PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS
CHAPTER 10. UNIFORM MULTIFAMILY RULES
SUBCHAPTER I. PUBLIC FACILITY CORPORATION COMPLIANCE MONITORING
The Texas Department of Housing and Community Affairs (the Department) proposes amendments to 10 TAC Subchapter I, Public Facility Corporation Compliance Monitoring, §10.1103. The purpose of the proposed amended rule is to provide compliance with Tex. Gov't Code §2306.053. The proposed amended rule codifies requirements on which Public Facility Corporation multifamily residential developments are required to submit audit reports to the Department by June 1 of each year.
FISCAL NOTE. Mr. Bobby Wilkinson, Executive Director, has determined that, for each year of the first five years the amendment to the rule is in effect, enforcing or administering the amendment does not have any foreseeable implications related to costs or revenues of the state or local governments.
GOVERNMENT GROWTH IMPACT STATEMENT. Mr. Wilkinson also has determined that, for the first five years the amendment would be in effect:
1. The proposed amendment to the rule will not create or eliminate a government program. The proposed amended rule provides an assurance that required monitoring requirements tasked to the Department are clearly relayed to Responsible Parties of Public Facility Corporations and their Sponsors.
2. The proposed amendment to the rule will require a change in the number of employees of the Department; the Compliance Monitoring Division will gain two additional full time employees through 2025.
3. The proposed amendment to the rule will not require additional future legislative appropriations.
4. The proposed amendment to the rule will result in neither an increase nor a decrease in fees paid to the Department;
5. The proposed amendment to the rule will create a new regulation; which is created and codified because of HB 2071.
6. The proposed amendment to the rule will not repeal an existing regulation; but will expand the existing regulations on this monitoring activity because the amendment is necessary to ensure ongoing compliance with HB 2071 and for the Department to amend rules to codify monitoring applicability.
7. The proposed amendment to the rule will increase the number of individuals subject to the rule's applicability because the rule is codifying that all Public Facilities Corporations must submit an annual audit to the Department.
8. The proposed amendment to the rule will neither positively nor negatively affect this state's economy.
PUBLIC BENEFIT/COST NOTE. Mr. Wilkinson also has determined that, for each year of the first five years the amendment to the rule is in effect, the public benefit anticipated as a result of the action will be clarification of the audit report requirements for PFC multifamily residential developments. There will be a nominal economic cost to PFC entities required to comply with the amendment to engage in services with an independent auditor.
ADVERSE IMPACT ON SMALL OR MICRO-BUSINESSES OR RURAL COMMUNITIES. The Department has determined that there will be no economic effect on small or micro-businesses or rural communities because it applies to all Public Facilities Corporation multifamily residential developments regardless when approved.
REQUEST FOR PUBLIC COMMENT. All comments or questions in response to this action may be submitted in writing from August 9, 2024, through September 9, 2024. Written comments may be submitted to the Texas Department of Housing and Community Affairs, Attn: Wendy Quackenbush, Rule Comments, P.O. Box 13941, Austin, Texas 78711-3941, by email wendy.quackenbush@tdhca.texas.gov. ALL COMMENTS MUST BE RECEIVED BY 5:00 p.m. Austin local time, September 9, 2024.
STATUTORY AUTHORITY. The proposed amendment is made pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules.
Except as described herein the proposed amendment affects no other code, article, or statute.
§10.1103.Reporting Requirements.
The following reporting requirements apply to all Developments
owned by a Public Facility Corporation (PFC), subject to Sections
303.0421 and 303.0425 of the Texas Local Government Code, and not
eligible under Section 10(b) or (c) of [to be grandfathered
under previous law pursuant to the criteria established by]
House Bill 2071, 88th Texas Legislative Session, effective June 18,
2023, (the Act) for continuation of the former law in effect
prior to the effective date of the Act. Pursuant to Section 10(d)
of the Act, all Developments owned by a PFC as described in Tex. Local
Gov't Code §303.0421(a), and with respect to which an exemption
is sought or claimed under §303.042(c) - regardless of when the
Development was acquired, approved, or occupied - must submit an Audit
Report in accordance with §303.0426(b) as described below.
(1) No later than June 1 of each year, the Public Facility User will submit to the Department an Audit Report from an Auditor, obtained at the expense of the Public Facility User. Concurrently with submission of the Audit Report, the Operator will complete the contact information form available on the Department's website. For Developments eligible for continuation of the former law in effect prior to June 18, 2023, the first Audit Report (due no later than December 1, 2024), will satisfy the requirements of Tex. Local Gov't Code §303.0426(b)(1) (compliance with new statutory provisions) by demonstrating its eligibility to continue under the former law, but must still fully address the requirements of §303.0426(b)(2) (identifying the difference in rent charged for income-restricted residential units and the estimated maximum market rents that could be charged for those units without the rent or income restrictions).
(2) The first Audit Report must include a copy of the Regulatory Agreement. The first Audit Report for a Development must be submitted no later than June 1 of the year following the first anniversary of:
(A) The date of the PFC acquisition for an occupied Development; or
(B) The date a newly constructed PFC Development first becomes occupied by one or more tenants.
(3) No later than 60 days after the receipt of the Audit Report, the Department will post a summary of the Audit Report on its website. A copy of the summary will also be provided to the Development and all Responsible Parties. The summary must describe in detail the nature of any noncompliance.
(4) If any noncompliance with Sections 303.0421 and 303.0425 are identified by the Auditor, no later than 45 days after receipt of the Audit Report the Department will notify the Public Facility User. The notification must include a detailed description of the noncompliance and at least one option for corrective action to resolve the noncompliance. The Public Facility User will be given 60 days to correct the noncompliance. At the end of the 60 days, the Department will post a final report on its website.
(5) If all noncompliance is not corrected within the 60 days, the Department will notify the Public Facility User, appropriate appraisal district, and the Texas Comptroller. The Department will also recommend a loss of tax-exempt status.
(6) The qualification of the Auditor must be submitted with each Audit Report. Qualifications must include experience auditing housing compliance, a current Certified Occupancy Specialist (COS) certification or an equivalent certification, and resume. The Auditor may not be affiliated with or related to any Responsible Parties. Additionally, a current or previous Management Agent that has or had oversight of the Development or is/was responsible for reviewing and approving tenant files does not qualify as an Auditor under these rules.
(7) The Public Facility User may not engage the same individual as Auditor for a particular Development for more than three consecutive years. After the third consecutive Audit Report by the same Auditor, the Public Facility User must engage a new Auditor for at least two reporting years before re-engaging with a prior Auditor.
(8) Audit Reports and supporting documentation and required forms must be submitted to the following email address: pfc.monitoring@tdhca.state.tx.us.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on July 26, 2024.
TRD-202403373
Bobby Wilkinson
Executive Director
Texas Department of Housing and Community Affairs
Earliest possible date of adoption: September 8, 2024
For further information, please call: (512) 475-3959