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'A violation of public trust': Officials with Florida agency that misused Hardest Hit funds now work for a developer getting state funds.

Stephen Auger, right resigned as executive director of Florida Housing Finance Corp. in 2017 and now works for a developer that gets funding from Florida Housing. Photos: Florida Housing Finance Corp

While Stephen Auger headed Florida Housing Finance Corp., the state-run agency had one of the nation's worst records of getting Hardest Hit Fund mortgage help to struggling homeowners. At the same time, it held lavish dinners and used Hardest Hit money for its employees to stay in luxury hotels.

Auger resigned in January 2017 as incidents of questionable spending and other problems piled up. But he has hardly struggled since. On his way out, he collected $175,523 in unused sick leave and vacation pay. And he landed a new job — as CEO of Birdsong Housing Partners, a developer that is getting millions of dollars in financing through his former employer, Florida Housing.

Auger is not the only Florida Housing official now working for Birdsong. Ken Reecy, who ran multi-family programs for the agency, is the company's director of development.

"It's absolutely a problem,'' said Ben Wilcox, research director of the watchdog organization Integrity Florida. "It's the whole issue of revolving doors where people go in and out of the public sector and into the private sector and end up profiting on the personal contacts they have in their former public agency and also their inside knowledge of how business and deals get done.''

Former state Senate President Don Gaetz agreed.

"I believe that is a violation of public trust … and exactly the kind of soft corruption that I abhor,'' said Gaetz, a member of the 2017-18 Florida Constitution Revision Commission.

Gaetz said Auger and Reecy's private employment exemplifies the "monetizing of public service'' that prompted Amendment 12, overwhelmingly approved by Florida voters in November. It has yet to take effect but will ban public officials and agency heads from lobbying their former agency for six years.

State law currently imposes a similar ban of two years. Auger's expired in January and he attended Florida Housing's February board meeting.

Auger and Reecy did not respond to phone calls or messages left with an owner of Birdsong Housing Partners.

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As the $183,643-a-year executive director of Florida Housing, Auger headed an agency unknown to most Floridians but one that plays a significant role in the state's housing market. It promotes homeownership — hence its involvement with the Hardest Hit Fund, created to help struggling homeowners avoid foreclosure. It also administers several highly competitive state and federal programs that finance affordable housing projects.

Auger left Florida Housing after an audit rapped the agency for hosting expensive meals, including a $52,548 dinner, and awarding nearly $443,000 in employee bonuses while thousands of Floridians were waiting for Hardest Hit help to save their homes.

Within seven months of leaving the state agency, Auger had joined Birdsong, a newly formed Kissimmee-based company whose projects include affordable housing. Birdsong also hired Reecy, who had served as temporary head of Florida Housing after Auger resigned.

All of Birdsong's partners are prominent Central Floridians. Among them: developer Domingo Sanchez, appointed by former Gov. Rick Scott to the Greater Orlando Aviation Authority, and lawyer Ed Haddock, who built Full Sail University in Winter Park into one of the world's largest entertainment, media and arts schools.

On its website, Birdsong says it has six housing projects under construction — five that have Florida Housing as a "financial partner.'' All five are using federal tax credits obtained through the state agency.

The so-called "low-income housing tax credit program'' is one of the federal government's main tools for encouraging the development of affordable housing. Credits can reduce the per-unit cost of a project by as much as 70 percent.

"Tax credits are the gold standard of housing subsidies,'' said Mark Hendrickson, a former executive director of Florida Housing and now a consultant to county housing finance agencies. "It provides enough subsidy so that even with a mix of low and extremely low-income residents and rents that go along with that, the deals are economically feasible.''

There's a catch: Only a certain amount of tax credits are allocated each year. As a result "'you could have north of 100 projects competing for a very limited amount of those,'' Hendrickson said. "The amount of competition compared to funding is significant.''

In applying for credits, developers prepare detailed applications that Florida Housing scores according to factors such as "proximity to services.'' Will the apartments be close to bus lines? Schools? Stores? Developers have been known to cheat: Several years ago one created an entire fake grocery store in Miami to try to get an edge on competitors.

Competition for the credits is so fierce that developers often sue if their projects aren't funded. To reduce the threat of litigation, Florida Housing is "very scripted'' in scoring applications and following set procedures, Hendrickson said. There can be mistakes, though, so it behooves developers to have employees who understand the complexities of applying — and of appealing if they are turned down.

"In any competitive process, somebody certainly needs to know how things work,'' Hendrickson said. "But I have pretty good faith in the competitive system. I don't think that by having the (former) director you have any particular advantage.''

•••

Ray Dubuque, a member of Florida Housing's board, said he doesn't have a problem with one development company employing two of the agency's former directors as long as they comply with state ethics rules.

"I guess if I was a developer looking to hire somebody, I'd look to hire people that have knowledge of that organization,'' said Dubuque, a former AT&T executive from Panama City. "If they are using insider information, that would concern me greatly.''

How do you tell if someone is using insider information?

"I really don't know,'' he said. "You just have to keep vigilant.''

Florida Housing said it considers its process for awarding tax credits and other funding to be "fair and unbiased.'' Harold "Trey'' Price, the agency's current executive director, said Auger and Reecy met with the agency's general counsel before they left in 2017 and were told of the two-year contact ban.

"I would say that both gentlemen to the best of our knowledge abide by our own rules and the law and have not contacted Florida Housing staff or board members,'' Price said. He said he knew the men had "some association'' with an affordable housing developer but did not know that both held top executive positions with Birdsong until told by a reporter.

Four of the five low-income apartment projects for which Birdsong received tax credits are in Osceola County, the company's headquarters and home to part of Disney World. The projects are:

• Palos Verdes Apartments, 120 units for the elderly. The application was filed in 2016 while Auger and Reecy were still with Florida Housing.

• Cameron Preserve, 100 units for the homeless. The application was filed in 2016 while Auger and Reecy were with Florida Housing.

• Los Altos Apartments, 100 units for families. The application was filed in 2016, while Auger and Reecy were with Florida Housing.

• Gannet Pointe, 80 units for individual and families experiencing homelessness. The application was applied for in 2018, after Auger and Reecy were working for Birdsong.

Birdsong also received tax credits and loans to rehab existing apartments in Brevard County, filing the application after Auger had resigned from Florida Housing but while Reecy was still there.

In each case, Birdsong and other developers had answered Florida Housing's "Request for Applications" for tax credits and loans to fund projects in specified counties and with certain categories of need, such as elderly housing. All applications are scored by a committee made up of Florida Housing staffers, with the committee's membership approved by Auger or his successors as executive director. The committee's recommendations go to Florida Housing's board, which has the final say and can fund several projects in one category depending on how many tax credits are available.

Shawn Wilson, president of Blue Sky Communities in Tampa, said his affordable housing company is a "direct competitor'' of Birdsong for various types of funding. But he thinks Florida Housing's process is fair, and "I honestly don't have a problem'' with two of its former executive directors working for Birdsong, he said.

"Nobody wants competition but as long as Steve and Ken are following the rules I don't really see what the issue is,'' he said. "They come from government and their ability to work in the private sector is going to be limited anyway because they haven't been in the private sector very much. I think Blue Sky is going to be better developer than Birdsong.'

Organizers of a 2018 conference on Orlando-area housing needs clearly thought Auger would be a valuable addition to the panel he was invited to sit on.

The topic? The financing and economics of affordable housing.

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.

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