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Presentation, discussion, and possible action regarding an appeal of the termination of the Application for Culebra Apartments
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RECOMMENDED ACTION
recommendation
WHEREAS, Culebra Apartments is a 2025 9% housing tax credit Application that requests $2,000,000 for the New Construction of 86 Units in San Antonio, Bexar County;
WHEREAS, the Application’s Development Team includes an entity and an individual, both acting as the Development Consultant, for which the Executive Director has recommended a six-month debarment;
WHEREAS, the affected parties have appealed that debarment, and that appeal is being heard at this meeting; and
WHEREAS, unless that appeal is granted by the Governing Board, the Application would require termination as it contains a debarred party and cannot be changed in accordance with state statute;
NOW, therefore, it is hereby
RESOLVED, that the appeal of the termination for Culebra Apartments is hereby denied.
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BACKGROUND
Culebra Apartments is a 2025 9% housing tax credit Application that requests $2,000,000 for the New Construction of 86 Units in San Antonio, Bexar County. After the Application was submitted, the Executive Director issued a determination that recommends a debarment term of six months for four parties, including Sonoma Housing Advisors, LLC, and James R. (Bill) Fisher. That determination has been appealed, and the appeal scheduled to be presented to the Governing Board at the same meeting as this item. This item does not directly address that debarment. For information concerning the debarment, please refer to the relevant item in the published materials for this meeting.
The Application includes Sonoma Housing Advisors and Bill Fisher listed as the Application Consultant on Tab 42, which is the section of the Application in which the Development Team Members are specified. The Application also specifies that the proposed fee for the Consultant is $149,000. 10 TAC §11.1(d)(38) and (41) define “Consultant” and “Development Team” as:
(38) Development Consultant or Consultant - Any Person who provides professional or consulting services relating to the filing of an Application, or post award documents, as required by the program.
(41) Development Team - All Persons and Affiliates thereof that play a role in the development, construction, rehabilitation, management, or continuing operation of the Development, including any Development Consultant and Guarantor.
Because the Application includes a debarred party as a member of the Development Team, the Department determined that this Application cannot be awarded, as a debarred party may not participate in new Department financing and assistance opportunities until the debarment is fully resolved. Tex. Gov’t Code §2306.6708 prohibits Applicants from changing an Application after the filing deadline except for providing clarifying information or corrective administrative deficiencies, and therefore, there does not appear to be an opportunity to change the Application and somehow remove or replace a debarred party, as the filing deadline has passed. Accordingly, on June 25, 2025, staff terminated the Application.
The Applicant timely appealed this termination. The appeal makes three primary arguments.
First, the appeal argues that the debarment is not in effect until the Board votes to approve the Final Order of Debarment. Because this had not occurred as of the date the Application was terminated, the Applicant suggests that termination was premature; however, in accordance with 10 TAC §2.401(m), until the Responsible Party's Debarment referral is fully resolved, the Responsible Party may not participate in new Department financing and assistance opportunities. The affected parties became ineligible to participate in new financing opportunities as of the date that the Debarment referral was issued, subject to their normal appeal rights.
Second, the appeal suggests that the terminated Application may not represent a “new” funding opportunity, as the Application was submitted prior to the date of the Debarment referral. While “new” is not specifically defined in rule, 10 TAC §2.401(n) stipulates that, “any person who has been debarred is prohibited from participation as set forth in the final order of Debarment for the term of their Debarment.” The Final Order of Debarment presented to the Board for approval at this meeting explicitly states that:
Respondents are barred from future participation in any capacity for all programs administered by the Department for a term ending January 10, 2026. This debarment does not prohibit Respondents from participating in any existing engagements funded through the Department where funds have already been awarded or allocated, nor does it affect any responsibilities or duties thereunder. Supplemental funding applications that would ordinarily be considered by the Department may still be considered by the Board during the debarment term on a case-by-case basis for existing engagements. Any other type of pending or future funding, financing, or assistance application may not be considered during the debarment term. [emphasis added]
Presuming that the Board upholds the Debarment and approves the Final Order without modifications, then the Order clearly stipulates that any “pending or future funding” may not be considered during the debarment term.
The appeal’s final argument warrants the most consideration. The appeal asks the Department to consider what it actually means for a Consultant to be debarred, and what effect this should have on an Application. The Applicant suggests that the Consultant, as a party with no Control of the Application, should not render an Application ineligible even if that Consultant is debarred. The appeal cites 10 TAC §11.202(1)(A) of the Qualified Allocation Plan (QAP), which states that:
(1) Applicants. An Applicant may be considered ineligible if any of the criteria in subparagraphs (A) - (N) of this paragraph apply to those identified on the organizational chart for the Applicant, Developer and Guarantor. An Applicant is ineligible if the Applicant, Developer, or Guarantor:
(A) Has been or is barred, suspended, or terminated from participation in a state or Federal program, including those listed in the U.S. government's System for Award Management (SAM); (§2306.0504)
The Applicant argues that, because the affected entities are not listed on the organizational chart for the Applicant, Developer, or Guarantor, then the debarment of the Consultant does not render the Application ineligible. While this rule does specify one consequence of Debarment, it is not reasonable to presume that all possible ramifications of Debarment are covered by it. The Department’s Debarment rule covers all of the Department’s programs, not just the Housing Tax Credit Program, and is necessarily broader than what is covered specifically in the QAP. In accordance with 10 TAC §2.401(a), related to Debarment, “the Department may debar a Responsible Party, a Consultant and/or a Vendor who has exhibited past failure to comply with any condition imposed by the Department in the administration of its programs” (emphasis added). Following the appeal’s logic, a brand new Application including the debarred Consultant could be submitted after the Final Order of Debarment was approved by the Board, and that Application would not be ineligible unless is specifically included the Consultant on the organizational chart for the Applicant, Developer, or Guarantor. Staff does not believe that this is the intended outcome of debarring a Consultant.
The appeal requests that, should the Final Order of Debarment be approved by the Board, the Department should require the Applicant to remove the debarred entities from the Application so as to allow it to proceed normally. As part of this arrangement, the debarred entities would be prohibited from receiving a fee from the Development. While the Department appreciates this suggestion, it has no available mechanism to enforce such an arrangement, as the payments made to vendors and Consultants from Department-funded Developments are private business transactions that do not require Department approval.
Staff recommends that the appeal be denied.