Travis County Commssioners Court
December 2, 2003
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Housing Finance Corporation
Let's call to order the Travis County housing finance corporation. 1. Consider results of compliance audit of prime crest and royal crest apartments, and take appropriate action.
>> good afternoon, him harvey Davis, manager for the corporation. And in 1990, the corps issued $5.8 million in bonds for the prime crest and royal crest apartments. They are now called wood wind chase 1 and 2. In early September, I can to the board and reported that the owner had -- had -- was not maintaining the compliance records nor was the owner sending the required compliance reports. And at that time the board authorized our attorney to send a 60-day cure letter to the owner. And so in -- on November the 10th, we went and did an on site audit of the apartments to determine whether they had regained compliance. And I did -- I do want to report that in my opinion they have not regained compliance. The issues that i've found on the onsite audit were that, one, they were not using the -- the correct income certification form. They have to use the form that's in the regulatory agreement. They were not requiring the tenants, they were not north rising the -- notarizing the tenants signature, also required in the regulatory agreement. They were not really maintaining the records to tabulate an accurate percentage of low income and eligible tenants. The main reason for this was they -- they had a change in management and they did not have any records of a lot of vacant units, what status those units were. And then I really found that they had only begun to address the issues in the cure letter in late October. So I went out in early November, so they really -- they really hadn't -- they had not done anything for more than a month and a half. And then their records, even their records that they -- in which they did a tabulation of low income and eligible units showed that they were -- were -- had not, they were -- they were very short of the necessary units to be in full compliance with the regulatory agreement. The -- our policy provides for -- if the owner has not cured -- if after we have sent a cure letter and the owner has not regained compliance after the cure period, then they are -- then I'm to report to the board and to the trustee and to the owner, you know, that this is what we've found and I have sent a copy of this backup material to the trustee. What I am recommending to the board is to -- is to send a second more strongly worded cure letter to the owner, giving him an additional 60 days and the reason for that is in the regulatory agreement, it allows the issuer to -- to allow up to six months to cure a default as long as the owner is diligently working to cure the default. And the reason --
>> you think the -- why do you think the owner is diligently working to cure the default.
>> the reasons are that, one, they have hired a consultant, consultant firm to -- to train the staff there of the -- of the compliance requirements and has -- has begun the process of -- of getting proper record keeping system in place. They have -- and they have reported to me since the audit that they -- that their percentages have improved quite a bit. Of course I need to go out there again and -- and verify that information.
>> well, why don't we --
>> I do believe that they have demonstrated that they are working towards that full compliance --
>> why don't we have cliff to send them a letter basically requesting that they come before us and basically show cause why we should not move to find them in default immediately or grant an additional 60 days to -- to cure as you suggest.
>> okay. I --
>> if you would like to --
>> [multiple voices]
>> sir?
>> you don't want to us eyeball them?
>> I'm happy for you to.
>> if [laughter] -- if they had 60 days and waited auto before they started working on it, this is serious stuff from our perspective.
>> very serious.
>> they got substantial benefits by going this route. We put our reputation on the line. I mean, I think we ought to get in writing exactly what they plan to do to comply and when.
>> all right.
>> it will take two or three minutes to do that.
>> in the cure letter that I -- that I had in the -- in the backup that I was recommending sending them, it did -- it did require them to send a plan within 30 days. I could suggest that we carry this item over to next week and I feel like I could -- I could persuade the owner's representative to come down here and --
>> [indiscernible] the plan.
>> seven days instead of --
>> right.
>> give us -- 30 days, I'm suggesting they ought to have 30 days to work on it. They got -- they had 60 already. So --
>> a little bit more -- I'm suggesting a little bit more serious action by us. Only take five minutes for us in court. But it will take them some time to put together. If they've had 60 days already, I don't know that I would give them 30 more. Just the steps you plan to take and when, right.
>> that's right.
>> we think you ought to be in compliance in 60 days, can you do that? Understand that you are not in compliance 60 days from now, that's two times 60 altogether, our next step will be to take whatever actions we are authorized to take under the regulatory agreement. At some point I think we ought to try to be halghts tougher, even if we're not. I think we outing to act like we are tougher.
>> hard candy christmas.
>> let me ask you a question. Harvey, whenever something like this comes up, I mean, this is -- this project was -- was first financed you said in the early 90s. Do we have a mechanism where we can make sure that if new owners, new management, whatever, comes in, that they are aware? I mean, I'm sure that some of these people say, you know, I didn't really know what I was supposed to do on this, right? Are there a number of --
>> well, no. I mean in -- in this -- this particular complex was purchased by new owner maybe three or four years ago.
>> okay.
>> uh-huh.
>> and they -- they did provide the proper reports. What happened was they defeased the bonds and they -- they were under the impression that because they defeased the bonds that that meant they didn't have any more requirements to -- to rent to low and moderate income tenants. And the -- the regulatory agreement provides that if you pay the bonds off, it's -- it's the later -- when the bond are paid off or 15 years. So they have these requirement, they are still obligated until 2005.
>> so where was the disconnect in what they thought --
>> well, we when they -- you know, as part of a knowledgeable buyer, they understand that they have these restrictions and -- and they are -- I mean, they should have, I guess, in my opinion, they should have good advice from -- from their own counsel saying, you know, you are buying this unit, you are going to have as part of the obligation of -- of owning these apartments, you have to rent to low and moderate income tenants.
>> so they did it, they purchased it three or four years ago.
>> yes.
>> and they were keeping the records.
>> they were keeping the record up until when? Up until the last six months?
>> right. About six months, right. I think they -- when they didn't -- they quit sending us a quarterly report. I think it was June of '03 when we did not get that. Then I inquired and they had changed management companies.
>> so the management company was the one -- the ones that aren't familiar with what the covenants of -- of the financial package was.
>> that's correct.
>> and would we only know that after x amount of months had gone by where we weren't getting what we were supposed to be getting. Or at the time that that new management group came on, were you aware of that? Are we made aware of that?
>> no.
>> shouldn't we? Just so you could run it by someone and say, hey, by the way, I mean, I hope you know -- I mean, I don't know. Maybe this never happens.
>> it's really not our responsibility to tell them their responsibilities as the owners of a tax exempt property like this.
>> I'm not saying that it's our responsibility necessarily. But I'm also saying that, you know, we do have a fiduciary responsibility somewhat to make sure that if somebody knew comes in, say, hey by the way, we have some things that you have to comply with.
>> that's where harvey did come in in terms of the quarterly the report. The minute it didn't come in he made us aware of that and it's not like you find out your kids been truant a year after the fact. Light readily when harvey found out there was something amiss, we sent out a notice saying hello, you have 60 days to cure, let's get with the program.
>> is this the first time this has ever happened where somebody says I wasn't real sure about what I needed to be doing, is this the first time with us -- with the housing finance corporation?
>> I believe in this particular fact situation, yes.
>> okay. Uh-huh. Where they thought because they -- I mean, they really didn't pay off their bonds, they defeased them which is can I have than redeeming the bonds.
>> right.
>> so this is -- this is the first time this particular fact situation occurred that -- judge, if -- if I'm understanding you correctly, would you like me to --
>> I'm going to help you right now.
>> okay, thank you.
>> I move that we ask mr. Davis to ask the manager or owner of this apartment complex to appear before this board next Tuesday, December 9th, at 1:30 in the afternoon, basically to show cause why we should not move to find them in default immediately. And to deliver to us a plan showing us not only that we should not move to find them in default, but show us how they would cure whatever problems exist right now.
>> could I ask a question before you go? I'm not going to be here next Tuesday.
>> yeah.
>> four second, harvey, see what you did. Now your question? I just remembered I'm not going to be here next Tuesday.
>> and can ms. Mays take care of this for you.
>> she will not be here, either.
>> is this some kind of a big holiday that we don't know about? [laughter]
>> it's --
>> it's an important --
>> two weeks from next Tuesday, how's that? You are not trying to help this apartment complex, are you?
>> no, sir, I'm sure not.
>> that's the 16th, isn't it? Getting real close to christmas there. How's that, is that okay? December 16th. The Davis-mays friendly amendment. [laughter] that ought to give them ample opportunity to reduce to writing whatever they want to do. My thinking is in the future we probably ought to act like we are a little bit tougher. The benefit they got it, they got at closing which is when the debt was issued.
>> that's right.
>> we facilitated that to the extent we could. We have some responsibility to the taxpayers, residents of Travis County to make sure that they comply with it, if we can.
>> right.
>> any more discussion? This will be back on December 16th.
>> uh-huh.
>> all in favor? That passes by unanimous vote. 2. Consider approval of two invoices for compliance audits, and take appropriate action.
>> if you will recall, we did change our policies to -- to allow invoicing for staff times to conduct these audits and so I'm asking approval to send them invoices for the prime crest, royal crest audit and for the fort branch landing audit that we have recently done. I have in the backup not only the invoices but the way that I tabulated the hours. I mean, I actually keep a time sheet and tabulate the hours and it's based on our pay and indirect costs and benefits to come up with an hourly rate and then apply that to the number of hours that's spent on these audits.
>> [indiscernible] direct costs we are asking to be reimbursed.
>> yes, sir.
>> I move approval.
>> second.
>> any more discussion? All in favor? That passes by unanimous vote. 3. Approve minutes of board of directors meetings of September 30 and October 7, 2003.
>> September 30th.
>> September 30. What did I say?
>> 20.
>> September 30th. And October 7th.
>> so move.
>> second.
>> all in favor? That passes by unanimous vote.
>> move adjourn.
>> all in favor? That passes by unanimous vote. Now let's call to order the Travis County health facilities development corporation. Only item is 1. Approve minutes of board of directors meeting of October 7, 2003.
>> move approval.
>> all in favor? That passes by unanimous vote.
>> move adjourn.
>> passes unanimously, also.
Last Modified: Tuesday, December 3, 2003 6:52 AM