(b) states that the Department may debar a person from participation in a Department program on the basis of the person's past failure to comply with any condition imposed by the Department in the administration of its programs;
WHEREAS, 10 TAC §2.401(a) defines violations that are eligible for debarment;
WHEREAS, the Responsible Parties failed to correct the above referenced event of noncompliance as required by the 2023 Agreed Final Order within six months of a demand being issued by the Department, a violation of 10 TAC §2.401(a)(6), which states that such failure may be grounds for debarment;
WHEREAS, the Land Use Restriction Agreement on the Property expired August 19, 2024 with unresolved noncompliance as noted above, a violation of 10 TAC §2.401(a)(11), which states that such failure may be grounds for debarment;
WHEREAS, Cindy Carthel participated in an informal conference with the Enforcement Committee on August 29, 2024, regarding the referrals for debarment;
WHEREAS, on September 13, 2024, the TDHCA Executive Director issued a debarment determination notice recommending a 10-year debarment term for the Responsible Parties;
WHEREAS, Responsible Parties did not submit an appeal; and
WHEREAS, staff has based the above debarment term recommendations on the Department’s rules for debarment and an assessment of each and all of the material factors identified at 10 TAC §2.401(j) that are to be considered in determining a recommended period of debarment, applied specifically to the facts and circumstances present in this case.
NOW, therefore, it is hereby
RESOLVED, that a Final Order of Debarment for a term of 10 years for Hale Center Housing Authority and Cindy Carthel, substantially in the form presented at this meeting, and authorizing any non-substantive technical corrections, is hereby adopted as the order of this Board.
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BACKGROUND
Property And Financing Information: The Property is subject to a Land Use Restriction Agreement (LURA) signed by a prior owner in 1994 in consideration for an interest-free loan in the amount of $204,460.00 to build and operate three scattered site single-family homes in Plainview, Hale County, Texas, located at 302 Southeast 4th Street, 304 Southeast 4th Street, and 306 Southeast 4th Street. Each contains four bedrooms. All units were restricted at 50% AMI. The LURA expired on August 19, 2024, and the loan matured on September 1, 2024. The loan has been paid in full.
Responsible Parties In Control: Hale Center Housing Authority and Cindy Carthel are Responsible Parties in Control for purposes of debarment analysis. These terms are an important distinction, determining who should be considered for debarment. Definitions are at Exhibit 1. The Hale Center Housing Authority purchased the property from the original owner on March 17, 2014, and signed an Assumption Agreement, assuming the TDHCA loan and all duties imposed, including operating the Property under the requirements of the LURA. Cindy Carthel is the housing authority’s executive director, and TDHCA’s primary contact. For many years, she was the only staff person; there are a few others now, but they appear to be office assistants and she does not give them authority to work on TDHCA matters. The housing authority’s board is not active, and TDHCA does not have any other contracts with the housing authority.
Extensive Enforcement History: The Responsible Parties signed Agreed Final Orders in 2017, 2020, and 2023 for reporting noncompliance and file monitoring noncompliance identified by TDHCA during the 2016, 2019, and 2022 file monitoring reviews, respectively. The Responsible Parties violated all three Orders, and paid the required administrative penalties as required, including $1,000.00 for violating the 2017 Order, $6,500.00 for violating the 2020 Order, and $5,300.00 for violating the 2023 Order. The administrative penalty amounts assessed in the 2022 and 2023 Orders were the maximum potential amounts.
Debarment Is Discretionary: Per 10 TAC §2.401(a), the following violations are discretionary debarment violations.
Violations Subject To Debarment:
1. Failing to comply with Agreed Final Order: 10 TAC §2.401(a)(6) states that the Department may debar a Responsible Party for “[f]ailing to correct Events of Noncompliance as required by an order that became effective after April 1, 2021, and/or failing to pay an administrative penalty as required by such order, within six months of a demand being issued by the Department.”
On February 2, 2023, Cindy Carthel signed an Agreed Final Order, as the Executive Director for Hale Center Housing Authority, agreeing to correct noncompliance from the March 1, 2022 file monitoring review, as outlined in the Order. Hale Center Housing Authority violated the Order, and TDHCA issued a collection letter on April 28, 2023, demanding an administrative penalty and corrective action within 30 days. It has been more than six months, and the Department has provided multiple opportunities for responsible parties to submit the remaining corrective documentation, but one violation remains unresolved, relating to a household in unit 306 that exceeds the income limit.
2. Having unresolved noncompliance at LURA expiration: 10 TAC §2.401(a)(11) states that the Department may debar a Responsible Party for “Controlling a multifamily Development and failing to correct Events of Noncompliance before the expiration of a Land Use Restriction Agreement, after the effective date of this rule.”
The LURA expired August 19, 2024, and there is unresolved noncompliance relating to a household in unit 306 that exceeds the income limit.
Factors Considered To Determine Recommended Debarment Term: On September 13, 2024, the TDHCA Executive Director issued a debarment determination notice for a 10-year debarment term for the Responsible Parties. There is no required minimum or maximum debarment term. Pursuant to 10 TAC §2.401(j), the recommended period of debarment was based upon the following material factors:
1. Repeated occurrences: The Responsible Parties only own one TDHCA property. They signed and violated three Agreed Final Orders in 2017, 2020, and 2023. The types of noncompliance in the Orders was also repeated, with the Responsible Parties regularly failing to collect basic tenant file components to prove eligibility, failing to properly calculate income, intentionally renting to households that exceed the income limit, and failing to execute lease language regarding required tenant protections.
2. Seriousness of underlying issues: The repeated noncompliance noted above is extremely serious. It was also not accidental, increasing the seriousness of the matter. The original finding for unit 306 related to a household that was nearly twice the income limit, and the replacement household is also over the limit. Failure to ensure that tenants meet income requirements is the most fundamental component of affordable housing. Not screening tenants and/or accepting households that are above the income-limit means that qualified households in the area cannot benefit from this housing. The Responsible Parties intentionally rented to households that did not meet income requirements, and regularly accepted households without fully screening for income and assets. The lease language omissions are also serious since they relate to mandatory tenant protections, and the Responsible Parties repeatedly fail to include that language in new leases.
When questioned during the informal conferences for the Agreed Final Orders noted above and for this 2024 debarment, Ms. Carthel stated that she did not understand TDHCA paperwork requirements. This can sometimes mitigate the seriousness of a penalty referral; however, it does not in this case. Ms. Carthel has attended training, most recently in 2020, and TDHCA has repeatedly provided one-on-one technical support. Furthermore, she is the executive director for this housing authority and three other housing authorities, she administers Section 8 vouchers in multiple counties, and she stated that she controls over 560 owned units. Those are complex programs, all of which require income qualification, so this is not a matter of TDHCA’s programs being overly complex, as Ms. Carthel claims. Instead, it appears to be a matter of priorities; the Responsible Parties only control three units with TDHCA, and compliance is a low priority.
Ms. Carthel has also repeatedly stated that they had difficulty finding large families to rent the three TDHCA units, so they sometimes rent to large households that exceed the income limit. This may have explained some income violations prior to 2020, somewhat mitigating the seriousness of those pre-2020 violations, but it does not explain the Responsible Parties’ continued pattern and practice of renting to households that exceeded TDHCA limits after 2020. The original LURA required units to be rented to large families of five or more members, and Ms. Carthel first indicated during the 2020 informal conference that there was not sufficient area demand by large families. TDHCA reviewed the matter and amended the LURA on May 27, 2020, making occupancy by large families a preference rather than a requirement. The income limitations remained in place. The Responsible Parties then continued to rent to households that exceeded the income limits.
3. Presence or absence of corrective action: During each informal conference, Ms. Carthel has expressed regret about purchasing the property, asked for information about the LURA expiration date, and asked whether it is possible to pay off the loan and leave the program. The Responsible Parties regularly submit late and incomplete corrective action that does not meet minimum requirements, despite repeated technical support from TDHCA staff. They have not implemented any improvements, and made no effort to employ qualified staff or outside management.
The original event of noncompliance identified during the 2022 file monitoring review was for Household 1 that moved in June 1, 2021, with an annual income of $57,697.08, exceeding the income limit of $27,450.00 for a three-person household. TDHCA cited noncompliance for Household 1 on March 1, 2022, but the Responsible Parties renewed the lease anyway in June 2022, repeating the noncompliance. Household 1 then vacated the unit on May 31, 2023, as required by the 2023 Agreed Final Order. The Order also required submission of a new tenant file within 30 days of occupancy, and the unit remained vacant until Household 2 moved into unit 306 on December 5, 2023. The Responsible Parties timely submitted a partial tenant file for Household 2 on January 9, 2024, but failed to verify child support or assets, so TDHCA was unable to verify eligibility. Failure to verify Household 2 at initial occupancy was also a repeated event of noncompliance. The Responsible Parties later submitted additional documentation on August 1, 2024, in response to a debarment informal conference notice. That new documentation certified Household 2 under current circumstances, but the calculated annual income exceeds the limit. Household 2’s current annual income is $42,869.19, exceeding the income limit of $40,500.00 for a five-person household. While Household 2 is closer to the income limit, this is another repeated event of noncompliance.
4. Other material factors: The Responsible Parties do not intend to participate in TDHCA programs in the future, and Ms. Carthel indicates that she is retiring this year. However, debarment remains appropriate when noncompliance is not resolved at the time of LURA expiration. The Department has limited funds, and it is important to debar the Responsible Parties in order to ensure that they do not purchase additional properties or request further TDHCA financing until they improve training, staffing, and supervision procedures, sufficient to ensure future compliance with TDHCA requirements.
Noncompliance for unit 306 remains unresolved as noted above; however, although the Responsible Party has repeated the noncompliance for that unit, Household 2 that moved in December 5, 2023 is only slightly over the income limit, which is an improvement. Additionally, the three units are in good physical condition, with scores of 95, 100, and 89 in their 2015, 2018, and 2021 Uniform Physical Condition Standards inspections, respectively.
The above pattern of noncompliance has caused Hale Center Housing Authority to pay multiple administrative penalties, and it did not earn partial loan forgiveness due to noncompliance. They assumed the loan when they purchased the property in 2014, which included a clause relating to the potential forgiveness of a $23,760.00 portion of the loan upon maturity on September 1, 2024. Such forgiveness was to be processed only in the event that the Owner did not default under the terms of the note or the LURA. For purposes of this analysis, noncompliance can occur under the LURA, but it must be resolved timely, within the corrective action period set by the Compliance Division. As shown above, the Owner did not earn that forgiveness. Owner submitted a final payoff check for $29,010.70 on August 15, 2024, paying the loan in full.
Debarment Appeal: Not applicable.
Accordingly, after consideration of all appropriate factors, including those set out in TEX. GOV’T CODE §2306.0504 and 10 TEX. ADMIN. CODE §2.401, the Enforcement Committee and Executive Director recommend a Final Order of Debarment for a term of 10 years for Hale Center Housing Authority and Cindy Carthel.
Attachments:
1. Excerpts from 10 TAC §2.102, 10 TAC §11.1(30), 10 TAC §2.401(d)(1), and Tex. Gov’t Code §2306.0504