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Presentation, discussion, and possible action on recommendation to adopt Agreed Final Orders assessing an administrative penalty relating to Villa de Reposo San Luis Asherton (HOME 539110 / CMTS 2730) and Villa de Reposo Encinal (HOME 530201 / CMTS 4002)
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RECOMMENDED ACTION
recommendation
WHEREAS, Community Services Agency of South Texas (Owner), controls two active TDHCA multifamily HOME developments, including Villa de Reposo San Luis Asherton (HOME 539110 / CMTS 2730) (Asherton) and Villa de Reposo Encinal (HOME 530201 / CMTS 4002) (Encinal);
WHEREAS, both developments had uncorrected compliance findings relating to the applicable land use restriction agreement and the associated statutory and rule requirements;
WHEREAS, TDHCA identified findings of noncompliance during its regularly scheduled 2024 file monitoring review at Asherton, and referred the noncompliance for an administrative penalty when it was not timely corrected;
WHEREAS, TDHCA identified findings of noncompliance during its regularly scheduled 2024 file monitoring review at Encinal, and referred the noncompliance for an administrative penalty when it was not timely corrected;
WHEREAS, the referred file monitoring noncompliance remains unresolved, including: one income recertification violation at Asherton, one income recertification violation at Encinal, and two initial household certification violations at Encinal;
WHEREAS, TDHCA identified findings of noncompliance during its regularly scheduled 2025 National Standards for the Physical Inspection of Real Estate (NSPIRE) inspection at Asherton, and referred that noncompliance for an administrative penalty when it was not timely corrected;
WHEREAS, the referred NSPIRE noncompliance was fully resolved on June 16, 2025;
WHEREAS, an Enforcement Committee informal conference was held on June 17, 2025, and Owner agreed, subject to Board approval, to enter into Agreed Final Orders assessing an administrative penalty of $1,250.00 for Asherton and $2,250.00 for Encinal; and
WHEREAS, staff has based its recommendations for Agreed Final Orders on TDHCA'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 Agreed Final Orders assessing an administrative penalty of $1,250.00 for Villa de Reposo San Luis Asherton (HOME 539110 / CMTS 2730) and $2,250.00 for Villa de Reposo Encinal (HOME 530201 / CMTS 4002), 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 INFORMATION: Villa de Reposo San Luis Asherton (HOME 539110 / CMTS 2730) (Asherton) received 1999 HOME funds to build and operate 16 units in Asherton, Dimmit County, under the HOME Program. There are eight buildings. Occupancy is limited to special needs households at or below 50% AMI. The HOME LURA was effective in 2000. The federal affordability period has ended, and the state affordability period ends on December 7, 2030.
Villa de Reposo Encinal (HOME 530201 / CMTS 4002) (Encinal) received 2002 HOME funds to build and operate 16 units in Encinal, La Salle County, under the HOME program. There are eight buildings. Occupancy is limited to elderly households at or below 50% AMI. The HOME LURA was effective in 2003. The federal affordability period ends this year, and the state affordability period ends on March 31, 2033.
OWNERSHIP AND PROPERTY MANAGEMENT: Both Asherton and Encinal are controlled by Community Services Agency of South Texas (Owner), a nonprofit corporation. It is the original owner. The nonprofit board of directors includes: Frank Ponce, Adaberto Bosquez, Sylvano Sanchez, Alicia Martinez, Dora Gonzalez, Azalia Garcia, Michael Camarrillo, Rosie Sauceda, and Rosario Morales. David Ojeda Jr. is the executive director, and has control authority. The properties are self-managed.
REFERRED VIOLATIONS SUBJECT TO ADMINISTRATIVE PENALTIES:
1. Asherton - National Standards for the Physical Inspection of Real Estate (NSPIRE). TDHCA conducted a physical inspection on March 4, 2025, and the Compliance Division set a corrective action deadline of July 10, 2025. Owner failed to respond, and all identified noncompliance was referred to the Enforcement Committee (the Committee). Complete corrective documentation was submitted on June 16, 2025, after intervention by the Committee, resolving all noncompliance. A complete list of referred noncompliance is attached to the Agreed Final Order.
2. Asherton - File Monitoring. TDHCA conducted a file monitoring review on November 20, 2024, and the Compliance Division set a corrective action deadline of March 19, 2025. Owner timely submitted corrective documentation, but it was incomplete. The Compliance Division provided a 10-day grace period expiring May 12, 2025. One violation was not resolved before the deadline, and was referred for an administrative penalty: failure to provide tenant income certification documentation for unit 8A when the annual recertification came due. The noncompliance remains unresolved.
3. Encinal - File Monitoring. TDHCA conducted a file monitoring review on November 20, 2024, and the Compliance Division set a corrective action deadline of March 20, 2025. Owner timely submitted corrective documentation, but it was incomplete. The Compliance Division provided a 10-day grace period expiring May 16, 2025. Three violations were not resolved before the deadline, and were referred for an administrative penalty: failure to provide tenant income certification documentation for unit 202 when the annual tenant self-certification came due; failure to certify the household in unit 300 at initial occupancy; and failure to certify the household in unit 400 at initial occupancy. All three units are now vacant, and the violations will remain unresolved until the Owner occupies the units with new qualified households and submits complete tenant files to the Department.
FACTORS CONSIDERED TO DETERMINE ADMINISTRATIVE PENALTY: The Committee analyzed the required statutory factors for determining an appropriate administrative penalty as follows:
1. The seriousness, extent, and gravity of the violations, and whether a hazard is posed to the health, safety, or economic welfare of the public: For the NSPIRE noncompliance at Asherton, the inspection scored 85.8 out of 100, which is a decent score. The violation list attached to the Agreed Final Order is short, and most items are of minimal seriousness, except the exposed electrical wiring in one unit. All NSPIRE noncompliance has been resolved.
For file monitoring noncompliance, failure to screen households at initial occupancy at Encinal is serious, however, it is unlikely that the households were above the income limit since Owner self-limits occupancy to Section 8 households. The recertification noncompliance at both Asherton and Encinal is less serious since those households did qualify at initial occupancy. Prior Agreed Final Orders for Owner have cited the same types of noncompliance, with owner regularly failing to perform screen households at initial occupancy or at recertification.
2. History of previous violations: Owner has a history of file monitoring noncompliance, and previously signed Agreed Final Orders in 2016, 2019, and 2023. Repeated findings of noncompliance include failure to screen households at initial occupancy and failure to perform recertifications.
a. Encinal: Agreed Final Order signed in 2016, agreeing to pay a $1,000.00 administrative penalty, which was to be fully forgivable if Respondent submitted timely corrective documentation. Respondent violated the Agreed Final Order and paid the full $1000.00 administrative penalty as required. All identified noncompliance was ultimately resolved.
b. Encinal: Agreed Final Order signed in 2019, agreeing to pay a $5,000.00 administrative penalty, of which $1,000.00 was paid at signing, and the remainder was forgiven when Respondent attended HOME Compliance Training. All identified noncompliance was resolved.
c. Asherton: Agreed Final Order signed in 2023, agreeing to pay a $7,500.00 administrative penalty, of which $3,500.00 was paid at signing, and the reminder was forgiven when complete corrections were submitted as required by the Agreed Final Order. All identified noncompliance was resolved.
3. Efforts made to correct the violations: Efforts to correct have been minimal. Owner submitted timely file monitoring corrections, but there is no quality control, so the submissions are of poor quality and incomplete. Owner routinely fails to collect required documentation to screen households and verify income and assets at initial occupancy, and at recertification. Owner failed to respond to the NSPIRE inspection until after it was referred for an administrative penalty. Owner regularly misses deadlines. Owner states that its staff is willing to attend training, however, Owner has already attended training on multiple occasions, and has received extensive technical support from TDHCA staff. Despite that, Owner continues to struggle with basic tenant file requirements, stating that TDHCA requirements are too complicated.
4. Any other matters that justice may require: Both properties are located in rural areas; they serve a very low-income population, and occupancy is limited to the elderly and disabled. Both properties are self-managed, and there is insufficient cash flow to hire a professional management company. Occupancy and finances at Asherton are stable, but 13 out of 16 units at Encinal are vacant, which has caused significant negative net cash flow. High vacancy rates have been a persistent problem at Encinal. Owner stated during the informal conference that market factors have contributed to the high vacancy rate, because Encinal is a very small town and has no nearby medical facilities to attract elderly residents. Owner wants TDHCA to materially amend the LURA to remove the elderly occupancy restriction, and increase income limits so that it can collect higher rents, however, it has provided no support for such request. Owner also indicated that it charges maximum TDHCA rents, and that occupancy delays for the 13 vacant units at Encinal are partly because it sends all applicants to the Cotulla Housing Authority to apply for Section 8 vouchers, a process that can take months. All three households currently residing at Encinal are Section 8 voucher-holders, but the property does not have project-based Section 8 funding, so vouchers are not guaranteed. TDHCA's posted income and rent limits are maximum limits, and a persistent 81% vacancy rate suggests that Owner is charging rents that are too high for the local market area in Encinal. The long length of vacancies also suggests that Owner's strategy of waiting for the Cotulla Housing Authority to issue Section 8 vouchers so that Owner can maximize rent collection is not realistic. Accordingly, the Enforcement Committee suggested during the informal conference that Owner should perform a financial analysis to determine the appropriate lower rent amount for Encinal, and then advertise those new rent amounts for new move-ins. Decreasing rents will likely improve occupancy rates, and therefore help the property to cash flow appropriately.
5. Amount necessary to deter future violations: The maximum administrative penalty is low due to the small size of these properties, and because the NSPIRE list of deficiencies was minimal. The Committee acknowledged an element of futility, with Owner's attitude and management style unlikely to change. Meanwhile, the Committee was not satisfied with Owner's explanations for the 81% vacancy rate at Encinal. Owner seems content with the 81% vacancy rate and there was no sense of urgency to implement a market study or make any changes, other than to continually insist - without any supporting evidence - that TDHCA needs to remove the elderly requirement and increase the income limit because there is not adequate market interest.
In light of the above factors, the Committee recommends Agreed Final Orders assessing the maximum administrative penalties of (1) $1,250.00 for Asherton, with full correction and payment due within 30 days of Board approval and (2) $2,250.00 for Encinal. There is no recommended forgivable or probated portion for either property, however, staff recommends the following structure for the Encinal Agreed Final Order, prioritizing market studies and occupancy improvement at Encinal to better serve low-income households. Owner has repeatedly asked TDHCA to remove the elderly requirement and increase income limits at Encinal, but has not taken any reasonable steps to analyze rents, or submit any information to support the request. Owner is unlikely to provide supporting documentation without pressure and incentive.
a. A loan modification and associated LURA amendment are currently pending for Encinal. This loan modification will modify the delinquent loan amount to a single balloon payment due upon the earlier of sale, transfer, refinance, or maturity. At the same time, the LURA term will be amended to match the new loan maturity date of September 1, 2035, and to bifurcate the federal and state affordability periods. This modification cannot be finalized until the 20-year federal affordability period ends in October. Owner must sign, have recorded, and return the loan and LURA modification within 14 days of issuance by TDHCA staff.
b. Owner must submit the following by October 15, 2025, for review and comment by TDHCA staff. The Department may, but is not required, to provide comments and feedback.
i. Traffic reports reflecting why prospective tenants are not moving into this property, including prospective applicant names, the date they expressed interest, and why they are not moving into the property.
ii. Copies of market surveys of other properties in the area, and rental analysis in order to determine appropriate rent amounts.
iii. Copies of proposed marketing materials, and details regarding how marketing will be conducted, including a copy of the property's Affirmative Marketing Plan.
iv. Copy of the property's Written Policies and Procedures.
c. Owner will have until November 14, 2025, to implement the above referenced marketing and rent reductions for new move-ins in order to attract residents.
d. Owner must submit timely quarterly vacancy reports via CMTS on October 10, 2025, January 10, 2026, and April 10, 2026. It must also upload updated traffic reports and marketing summaries for each quarter.
e. If occupancy does not improve to 90% by April 10, 2026, Owner may submit a material LURA amendment request on or before June 1, 2026, including the following:
i. The $2,500.00 application processing fee will be waived by TDHCA if all of the above items are submitted.
ii. Current Unit Status Report.
iii. Written material LURA amendment request following all instructions from the Post Award Activities Guidance and Manual.
f. Owner must correct the file monitoring noncompliance at Encinal by July 1, 2026, by occupying the affected units with qualified households and submitting full tenant files to the Department.
g. Owner must pay the full $2,250.00 administrative penalty no later than July 1, 2026.