Did the Taylor Housing Authority lose control of more than $2 million in property?
That question could be decided this year in court.
At stake are 111 low-income housing units at the Mallard Run, Heritage Oaks and Market Street apartments. They are worth a total of $2,032,266.
The Taylor Housing Authority owned them until 2008, when its executive director, Steve Shorts, improperly transferred them to a separate entity called the Mallard Run Housing Development, according to a U.S. Department of Housing and Urban Development audit in 2014.
The audit by HUD, which oversees the Taylor Housing Authority, recommended it reclaim the properties.
The housing authority is suing to take back the properties, which are now owned by two nonprofit organizations: the Mallard Run and Taylor Sunset housing developments.
“I can find no other cases in the state of Texas that this has ever happened, where a housing authority has lost control of its subsidiary corporations,” said Mark Dietz, one of the authority’s attorneys.
The nonprofits are countersuing the authority, saying they are the legal owners because the properties were deeded to them. The Taylor Housing Authority deeded the Heritage Oaks and Mallard Run apartments to the organizations in 1988 and 2001, respectively, said Thomas Turner, a lawyer for the nonprofits.
A trial has been set for December.
“At trial, we are confident that the judge and jury will prevent THA from taking property it does not own from two nonprofits that provide necessary low-income housing to the citizens of Taylor,” Turner said.
The trial will also include the issue of whether Shorts misappropriated $28,546 from the authority. The 2014 HUD audit concluded that Shorts inappropriately approved down payment housing assistance for his son and for a program manager.
Turner, who is also one of the lawyers for Shorts, said Shorts did nothing wrong.
“Mr. Shorts’ actions were at all times made with full knowledge and permission of HUD and the consent of the THA board, and he denies the allegations made against him,” Turner said.
The legal fights do not involve the city of Taylor because the Taylor Housing Authority is a separate entity that receives money from the federal government and not the city, said Mayor Jesse Ancira Jr.
Dietz said that just because the housing authority deeded the Mallard Run and Heritage Oaks apartments to the nonprofits doesn’t mean they control the property. The nonprofits operated as subsidiary corporations under the control of the housing authority until 2008, he said.
But in 2008, he said, the board of the Taylor Housing Authority “either mistakenly, illegally or whatever else allowed control of the boards of the subsidiary corporations to no longer be responsible to the housing authority,” Dietz said.
Turner disagreed. HUD made a rule change in 2008 that would have resulted in the Taylor Housing Authority losing 80 percent of the fees it received to be a contract administrator for the two nonprofit companies, he said.
“So that year the THA board voted to resign as members of the Sunset and Mallard Run boards, and to appoint new directors to those entities,” he said. “The complexes were not owned by THA or THA assets.”
No one seemed to notice what had happened, Dietz said, until HUD audited the housing authority in 2014.
As part of its attempt to reclaim control of the 111 low-income housing units, the Taylor Housing Authority sued the board of directors for the two nonprofits in February.
The members are violating a state law called the Public Facility Corporation Act, Dietz said. The law requires that the board of directors of the nonprofits include at least three people appointed by the Taylor Housing Authority. Currently the boards don’t include a member appointed by the authority.
Turner said the lawsuit against the nonprofits’ board members is a “last-ditch” litigation tactic. He also said the state law is an “esoteric, inapplicable statute.”
Dietz — citing the board members’ violation of the act — asked the Texas attorney general’s office to intervene, according to a letter he sent to the state office in May. The attorney general’s office oversee the actions of nonprofits.
“Mallard and Sunset control public funds which can be misused,” said Dietz. “Governmental statutes and oversight provide protection from such an event. This is the reason the Public Facilities Act governed the appointment of board members by requiring them to be appointed by a process responsible to democratically elected officials.”