Travis County Commissioners Court
September 6, 2005
Housing Finance Corporation
Now let's call to order the Travis County housing finance corporation. Item 1 is consider and take appropriate action on the following: a, results of couple nce audit, and, but, options to collect past due annual fees from the parks at wells branch. Now, a is the results of compliance audit at --
>> at the parks at wells branch.
>> harvey Davis, manager for the corporation. I知 here with cliff blunt our attorney and jim prichard who is a county attorney.
>> assistant county attorney.
>> correct.
>> we don't want david to get mad at us.
>> okay, I知 sorry about that. I知 here to report, first of all, on results of a compliance audit I did at the parks at wells branch. This is a 304-unit apartment complex on wells branch boulevard. The corporation issued 17,740,000 in tax exempt bonds in June of 2002. The -- I have two issues that I wanted to bring to your attention as a result of this audit. Although they were in compliance with our low-income tenant leasing requirement which was they had to lease at least 20% of the units to tenants whose income did not exceed 50% of the Austin median income, I did disqualify 15 of the files that I examined. I examined 59 tenant files. I disqualified 15 of these files. The reasons, there were various reasons, but they, in my opinion, were due to not being -- the management not being careful as far as documenting -- doing all the requirements that they have to do to show that the tenants fit the requirements. Such as not all the family members signing income certification, not figuring income in the correct manner so that they were classifying people as lower income when they did not meet those income qualifications.
>> but we still have 90 that met the low-income qualifications?
>> they still met that qualification, yes.
>> 90 did.
>> well, they had to have at least 60 -- 61 units at lower income, and they claimed 105. So I disqualified 15 of those 105 units.
>> so they had 90 that met the low-income --
>> that's exactly right.
>> go ahead. Pardon the interruption. My only pointed was they greatly exceeded the requirement even after 15 disqualifications.
>> that's right. That's right.
>> they are to be applauded for that.
>> then on the eligible tenant leasing requirements, which is 120% of median income, to fit that requirement, which is quite high, they have to 90% of the units. They in their documentation, they said that 257 units were eligible tenant units. 90% of the total units is 372 -- 274 units. So from their documentation, they showed fewer, and that was because they did not classify their vacant units at the time of the audited, there were 28 vacant units, and it's certainly safe to assume that most or all of those vacant units qualify as eligible tenant units. However, they need to go back and review the files and correct their documentation to tell us that yes, those units do qualify as eligible tenant units. So those were the two -- two issues that I have raised during this audit and would request permission to communicate that to them and ask them to make corrective action.
>> so moved.
>> second.
>> questions? Comments? All in favor? That passes by unanimous vote. You will do that in writing, of course.
>> yes, sir.
>> okay.
>> then the second issue is on the annual fee. This is a chdo apartment complex which they are exempt from property taxes. They have not paid our annual fee. This is the third year that they have not paid the annual fee. The cumulative amount that they owe the corporation is $52,440. I have been in communication with garrett carlson who represents the owner. He lives in minnesota. He -- and I have made requests that the board would like to speak directly with him. He said he would be -- also wants to meet with the board, it's just that he has not had a -- not been down here at a time that coordinates with being here on a Tuesday. But he has promised -- and he feels that he is working on a refinancing arrangement that he feels that he will be able to pay all the annual fees and has told me that he would have more detail on the arrangements and come down and meet with the board later this month. So I知 hopeful that we will -- I値l have this back on the agenda and hopefully with some better news as far as more detail when this annual fee will be paid.
>> is the refi of such a nature that it means that they would no longer be utilizing the bonds through us or what's -- give me a tad more information.
>> I have traded phone calls with the underwriter for this group and we haven't spoken, but as I understand it the structure is one I致e seen in some other transactions and it will not affect the financing -- these bonds will stay outstanding. They will actually be bought back by the insurance company and some trust certificates paid out. They kind of change the cash flow to temporarily to allow the apartment project to get back on its feet and so forth. Although I haven't gotten the exact details, my understanding is that we would have to structure this being done around the country in quite a few places right now.
>> is the thought too in terms of forward-looking that in future years they will not have the same kinds of challenges paying this fee because it's like reminding everybody they have tax exempt status, it's chdo, they are not paying property taxes so there are responsibilities that go along with this.
>> that same question, if they are chdo and they do not have to pay property taxes, do we have any estimate of how much stabgsz they were not allowed to pay under the conditions of a chdo for this particular property?
>> [inaudible].
>> I didn't see that.
>> that's what I understand.
>> so $350,000 that they didn't have to pay, otherwise they would have had to pay it. And we're talking about $52,000 for a fee. Somewhere along this line that doesn't make any sense to me. You know -- go ahead, I知 sorry.
>> this is a very nice complex too and, you know, the apartment situation in general, and there is improving and so they should have the means to pay this fee.
>> property tax, you know, $250,000, you know, that's pretty significant.
>> have we made it clear that on our priority list seeing him is number 2, getting the money is number 1? If he is -- if his time is better spent getting us the money, we want to bless that. Not necessarily see him. We want to see him if we need to work out some other options.
>> [inaudible].
>> remind me again what recourse do you really have, do we really have with this? I mean can you lose your chdo status for not complying with all the covenants of the loan? I mean --
>> you can lose your chdo status for failing to comply with the chdo property tax code requirements for being a chdo, and those are I believe it's every three years they are looked at, but it's over a certain period of time you have to be basically reevaluated. I believe it's every three years. But so long as a borrower or property owner meets those khoe toe tkoeurplts, the tax exemption is automatic.
>> so is not paying the fee that we have that basically I mean by allowing this thing to go financed through us, I mean is that grounds for let's get your attention and let you pay $350,000 a year versus paying our 17,350?
>> no, sir, that's not one of the requirements this the property tax code to be in the chdo, to have the chdo designation.
>> all we can do is make you feel shameful. Hopefully. Let's do that. Let's make sure we do that at least.
>> all righty.
>> so do you need anything on that?
>> no, sir.
>> I would --
>> making this report to you.
>> I would send one of those tough letters and just indicate -- if he's three years delinquent, we need to be paid.
>> [inaudible].
>> unless you need a motion. Any objection to that?
>> I will do that, yes.
>> number 2, consider and take appropriate action on the following: a, final report to housing initiative at the lake view amounts. B, a report on the annual fees and property tax owed by agape Austin. And 2-c, request for rental assistance to a housing initiative tenant. In that order.
>> all righty. The -- the lakeview amounts, which has been before the board on many occasions, the bond holder foreclose odd the nonprofit on June 7th of this year, and the new owner is called lakeview nevada, ll c,which is controlled by vest n group headquartered in nevada. My understanding is that the property has become taxable as far as property taxes. They also -- the rental restrictions have ended. The bonds have been liquidated or repaid. And so they -- this is now a market property. They have no requirement to lease to low or moderate income tenants nor do they have requirements to pay the annual fee. Of course, the old owner, agape, still owes substantial amounts of annual fees, and those remain unpaid. And so also there was a long-standing litigation between agape and the appraisal district and the county regarding whether agape qualified for tax exemptions, and the issue revolved around agape never presented a certified financial audit to the appraisal district. After the foreclosure, agape came up with a audited financial statement and so the appraisal district gave them the property tax exemptions for the past. So they -- so the result is that the -- the -- our fees remain unpaid and I don't -- you know, in my opinion there's not much hope of ever recovering any of the annual fees. And the property -- agape has gained their property tax exemptions so that that issue is resolved, and mr. Prichard is here to answer any questions regarding that issue. And the new owners have informed us that they -- they did not want to continue with the housing initiative, which is the program that we started to -- to -- as an alternative to paying the annual fee where they were -- where they offered 10 units to elderly and disabled tenants, and has not responded to our request to at least honor the contract that we had with agape that ran through March of 2006. And so we had tenants at lake view that were stuck, elderly and disabled people that were sort of did not have the means to continue the program once their lease ran out. All the tenants had six-month leases and so the leases were -- ran out at various times. Fortunately where a lot of work by family elder care, they have been able to find alternative housing for all the tenants but one tenant that is still out there.
>> so harvey, how many walk-throughs, in terms of the property tax issues, that has been resolved, it took a while, but there are no back property taxes owed because that all got disposed of, correct?
>> correct.
>> okay. Related to the fees that we are owed, when agape was let out of their obligations because they were foreclosed upon, did agape receive any kind of money in terms of a settlement of all claims, et cetera? Related to this property.
>> my understanding is that the foreclosure was foreclosed on for some portion of the debt owed. Agame did not receive any proceeds from the for closure sale.
>> does agape have any assets?
>> that I don't know, but I would presume no. We do have -- I have not seen the certified audit. I assume we could get a copy of that from the appraisal district.
>> I have made a request to agape for a copy of the audit which they are required to send us as part of that bond agreement. But I致e not received a copy of it.
>> well, then, in terms of when veston took over the obligations of this site, did they proportionately share the grief from this particular venture? Did they get all their money and we're the only ones left holding the bag here or were there still outstanding issues and it's just one of those things of we are left with our proportionate holding our end of the obligation?
>> well, I believe what's happened is that the bonds were issued in 2001, December 2001. And then the property went, you know, from almost the beginning had tremendous financial difficulties. About a year ago, the bond holders sold the bonds to this group, veston. So I presume that veston has acquired the bonds on some greatly discounted amount with the knowledge of this property significant property tax issue sort of as part of the, you know, encumbrances or obligations th-rp inheriting. And then so they are the ones that have decided that it was in their best interest to foreclose on the property, get agape out and go ahead and pay property taxes and that paying property taxes was better than having the rental restrictions and all the other issues that they had with -- being a form housing complex.
>> because they've now switched over to being taxable, when ms.nelda sends out the property tax notes in November, December time fray, are they getting a bill? Because during this calendar year they are now back to property tax roll. So are they going to get a bill?
>> yes. And the appraisal district, I talked with them directly about this issue, they said that the property taxes start to accrue starting June 7th. Not -- not January 1st, 2006.
>> yeah, it was really more of there would be some obligation for whatever time period it was during this calendar year they are going to have a bill.
>> that's right.
>> so our debt did not travel with the siege of the property, I take it.
>> no, the property tax debt, of course went away when the appraisal district granted the exemptions.
>> thought the property tax, but they owed us annual fees by agreement. They were delinquent on those. So we don't get any protection from the future property owner. Of the delinquent fees that were owed for the two years preceding transfer of title.
>> no, sir. Austin agape still has an obligation to pay those delinquent fees, but not the new owner on the fees. They took subject to the [inaudible] but because of the exemption, taxes owed all went away.
>> [inaudible] that's not a small amount of money. And so my question is if veston has no obligation to pay this, what is on somebody's permanent record so that if they, you know, get their act together at some future point, that this $52,000 is not forgotten. They don't get to write it out, put a new identity on it and move forward. There's still an outstanding debt. At least with property taxes, it never goes away. But this is different.
>> at this point it's a contract you'll obligation of Austin agape to the corporation. We can pursue -- as in any dispute for failure to pay, we could pursue a lawsuit to get a judgment and then go through all the normal collection procedures. If you all would like to pursue that, I don't think there is any question that the amount of money is owed. It's just a matter of collect bility.
>> is it on the closing statement? Was the amount of money that was owed Travis County on the closing statement at the time when the transaction was done with veston coming in?
>> no, it was a foreclosure. There wasn't a closing statement. It was just on the courthouse steps.
>> but you still have a -- I mean a transaction, I mean you still have a list of liabilities there whenever you -- whenever you buy out of a foreclosure.
>> [inaudible].
>> taxes -- if agape had not subsequently qualified tore the tax epl shepl sun, the property would have been subject to taxes and veston would have had to pay e taxes. It's because agape subsequent to the foreclosure qualified tore the exemption so those previous taxes are wiped away by the exemption, not by the for closure.
>> well, in what was foreclosed on was the first hrao pb derthat the bond holders had sol the infear year or junior leagues were wiped out by the for closure also.
>> and I would certainly be in favor of litigation for this. I mean this is not -- because if you don't do these things, if we are not more aggressive with this kind of stuff, I mean it's one thing to be in such a low tiered position that we usually find ourselves in because, you know, the lenders are in the first tier position. But otherwise, mean this is just always a gamble. Now, maybe the number of these things that we do is insignificant, I mean, you know, whenever you start talking about these dollars, but pretty soon, I mean you start taking a couple of $50,000 hits, I mean and, you know, somebody, I would think, if litigation -- and in my case or in my line of thinking at in moment, whether it's agape or veston, now, I知 sure veston is going to go hold it, we didn't sign up for that. That's the reason I would want to go to either a title company or somebody that says here's a list of liabilities. And these are things that you are taking on. The point is, cliff, we have somehow got to find a way to give ourselves the opportunity to be more aggressive than just yeah, come over here and everybody just kind of what do you want to do. I mean, you know, we can send harsh letters and all this kind of stuff, but if you don't have some teeth in something, and quite frankly, a lot of people don't like to get into litigation. I mean, you know, we have grounds here for litigation. And, you know, and we have two and a half -- we have one county attorney and two and a half floors of the assistant county attorneys. So let's put them to use and say, you know, let's -- I just think we need to be more aggressive with this. I know that you all are saying hey, you tell us what to do and we'll be as aggressive as the board wants us to be. But I will tell you that I知 not interested in continuing to have these $50,000 fees that are owed us, I mean because, you know, our participation in this, not that they couldn't have gone and done a chdo without us, but the fact of the matter is that we were integral in -- and I will tell you that the original owners out of all these properties, I mean even they they might have declared bankruptcy or whatever, there were great benefits, you know, that was derived from, you know, our participation in this thing. And I don't think that we are being overly, you know, aggressive at this stage. But I mean I think that we sure need to turn up some heat and let people know that this is just not something you are going to do. This stuff gets around pretty quick. If you owe them, go over there and if Commissioners go well, what can we do. I mean I am in favor, I will tell you, as being very aggressive with this, andist attorneys can put their heads together as to who do we have the best shot of going after.
>> second the motion to pursue all legal rights that the corporation has.
>> so moved.
>> that was the motion, right?
>> yes.
>> discussion? All in favor? That passes by unanimous vote.
>>
>> [one moment, please, for change in captioners]
>>
>> ...their lease runs out September 230e, they need some time to get better situation there. Kendra was telling me that they are on the list for the Austin housing authority. That they do believe that they would be able to find alternative housing within six months. And so my request is that the board budget up to $3,000 to help this family. And probably -- and if -- if approved, it would be, you know, providing the 75% of the rent owed on the units, that were being provided through the housing initiative program. The tenant pays 25% of the rent.
>> are you placed on a priority list, if you suffer some sort of disability?
>> they have a priority due to the fact that the mother is over 62 years old. So we are anticipating the wait to be anywhere between four and six months. But this is the last family that's -- that's left not housed and I just want to say the program is great. I used it as a longer term transitional housing program, was able to perm nately and affordablely house quite a few families. But eric and ray lynn kind of cared for each other, their options aren't that great because they both live on her income of $560 a month. He's awaiting his disability due to the results of his head injury. But they kind of care for each other and -- and so they are the last family that's needing to be placed.
>> how many 10?
>> we have 10 units total? Over the months we moved more than 10 families through.
>> second Margaret's motion.
>> okay. Discussion? Two or three thousand dollars. Lets let mr. Davis do a personal letter on behalf of our friends on the Commissioners court requesting priority status for this family. Letter to the Austin housing authority.
>> I will do that, yes, sir.
>> we will see if we have some friends over there, mr. Davis. This is a test tube letter. Any more discussion? All in favor? That passes by unanimous vote. One other item today, that's number 3. That takes care of this one, right?
>> yes, sir.
>> consider and take appropriate action to consider first omnibus modification of documents related to the corporation's multi-family housing revenue bonds, with wade square apartments, series 2005 extending the commitment maturity date and the conversion date for the project.
>> first of all this is the project that -- [indiscernible] there's no fee issues or toto issues here. This is just a project that we financed about two years ago and the -- the lease up period has been slow. September first was the date what we call basically the stabilization period. The property had not leased up sufficiently, so the lenders agreed to a six-month extension of the stabilization date. The bore reor the own -- borrower or the owner needs to start paying the payments. It causes the borrow to start having to make not just interest only patients at the end of construction, but amortized portions of principle. They are going to have to start paying those, but there won't be what they call a resizing. A lot of times stabilization if the property hasn't seized up, they will [indiscernible] they are going to delay that another six months to allow this property a little bit more time to get up to speed. All of the parties at risk, basically the lender, which is j.p. Morgan chase bank, the letter of credit lender and the bond holders are agreeing to this change. So those are the parties at risk financially for this and they have agreed to it and requested it.
>> how does it affect the appropriation?
>> and the corporation has been paid the annual fees timely, on this -- these bonds. Actually, they have paid two years of annual fees.
>> no adverse impact?
>> no, sir.
>> that's why I move approval.
>> second.
>> discussion? No reason why we should not do this, right?
>> no, sir. It's -- it's very -- very routine.
>> all in favor? Passes unanimously.
>> move adjourn.
>> second.
>> all in favor? That passes by unanimous vote. Thank you all very much.
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Last Modified:
Wednesday, September 7, 2005 10:24 AM