Court Opinion

ID: 4128598
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:40:14.337151+00
Date Added: 2024-06-11T14:32:45.603818
License: Public Domain

ATTORNEY GENERAL OF TEXAS
                                            GREG        ABBOTT

                                             December 22,2006

The Honorable Ismael “Kino” Flores                          Opinion No. GA-0497
Chair, Committee on Licensing and
   Administrative Procedures                                Re: Whether the 2006 Qualified Allocation
Texas House of Representatives                              Plan of the Texas Department of Housing and
Post Office Box 2910                                        Community Affairs complies with Government
Austin, Texas 78768-2910                                    Code section 2306.6710(b)   (RQ-0515GA)

Dear Representative     Flores:

       You ask about the Texas Department of Housing and Community Affairs (“TDHCA”) and
whether its 2006 Qualified Allocation Plan complies with Government Code section2306.6710@).’

        The federal government offers tax credits to private developers to stimulate investment in
and construction of low-income housing. See generally 26 U.S.C.A. 3 42 (West Supp. 2006). These
federal tax credits are allocated among the states and awarded at the state level by a designated
housing credit agency. See id. 5 42(h), (m). In Texas, the legislature, under Government Code
chapter 2306, subchapter DD, has designated the TDHCA to administer the state’s low-income
housingtax-creditprogram.     &~TEx.Gov’TCODEANN. @2306.6701-.6734(VernonSupp.              2006);
see also id. 5 2306.053(b)(lO) (V ernon 2000) (authorizing TDHCA to “administer federal housing,
community affairs, or community development programs, including the low income housing tax
credit program”).

        The Internal Revenue Code requires TDHCA, as administrator of this tax-credit program,
to allocate tax credits according to selection criteria laid out in a “qualified allocation plan”
(a “QAP”): See 26 U.S.C.A. 5 42(m)(l)(B)-(C)        (West Supp. 2006). Texas law implements the
federal law by requiring the TDHCA board to annually adopt a QAP, see TEX. GOV’T CODEANN.
5 2306.67022 (Vernon Supp. 2006), which, among other things, provides the threshold, scoring, and
underwriting criteria and procedures for applicants seeking low-income housing tax credits. See id.
5 2306.6702(a)(lO). While TDHCA has discretion to determine the number of points to assign the
underwriting criteria and to score and rank the applications for tax credits, ,numerous provisions in
the Government Code require TDHCA to consider specific funding priorities, information, and

         ‘See Letter from Nonarable lsmael “Kino” Flares, Chair, Committee on Licensing and Administrative
Procedures, Texas House of Representatives,to Honorable Greg Abbott, Attorney General of Texas, at 1-2 (June 13,
2006) (on file with the Opinion Committee, a/so available at http:/i~.oag.state.tx.us) [hereinafter Request Letter].
The Honorable Ismael “Kino” Flares - Page 2                  (GA-0497)

preferences in doing so? And it is these prescriptive provisions that give rise to your question.             See
Request Letter, supra note 1, at l-2.

         Specifically, you ask about Government Code section 2306.6710(b), see id., which requires
TDHCA to score and rank tax-credit applications using a point system that prioritizes certain criteria
over others. See TEX. GOV’T CODE ANN. 5 2306.6710(b) (Vernon Supp. 2006). Subsection
(b)(l)(B) of this section, which is at the crux of your question, requires TDHCA to consider and rank

                quantifiable   community    participation   with respect     to the
                development,  evaluated on the basis of written statements from any
                neighborhood organizations on record with the state or county in
                which the development is to be located and whose boundaries contain
                the proposed development site[.]

Id. § 2306,6710(b)(l)(B) (Vernon Supp. 2006) (emphasis added). “Neighborhood                    organization” is
not defined in the statute. See id 5s 2306.67OlL.6734.

        TDHCA, however, has defined the term in its 2006 QAP:

                         A “neighborhood organization” is defined as an organization
                 of persons living near one another within the organization’s defined
                 boundaries that contain the proposed Development site and that has
                 a primary purpose of working to maintain or improve the general
                 welfare of the neighborhood. “Neighborhood organizations” include
                 homeowners associations, property owners associations, and resident
                 councils (only for Rehabilitation or demolition with New
                 Construction applications in which the council is commenting on the
                 rehabilitation OY demolition/ New Construction of the property
                 occupied by the residents). “Neighborhood organizations” do not
                 include broader based “community” organizations; organizations that
                 have no members other than board members; chambers of commerce;
                 community development corporations; churches; school related
                 organizations; Lions, Rotary, Kiwanis, and similar organizations;
                 Habitat for Humanity; Boys and Girls Clubs; charities; public housing
                 authorities; or any governmental         entity. Organizations   whose
                 boundaries include an entire county or larger area are not
                 “neighborhood     organizations.” Organizations whose boundaries
                 include an entire city are generally not “neighborhood organizations.”

3 1 Tex. Reg. 105,144 (2006) (to be codified at 10 TEX. ADMM CODE 5 50.9(i)(2)(A)(iv)) (emphasis
added) (TDHCA “2006 Housing Tax Program Qualified Allocation Plan and Rules”). You express

          %ee TEX. GOV’TCODEANN. 5 2306,6725(a) (Vernon Supp. 2006); Tex. Att’y Gen. Op. No. GA-0208 (2004)
at 9 n.13 (discussing the discretion Government Code section 2306.6725(a) p emits TDHCA in assigning points to
underwriting criteria);seeako,   e.g., TEx. GOV’TCODEANN. $5 2306.11 l(d),(g), .6704(b), .6710(b), .6718(b) (Vernon
supp. 2006).
The Honorable Ismael “Kino” Flores - Page 3            (GA-0497)

concern that TDHCA’s rule, by limiting resident councils to commenting only on the rehabilitation
of or demolition with new construction of the property occupied by the residents, conflicts with
Government Code section 2306.6710(b). See Request Letter, supra note 1, at 2.

       Based on this information,     you first ask:

               Whether Section 2306.6710(b)          is a mandatory provision that
               requires the 2006 QAP to rank applications for Low Income Housing
               Tax Credits by a point system that includes as a factor quantifiable
               community participation with respect to the development, evaluated
               on the basis of written statements from any neighborhood
               organizations on record with the state or county in which the
               development is to be located and’whose boundaries contain the
               proposed development site?

Id. This office has, on two occasions, determined that Government code section 2306.6710(b) is a
mandatory provision that requires TDHCA to rank applications using a point system that gives the
greatest number of points, in descending order, to the nine factors listed in that section. See Tex.
Att’y Gen. Op. Nos. GA-0455 (2006) at 2-3; GA-0208 (2004) at 10.

         You next ask “[wlhether TDHCA has discretionary authority to impose additional limiting
criteria for quantifiable community participation by neighborhood organizations under Section
2306.6710(b)?”      Request Letter, supra note 1, at 2. As this of&e has already said, section
2306,6710(b) does not permit TDHCA to adopt additional criteria for that section. See Tex. Att’y
Gen. Op. No. GA-0208 (2004) at 6-7. Therefore, TDHCA may not impose additional limits on
quantifiable community participation by neighborhood organizations under section 2306.6710(b).

        Third, you ask:

               Whether      the TDHCA       implemented     language     in Section
               [50,9(i)(2)(A)(iv)] of the 2006 Qualified Allocation Plan that limits
               quantifiable community participation by a Resident Council, a
               qualified neighborhood organization, is in compliance with Section
               2306.6710(b) of the Texas Government Code            .~. that requires
               quantifiable     community    participation with respect       to the
               development, evaluated on the basis of written statements from any
               neighborhood organizations on record with the state or county in
               which the development is to be located and whose boundaries contain
               the proposed development site?

Request Letter, supra note 1, at 2,

         Because the term “neighborhood organization” in section 2306,6710(b)(l)(B) is not defined
by statute, TDHCA has construed the term by an interpretive rule under the general authority granted
to it by the legislature to adopt an annual QAP. See TEX. GOV’T CODEANN. § 2306.67022 (Vernon
The Honorable Ismael “Kino” Flares - Page 4                     (GA-0497)

Supp. 2006). Interpretive rules are those rules that interpret and apply the provisions of an applicable
statute. See FirstFed SCIV.& LounAss’n. v. VandygrifJ; 639 S.W.2d. 492,498 (Tex. App.-Austin
1982, writ dism’d). Construction of a statute in agency rules by the administrative agency charged
with the statute’s enforcement is entitled to serious consideration, so long as the construction is
reasonable and does not contradict the plain language of the statute. See Turrant Appraisal Dist. v.
Moore, 845 S.W.2d 820,823 (Tex. 1993). But a rule may be invalid if the rule’s language exceeds
the agency’s statutory authority. See R.R. Comm ‘n v. Arco Oil & Gas Co., 876 S.W.2d 473,477-78
(Tex. App.-Austin     1994, writ denied). In deciding whether an administrative agency has exceeded
its rule-making powers, the determinative factor is whether the rule’s provisions are “in harmony”
with the general objectives of the statute. See Edgewoodlndep. Sch. Dist. v. Meno, 917 S.W.2d 717,
750 (Tex. 1995) (citing Gerst v. Oak ClifSuv. &Loan Ass’n,,432 S.W.2d 702,706 (Tex. 1968)).

         Here, section 2306,6710(b)(l)(B)       establishes two requirements         that neighborhood
organizations must meet in order to have their input count as quantifiable community support for or
against a particular low-income housing project: (1) the organization~must be on record with the
state or county in which the development is to be located; and (2) the organization must represent
an area whose boundaries contain the proposed development site. TEX. GOV~T CODE ANN.
5 2306,6710(b)(l)(B)     (Vernon Supp. 2006). TDHCA interprets these requirements by defining
“neighborhood organization” in the 2006 QAP to include, among other things, a resident council,
but only to the extent the resident council is commenting on “the rehabilitation or demolition/ New
Construction of the property occupied by the residents.” 31 Tex. Reg. 105, 144 (2006) (to be
codified at 10 TEX. ADMEV. CODE 5 50.9(i)(2)(A)(iv)) (TDHCA “2006 Housing Tax Credit
Program Qualified Allocation Plan and Rules”). That is, for the resident council to satisfy section
2306,6710(b)(l)(B)‘s    requirementthat aneighborhood organizationrepresent         an area boundingthe
proposed development, the proposed development must occur on the property that the resident
council represents. A resident council, by definition, represents only the property occupied by its
residents? A resident council cannotrepresentproperty      not yet constructed, unlike existing property
to be rehabilitated or to be demolished and then reconstructed. TDHCA is not, therefore, limiting
the meaning of neighborhood organization or adding criteria to section 2306.6710(b); rather,
TDHCA’s rule for resident councils merely restates the statute’s requirements in terms specific to
a resident council. Thus, in answer to your third question, TDHCA’s rule for resident councils is
in harmony with Government Code section2306,6710(b)(l)(B).

         Finally, you ask, if any of our above answers would require the TDHCA to modify its 2006
QAP, “what steps .must TDHCA take to ensure the 2006 application cycle is conducted in
accordance with the law?’ Request Letter, supra note 1, at 2. Because we have determined that
TDHCA has not, with respect to your questions, interpreted section 2306.671 O(b) inconsistent with
the statute, we need not address this issue.

          j&e, e.g., 12 U.S.C.A $4119(1 l)(A) (West 2001) (applying to federal low-income housing preservation and
defining the term “resident council” as “any incorporated nonprofit organization or association that, is representative
of the residenls ofthe housing”) (emphasis added).
The Honorable Ismael “Kino” Flores - Page 5         (GA-0497)

                                      SUMMARY

                       Government Code section 2306,6710(b) is a mandatory
              provision that requires the Texas Department of Housing and
              Community Affairs to rank applications using a point system that
              gives the greatest number of points, in descending order, to the nine
              factors listed in that section. Section 2306.6710(b) does not permit
              the department to adopt additional criteria.

                      Government~Code section 2306,6710(b)(l)(B)       requires the
              department to score proposed development projects based on input
              from “neighborhood organizations,” which must be on record with
              the state or county in which the development is to be located and
              which must represent an area that contains the proposed development
              site. The 2006 Qualified Allocation Plan from the department
              defining “neighborhood organization” to include resident councils,
              but only to the extent the proposed project is located on property
              occupied    by their residents,     is in harmony      with section
              2306,6710(b)(l)(B).

                                             Attorney M era1 of Texas

KENT C. SULLIVAN
First Assistant Attorney General

ELLEN L. WITT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Daniel C. Bradford
Assistant Attorney General, Opinion Committee