Court Opinion

ID: 4128887
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:44:09.493247+00
Date Added: 2024-06-11T14:33:52.831416
License: Public Domain

ATTORNEYGENERAL                     OF    TEXAS
                                             GREG        ABBOTT

                                                  June 23,2004

The Honorable Robert E. Talton                            Opinion No. GA-0208
Chair, Urban Affairs Committee
Texas House of Representatives                            Re: Whether the Texas Department of Housing
Post Office Box 2910                                      and Community Affairs’ 2004 plan for allocating
Austin, Texas 78768-29 10                                 low-income housing tax credits is consistent with
                                                          Senate Bill 264 (RQ-0161-GA)

Dear Representative      Talton:

         You ask whether various aspects of the Texas Department of Housing and Community
Affairs’ 2004 plan for allocating low-income housing tax credits are consistent with Senate Bill 264,
a bill enacted in 2003 by the Seventy-eighth Legislature that extensively amended Government Code,
chapter 2306.’

I.       LePal Backmound

         A.       Qualified Allocation Plans

                 Pursuant to section 42 of the Internal Revenue Code, 26 U.S.C. 6 42, the federal
government makes available federal income tax credits to stimulate private developers to invest in
and construct low-income housing. See 26 U.S.C. $ 42 (2000). These federal tax credits are
allocated between the states and awarded at the state level by a designated housing credit agency.
See id. 5 42(h), (m). In Texas, the legislature has designated the Texas Department of Housing and
Community Affairs (the “Department” or “TDHCA”) to administer the state’s low-income housing
tax-credit program pursuant to Government Code, chapter 2306, subchapter DD. See TEX. GOV’T
CODEANN. $5 2306.6701-.6734 (Vernon Supp. 2004); see also id. 0 2306.053(10) (Vernon 2000)
(authorizing the Department to “administer federal housing, community affairs, or community
development programs, including the low income housing tax-credit program”).

        Federal law charges a state housing credit agency, such as the Department, with allocating
tax credits pursuant to a “qualified allocation plan,” which it defines to mean “any plan”

         ‘See Letter f?omHonorable Robert E. Talton, Chair, Urban Affairs Committee, Texas House OfRepresentatives,
to Honorable Greg Abbott, Texas Attorney General (Jan. 9,2004) (on file with Opinion Committee, also available at
http://www.oag.state.tx.us) [hereinafter Request Letter].
  The Honorable Robert E. Talton      - Page 2          (GA-0208)

                 (i) which sets forth selection criteria to be used to determine
                 housing priorities of the housing credit agency which are appropriate
                 to local conditions,

                 (ii) which also gives preference in allocating housing credit dollar
                 amounts among selected projects to --

                      (I)   projects serving the lowest income tenants,

                      (II) projects obligated to serve qualified tenants for the longest
                 periods, and

                       (IIJ) projects which are located in qualified census tracts (as
                 defined in subsection (d)(5)(C)) and the development       of which
                 contributes to a concerted community revitalization plan, and

                (iii) which provides a procedure that the agency (or an agent or other
                private contractor of such agency) will follow in monitoring for
                noncompliance with the provisions ofthis section and in notifying the
                Internal Revenue Service of such noncompliance which such agency
                becomes aware of and in monitoring for noncompliance             with
                habitability standards through regular site visits.

26 U.S.C. 5 42(m)(l)(B).     Section 42 also specifies certain selection criteria that must be included
in a qualified allocation plan. See id. 0 42(m)(l)(C) (p roviding that an allocation plan must include
the following selection criteria: “(i) project location, (ii) housing needs characteristics, (iii) project
characteristics, including whether the project includes the use of existing housing as part of a
community revitalization plan, (iv) sponsor characteristics, (v) tenant populations with special
housing needs, (vi) public housing waiting lists, (vii) tenant populations of individuals with children,
and (viii) projects intended for eventual tenant ownership”).

          State law also directs the Department annually to adopt a qualified allocation plan, see TEX.
 GOV’T CODEANN. $2306.67022 (Vernon Supp. 2004) (“The board annually shall adopt a qualified
.allocation plan and a corresponding manual to provide information regarding the administration of
 and eligibility for the low income housing tax credit program.“), which it defines as a plan adopted
 by the Department’s governing board that

                (A) provides the threshold, scoring, and underwriting criteria based
                on housing priorities of the department that are appropriate to local
                conditions;

               (B) consistent with Section 2306.6710(e),          gives preference     in
               housing tax credit allocations to developments     that, as compared    to
               the other developments:
 The Honorable Robert E. Talton             - Page 3             (GA-0208)

                         (i) when practicable and feasible based on documented,
                    committed, and available third-party funding sources, serve the
                    lowest income tenants per housing tax credit; and

                          (ii) produce for the       longest economically feasible period the
                    greatest number of high            quality units committed to remaining
                    affordable to any tenants         who are income-eligible  under the low
                    income housing tax credit        program; and

                    (C) provides a procedure for the department, the department’s agent,
                    or another private contractor of the department to use in monitoring
                    compliance with the qualified allocation plan and this subchapter.

Id. 0 2306.6702(a)(lO).   Numerous other chapter 2306 provisions direct the Department to include
certain items in the annual qualified allocation plan or require the Department to consider certain
funding priorities, information, criteria, or preferences in allocating housing tax credits.2

          B.       Agency Rules’ Validity

                 You ask about the validity of the Department’s 2004 qualified allocation plan, which
the Department developed in the fall of 2003 and adopted as agency rules3 pursuant to chapter 2306,
subchapter DD. See id. $0 2306.67022 (requiring the Department annually to adopt a qualified
allocationplan), .6724(a)-( c) (re q uiring the Department’s governing board to adopt and the Governor
to approve a qualified allocation plan by December 1): The 2004 qualified allocation plan (which
you refer to as the “QAP”) became effective January 1, 2004.5 You ask whether certain plan
provisions conform to chapter 2306 as amended in 2003 by the Seventy-eighth Legislature in Senate
Bill 264. See Act of June 1,2003,78th Leg., R.S., ch. 330,2003 Tex. Gen. Laws 1407 (Senate Bill
264). Senate Bill 264 became effective September 1,2003 and applies to applications submitted to
the Department after its effective date. See id. $5 29,32,2003      Tex. Gen. Laws at 1424.

        ‘See, e.g., TEX. GOV’TCODEANN. $9 2306.11 l(d), (g), .6704, .6710(b), (e), .6718(b), .6725(a)-(b) (Vernon
Supp. 2004).

        ‘See Texas Department of Housing and Communi ty Affairs Multifamily Finance Production Division 2004
Housing Tax Credit ProgramQualified AllocationPlan and Rules (available at http://www.tdhca.state.tx.us/pdfXhtc/04-
FinalQAP-040116.pdf); WL 10 TAC ss 50.1-24 (effective January 4,2004) (“200[4] Low Income Housing Tax Credit
Program Qualified Allocation Plan and Rules”) (to be codified at 10 TEX. ADMIN.CODE$9 50.1-.24).

          4See TEX. GOV’TCODEANN.Q2306.6724(a) (Vernon Supp. 2004) (“Not later than September 30 of each year,
the department shall prepare and submit to the board for adoption the qualified allocation plan required by federal law
for use by the department in setting criteria and priorities for the allocation of tax credits under the low income housing
tax credit program.“), (b) (“The board shall adopt and submit to the governor the qualified allocation plan not later than
November 15.“), (c) (‘The governor shall approve, reject, or modify and approve the qualified allocation plan not later
than December 1.“).

          ‘See id.; see also 28 Tex. Reg. 11522 (2004) (repealing old sections 50.1-.16 and adopting new sections 50.1-
.24, to be codified at 10 TEX. ADMIN.CODE$9 50.1-.24) (Tex. Dep’t of Housing and Cmty. Affairs).
 The Honorable Robert E. Talton          - Page 4            (GA-0208)

           The legislature has expressly granted the Department authority to adopt an annual qualified
 allocation plan. See TEX. GOV’T CODE ANN. $2306.67022 (Vernon Supp. 2004). In adopting the
 plan, the Department has construed chapter 2306. 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.”
 Tarrant Appraisal Dist. v. Moore, 845 S. W.2d 820,823 (Tex. 1993) (quoting Stanford v. Butler, 18 1
 S.W.2d 269,273 (Tex. 1944)). H owever, the plan may be invalid despite the Department’s attempt
 to perform its statutory duties if the plan exceeds the Department’s statutory authority. See R.R.
 Comm ‘n v. Arco Oil & Gas Co., 876 S.W.2d 473,477 (Tex. App.-Austin             1994, writ denied). In
 deciding whether an administrative agency has exceeded its rulemaking powers, the determinative
 factor is whether the rule’s provisions are “in harmony” with the general objectives of the statute.
 See Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717,750 (Tex. 1995); Gerst v. Oak CliffSav.
 &Loan Ass ‘n, 432 S.W.2d 702,706 (Tex. 1968). In determining whether a rule is in harmony with
 a statute’s general objectives, courts look to “all applicable provisions” of the act, rather than only
 one particular section. Gerst, 432 S.W.2d at 706.

         In construing provisions     of chapter 2306, we must give effect to the legislature’s intent. See
 TEX. GOV’T CODE ANN. $0 311.021, .023 (Vernon 1998); AZbertson ‘s, Inc. v. Sinclair, 984 S.W.2d
 958,960 (Tex. 1999); Mitchell Energy Cozp. v. Ashworth, 943 S.W.2d 436,438 (Tex. 1997). To
 do so, we must first attempt to construe the statutes according to their plain language. See In re
 Canales, 52 S.W.3d 698,702 (Tex. 2001); RepublicBankDallas,            N.A. v. Interkal, Inc., 691 S.W.2d
605, 607-08 (Tex. 1985). We may also consider, among other things, a statute’s objectives, its
legislative history, and the consequences of a particular construction. See TEX. GOV’T CODE ANN.
 3 3 11.023 (Vernon 1998); see also id. 5 3 11.021(2)-(4) (“In enacting a statute, it is presumed that
. . . the entire statute is intended to be effective[,J a just and reasonable result is intended[, and] a
result feasible of execution is intended . . . .“). Finally, we must also consider individual statutes in
the context of chapter 2306 as a whole. See HeZena Chem. CO. v. FWkins, 47 S.W.3d 486,493 (Tex.
2001) (“[W]e must always consider the statute as a whole rather than its isolated provisions. We
should not give one provision a meaning out of harmony or inconsistent with other provisions,
although it might be susceptible to such a construction standing alone.“) (citations omitted); see also
TEX. GOV’T CODE ANN. 9 3 11 .Ol 1(a) (Vernon 1998) (words and phrases to be read in context).

II.      Analysis

         A.       Section 2306.6710(b):       Tax-Credit Application        Scoring and Ranking

                You ask two questions about the validity of the Department’s 2004 qualified
allocation plan in light of Senate Bill 264’s amendments to section 2306.671 O(b) ofthe Government
Code. See Request Letter, supra note 1, at 1. Section 2306.6710(a) requires the Department to
determine whether a tax-credit application “satisfies the threshold criteria required by the board in
the qualified allocation plan.” TEX. GOV’T CODE ANN. 0 2306.6710(a) (Vernon Supp. 2004).‘j

          6See also TEX. GOV’TCODEANN. $9 2306.6702(a)( 15) (Vernon Supp. 2004) (“‘Threshold criteria’ means the
criteria used to determine whether the development satisfies the minimum level of acceptability for consideration
                                                                                                    (continued...)
 The Honorable Robert E. Talton              - Page 5               (GA-0208)

 Section 2306.6710(b) requires the Department                 “to score and rank” applications          that have met the
 threshold criteria “using a point system” that:

                          (1) prioritizes in descending           order criteria regarding:

                              (A) financial feasibility of the development based on the
                    supporting financial data required in the application that will include
                    a project underwriting pro forma from the permanent or construction
                    lender;

                             (B) 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;

                               (C) the income levels of tenants of the development;

                               (D) the size and quality of the units;

                              (E) the commitment             of development          tiding     by local
                    political subdivisions;

                               (F) the level of community support for the application,
                    evaluated on the basis of written statements from state elected
                    officials;

                              (G) the rent levels of the units;

                              (H) the cost of the development            by square foot; and

                           (I) the services             to   be     provided    to    tenants    of   the
                   development; and

                         (2) uses criteria imposing penalties on applicants or affiliates
                   who have requested extensions of department deadlines relating to
                   developments supported by housing tax credit allocations made in the
                   application round preceding the current round or a developer or
                   principal of the applicant that has been removed by the lender, equity

established in the department’s qualified allocation plan.“), .6704(c) (“The department shall reject and return to the
applicant any application assessed by the department under this section that fails to satisfy the threshold criteria required
by the board in the qualified allocation plan.“).
 The Honorable Robert E. Talton           - Page 6           (GA-0208)

                   provider, or limited partners for its failure to perform its obligations
                   under the loan documents or limited partnership agreement.

 Id. 8 2306.6710(b).    Section 2306.6710(c) requires the Department to “publish in the qualified
 allocation plan details of the scoring system used by the department to ‘score applications.” Id.
 5 2306.671 O(c).

         As we understand         it, the 2004 qualified allocation plan ranks the nine section
 2306.671O(b)( 1) criteria in the order they appear in the statute in relation to each other. But the plan
 gives certain additional criteria, taken from 26 U.S.C. 9 42 and other chapter 2306 provisions, more
 points and thus greater weight than some of the nine criteria.7 For example, the Department indicates
 that the 2004 qualified allocation plan assigns points to two criteria not listed in section
 2306.6710(b)(l) - housing needs in the proposed development’s area and providing transitional
 housing for the homeless - that effectively rank those two criteria between the second and third
 section 2306.671 O(b)( 1) criteria. See TDHCA Brief, supra note 7, at 11, 16. As a result, you ask:

                        Whether Section 2306.6710(b), . . . as amended by S.B. 264, is
                  a mandatory provision that requires the 2004 QAP to rank
                  applications for Low Income Housing Tax Credits by a point system
                  that gives the greatest points, in descending order, to the nine factors
                  listed?

                        Whether    the Department       has discretionary    authority   to
                  intersperse other factors into the ranking system that will have greater
                  points than a factor listed in Section 2306.6710(b)?

Request Letter, supra note 1, at 1 (questions         1 and 2).

          Section 2306.671 O(b)( 1) expressly requires the Department to score and rank applications
according to nine criteria that the statute prioritizes in descending order. See TEX. GOV’T CODE
ANN. $2306.67 1O(b)( 1) (V emon Supp. 2004) (“the department shall score and rank the application
using a point system that . . . prioritizes in descending order criteria regarding . . . .“), (b)(l)(A)-(I)
(criteria). The Department must use a point system that prioritizes the criteria in that specific order.
See id. 0 2306.671 O(b). Section 2306.671 O(b)( 1) does not assign points to each of the nine criteria.
However, the statute must be construed to require the Department to assign more points to the first
criterion than to the second, and so on, in order to effectuate the mandate that the scoring system
“prioritiz[e the criteria] in descending order.” Id. 5 2306.6710(b)(l);        id. 89 311.021(2) (Vernon
1998) (in enacting a statute, it is presumed that the entire statute is intended to be effective); .023(l),
(5) (in construing a statute a court may consider the statute’s objectives and the consequences of a
particular construction).   Furthermore, the statute’s plain language does not indicate that the nine
criteria are optional or merely illustrative.       Nor does section 2306.6710(b)(l)         authorize the

         ‘See Brief from Chris G. Wittmayer, General Counsel, Texas Department of Housing and Community Affairs,
to Honorable Greg Abbott, Texas Attorney General, at 10 (Feb. 23,2004) (on file with Opinion Committee) [hereinafter
TDHCA Briefj; WL 10 TAC s 50.9(g) (selection criteria) (to be codified at 10 TEX. ADMIN. CODE tj 50.9(g)).
 The Honorable Robert E. Talton             - Page 7              (GA-0208)

 Department     to adopt additional        criteria or to give higher priority or greater weight to any other
 criteria.

         By contrast, prior to the 2003 amendments, section 2306.6710(b) required the Department
to “score and rank” applications using a point system “based on criteria that are adapted to regional
market conditions and adopted by the department, including criteria . . . regarding” eight listed
items.* Act ofMay27,2001,77th          Leg., R.S., ch. 1367, $j8.01, sec. 2306.6710(b), 2001 Tex. Gen.
Laws 3391, 3440 (effective Sept. 1, 2001) (emphasis added). The statute did not mandate that
criteria be prioritized in any particular order. Although it listed criteria, it expressly authorized the
Department to adopt criteria, see id., and the term “including” indicated that the listed criteria were
not exclusive. See Badouh v. Hale, 22 S.W.3d 392,395 (Tex. 2000) (“it is a ‘well settled rule that
the words “include,” “including,” and “shall include” are generally employed as terms of
enlargement rather than limitation or restriction”‘) (quoting RepublicIns. Co. v. SiZverton Elevators,
Inc., 493 S.W.2d 748,752 (Tex. 1973)). In amending section 2306.6710 to delete the Department’s
authority to adopt criteria and by ranking nine specific criteria in a particular order, the legislature
intended to change the law. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,681
(Tex. 1979) (“It is apparent that in amending the statute, the legislature intended some change in the
existing law, and this court will endeavor to effect the change.“); Am. Sur. Co. of N. Y. v. Axtell, 36
S.W.2d 715,719 (Tex. 1931) (legislature presumed to have intended some change to existing law
when amendment was enacted and effect must be given to amendment); see aZso TEX. GOV’T CODE
ANN. 0 3 11.023( 1), (3), (5) (V emon 1998) (in construing a statute a court may consider the statute’s

         *The former statute listed these criteria:

                             (A) the income levels of tenants of the development;

                             (B) the rent levels of the units;

                             (C) the period of guaranteed affordability for low income tenants;

                             (D) the cost by square foot of the development;

                             (E) the size, quality, and amenities of the units;

                            (F) the services to be provided to tenants of the development;

                           (G) the commitment of development funding by local political subdivisions
                  that enables additional units for individuals and families of very low income; and

                            (H) the level of community support for the application, evaluated on the
                  basis of written statements of support from local and state elected offkials
                  representing constituents in areas that include the location of the development; and

        (2) imposing penalties on applicants or affiliates who have requested extensions of department
        deadlines relating to developments supported by housing tax credit allocations made in the application
        round preceding the current round.

Act ofMay27,2001,77thLeg.,       R.S., ch. 1367, $8.01, sec. 2306.6710(b)(1)-(2), 2001 Tex. Gen. Laws 3391,3440-41.
(effective Sept. 1,200l).
 The Honorable Robert E. Talton            - Page 8             (GA-0208)

 objectives, its legislative    history, and the consequences of a particular construction). Accordingly,
 we conclude that section       2306.671 O(b) as amended does not authorize the Department to modify or
 add to the nine section         2306.6710(b)(l)    criteria and that the statute does not authorize the
 Department to give other       chapter 2306 criteria greater weight or higher priority than any of the nine.

          The Department asserts that chapter 2306, read as a whole, authorizes it to assign other
 criteria greater weight than the section 2306.6710(b)(l)  criteria. Summarizing its position, the
 Department states that it reads section 2306.67 1O(b)( 1)

                   to be mandatory and to require that its nine criteria be weighted in
                   descending order. The plain language of the section, however, as
                   well as a reasoned construction of all the requirements of [26 U.S.C.]
                   5 42 and Chapter 2306, taken together as a consistent whole, do not
                   require all other 0 42 and Chapter 2306 criteria [to] have point values
                   lower than the lowest of the nine criteria of 9 2306.671O(b)( 1).

TDHCA Brief, supra note 7, at 20. However, while chapter 2306 contains numerous provisions that
require the Department to consider other criteria,’ preferences,” or similar factors” in allocating tax

           ‘See, e.g., TEX.GOV’TCODEANN.$8 2306.6702(a)( 10)(A) (V emon Supp. 2004) (defining “qualified allocation
plan” to mean a plan adopted by the Department’s governing board that “provides the threshold, scoring, and
underwriting criteria based on housing priorities of the department that are appropriate to local conditions”), .6725(a)
(“[i]n allocating low income housing tax credits, the department shall score each application using a point system based
on criteria adopted by the department that are consistent with the department’s housing goals,” including certain criteria).

            “See, e:g., id. $0 2306.127 (“In a manner consistent with the regional allocation formula described under
 Section 2306.11 l(d), the department shall give priority through its housing program scoring criteria to communities that
 are located wholly or partly in (1) a federally designated urban enterprise community; (2) an urban enhanced enterprise
 community; or (3) an economically distressed area or colonia.“), .6702(a)( IO)(B) (defining “qualified allocation plan”
 to mean a plan adopted by the Department’s governing board that “consistent with Section 2306.6710(e), gives
preference in housing tax credit allocations to developments that, as compared to the other developments: (i) when
practicable and feasible based on documented, committed, and available third-party funding sources, serve the lowest
income tenants per housing tax credit; and (ii) produce for the longest economically feasible period the greatest number
of high quality units committed to remaining affordable to any tenants who are income-eligible under the low income
housing tax credit program”), .6704(b) (“The department shall award in the application evaluation process described by
Section 2306.6710 an appropriate number of points as an incentive for participation in the preapplication process.“),
.6710(e) (“In scoring applications for purposes of housing tax credit allocations, the department shall award, consistent
with [26 U.S.C. 9 421, preference points to a development that will: (1) when practicable and feasible based on
documented, committed, and available third-party funding sources, serve the lowest income tenants per housing tax
credit, if the development is to be located outside a qualified census tract; and (2) produce for the longest economically
feasible period the greatest number of high quality units committed to remaining affordable to any tenants who are
income-eligible under the low income housing tax credit program”), .6725(b) (“[t]he department shall provide
appropriate incentives as determined through the qualified allocation plan to reward applicants who agree to” certain
conditions).

         “See, e.g., id. $0 2306.11 l(d) (“The department shall allocate . . . commitments issued under the federal low
income housing tax credit program. . . to all urban/exurban areas and rural areas of each uniform state service region
based on a formula developed by the department that is based on the need for housing assistance and the availability of
housing resources in those urban/exurban areas and rural areas, provided that the allocations are consistent with
                                                                                                          (continued...)
 The Honorable Robert E. Talton              - Page 9             (GA-0208)

credits, none directs the Department to consider other criteria, preferences, or factors before the nine
section 2306.671 O(b)(l) criteria or to give higher priority or greater weight to other criteria,
preferences, or factors in evaluating applications.”      By contrast, section 2306.67 10 establishes
express, mandatory procedures. After the Department has determined that an application satisfies
its threshold criteria, see TEX. GOV’T CODE ANN. $2306.6710(a) (Vernon Supp. 2004), it must then
score and rank the application using a point system that prioritizes the statute’s nine criteria in
descending order, see id. § 2306.671O(b)( 1). Given section 2306.671O(b)( 1)‘s express language, we
believe that if the legislature had intended any other provision to authorize the Department to give
higher priority or greater weight to other factors, the legislature would have said so expressly.

          The Department contends that it must give other criteria greater weight than some of the nine
section 2306.6710 criteria in order to harmonize section 2306.6710(b) with other chapter 2306
provisions. See TDHCA Brief, supra note 7, at 10. However, the Department may harmonize the
other chapter 2306 provisions with section 2306.6710(b) by considering the other information,
criteria and preferences but assigning them less weight than the section 2306.671 O(b)( 1) criteria. See
TEX. GOV’T CODE ANN. 9 3 11.021(2)-(4) (V emon 1998) (“In enacting a statute, it is presumed that
. . . the entire statute is intended to be effective [,] a just and reasonable result is intended[, and] a
result feasible of execution is intended . . . .“).I3

          “(...continued)
 applicable federal and state requirements and limitations.“), (g) (“For all urban/exurban areas and rural areas of each
uniform state service region, the department shall establish funding priorities to ensure that: (1) funds are awarded to
project applicants who are best able to meet recognized needs for affordable housing, as determined by department rule;
(2) when practicable and when authorized under [26 U.S.C. § 421, the least restrictive funding sources are used to serve
the lowest income residents; and (3) funds are awarded based on a project applicant’s ability, when consistent with [26
U.S.C. $42], practicable, and economically feasible, to: (A) provide the greatest number of quality residential units; (B)
serve persons with the lowest percent area median family income; (C) extend the duration of the project to serve a
continuing public need; (D) use other local funding sources to minimize the amount of state subsidy needed to complete
the project; and (E) provide integrated, affordable housing for individuals and families with different levels of income.“),
.185(a) (“The department shall adopt policies and procedures to ensure that, for a multifamily rental housing
development funded through loans, grants, or tax credits under this chapter, the owner of the development: (1) keeps
the rents affordable for low income tenants for the longest period that is economically feasible; and (2) provides regular
maintenance to keep the development sanitary, decent, and safe and otherwise complies with the requirements of Section
2306.186.“), .185(b) (“In implementing Subsection (a)( 1) and in developing underwriting standards and application
scoring criteria for the award of loans, grants, or tax credits to multifamily developments, the department shall ensure
that the economic benefits of longer affordability terms and below market rate rents are accurately assessed and
considered.“), .6718(b) (“The department shall provide the elected offtcials with an opportunity to comment on the
application during the application evaluation process provided by Section 2306.67 10 and shall consider those comments
in evaluating applications under that section.“).

          12Seesupru notes 9-11.

           13Wenote that section 2306.6725(a) more generally requires the Department to score applications using a point
system “based on criteria adopted by the department that are consistent with the department’s housing goals” including
six statutory criteria. See TEX. GOV’TCODEANN. Q 2306.6725(a) (Vernon Supp. 2004). Section 2306.6725(a) does
not require the Department to score applications immediately after they have satisfied the threshold criteria or to
prioritize criteria in any particular order. The legislature did not amend section 2306.6725(a) in 2003. To the extent
section 2306.6710(b) and section 2306.6725(a) conflict, section 2306.67 IO(b) prevails. See id. Q 3 11.025(a) (Vernon
1998) (“if statutes enacted at the same or different sessions of the legislature are irreconcilable, the statute latest in date
of enactment prevails”).
 The Honorable Robert E. Talton              - Page 10             (GA-0208)

         The Department asserts that 26 U.S.C. 5 42(m), the federal provision requiring the
Department to adopt a qualified allocation plan, requires it to modify the section 2306.6710(b)(l)
criteria. See TDHCA Brief, supra note 7, at 15-l 7. Section 42(m) specifies certain selection criteria
that must be included in a qualified allocation plan. I4 However, federal courts have held that “no
specific directives [in section 42(m)] mandate how [a state housing credit agency] must weigh or
consider those criteria. . . . [O]nce the criteria are considered, no particular outcome necessarily
follows.” DeHarderlnvest,      Corp. v. Indiana Hous. Fin. Auth., 909 F. Supp. 606,613-14 (S.D. Ind.
 1995). “[Nlothing in $42(m) provides guidance as to how the statutory criteria are to be weighed
or measured by the Authority.” Id. at 615; see also Barrington Cove Ltd. P’ship v. Rhode Island
Hous. and Mortgage Fin. Corp., 246 F.3d 1,6 (1 st Cir. 2001) (“As the DeHarder court aptly noted,
the federal statute simply mandates that states promulgate their own allocation plans regarding these
federal income tax credits, without identifying any particular condition under which the states are
obligated to allocate them.“). Thus, while the Department must include the section 42(m) criteria
in the allocation plan, the federal statute does not require the Department to give those criteria
greater weight than the section 2306.671 O(b)( 1) criteria. The Department may comply with section
42(m) by ranking the section 42(m) criteria below the section 2306.671O(b)( 1) criteria.

         In answer to your specific questions, we conclude that section 2306.671 O(b) “is a mandatory
provision that requires the 2004 QAP to rank applications for Low Income Housing Tax Credits by
a point system that gives the greatest points, in descending order, to the nine factors listed”15 and that
the Department lacks “discretionary authority to intersperse other factors into the ranking system that
will have greater points than a factor listed in Section 2306.67 1O(b).” Request Letter, supra note 1,
at 1. The 2004 qualified allocation plan contradicts section 2306.671O(b)‘s plain language and
exceeds the Department’s authority to the extent it is inconsistent with section 2306.671 O(b)( 1).

          B.        Section 2306.359:         Private Activity Bonds

               Next you ask “[wlhether the allocation criteria set forth in the 2004 QAP [are] in
compliance with Section 15 of S.B. 264, regarding the issuance of private activity bonds?” Request
Letter, supra note 1, at 1 (question 3). Section 15 amended Government Code chapter 2306,

           14See26 U.S.C. $42(m)(l)(C) (2000) (providing that an allocation plan must include the following selection
criteria: “(i) project location, (ii) housing needs characteristics, (iii) project characteristics, including whether the project
includes the use of existing housing as part of a community revitalization plan, (iv) sponsor characteristics, (v) tenant
populations with special housing needs, (vi) public housing waiting lists, (vii) tenant populations of individuals with
children, and (viii) projects intended for eventual tenant ownership”).

          15Wenote that the Department and the requestors disagree over the Department’s decision to subtract points
for negative evidence regarding commum‘ty participation, the section 2306.67 lO(b)( l)(B) criteria. See TDHCA Brief,
supru note 7, at 9; Brief from Eric Gpiela, Law Offke of Eric C. Gpiela, submitted on behalf of select members of the
Texas House of Representatives, to Honorable Greg Abbott, Texas Attorney General, at 7 (Jan. 9,2004) (on file with
Opinion Committee) [hereinafter Gpiela BriefJ. Should the Department score a section 2306.671O(b)( 1) criterion using
a negative to positive point scale, the Department must ensure that the criterion’s scoring maintains the priority order
mandatedbythe legislature in section 2306.6710(b)( I), by, for example, scoring communityparticipationusing a scoring
system that preserves its place below financial feasibility and above tenants’ income levels. Given that the current
scoring and ranking system is not consistent with section 2306.671O(b)( l), we cannot assess whether points assigned to
particular section 2306.671O(b)( 1) criteria appropriately prioritize the criteria.
The Honorable Robert E. Talton          - Page 11           (GA-0208)

subchapter P, which governs the Department’s authority to issue bonds, by adding section 2306.359.
See Act of June 1,2003,78th Leg., RX, ch. 330, $15,2003 Tex. Gen. Laws 1407,1415-16 (Senate
Bill 264). Section 2306.359 provides that “[i]n evaluating an application for an issuance ofprivate
activity bonds, the department shall score and rank the application using a point system based on
criteria that are adopted by the department, including” eight statutorily defined criteria and “other
criteria as developed by the board.” TEX. GOV’T CODE ANN. $2306.359(a) (Vernon Supp. 2004).

         Subchapter DD, which requires the Department to adopt an annual qualified allocation plan,
does not govern the Department’s authority to allocate housing tax credits to developments financed
by private activity bonds, see id. 6 2306.67021 (“Except as provided by Section 2306.6703, this
subchapter does not apply to the allocation of housing tax credits to developments financed through
the private activity bond program.“); see also id. 9 2306.6703 (making certain applicants ineligible
for consideration), and the 2004 allocation plan does not govern the Department’s authority to
issue private activity bonds, see WL 10 TAC ss 50.1-.24 (to be codified at 10 TEX. ADMIN. CODE
$5 50.1-.24); TDHCA Brief, supra note 7, at 22. Rather, the Department explains, it has adopted
the criteria for scoring private activity bond applications in another administrative rule, 10 TEX.
ADMIN. CODE 9 33.6(b) (2004). See TDHCA Brief, supra note 7, at 22.

         A brief submitted on your behalf suggests that the Department did not consider section 15
of Senate Bill 264 in drafting the 2004 qualified allocation plan “because it believed S.B. 264 to be
displaced by S.B. 1664,” which amended section 1372.032 1 of the Government Code. See Qpiela
Brief, supra note 15, at 14; Act of June 1,2003, 78th Leg., R-S., ch. 1329, 8 lo,2003 Tex. Gen.
Laws 5014, 5017 (Senate Bill 1664 amending Government Code section 1372.0321).               Section
1372.0321 requires the Texas Bond Review Board to give priority to certain types of projects “[i]n
granting reservations to issuers of qualified residential rental project issues.” TEX. GOV’T CODE
ANN. 3 1372.0321(a) (V emon Supp. 2004); see also id. $ 1372.001(l) (defining “board” to mean
“the Bond Review Board”). Section 1372.0321 does not govern the authority of the Department to
score private activity bond applications.

          In answer to your specific question - “[wlhether the allocation criteria set forth in the 2004
QAP are in compliance with Section 15. of S.B. 264, regarding the issuance of private activity
bonds”16 -the qualified allocation plan is not required to comply with section 15 and therefore is not
inconsistent with it. The Department has promulgated criteria pursuant to section 15 in a separate
rule. You have not asked or briefed whether the rule on scoring private activity bond applications
comports with section 15, see Request Letter, supra note 1, at l-2; Qpiela Brief, supra note 15, at
1 l- 15, and we do not consider that issue.

        C.      Section 2306.6705:         Notice to Neighborhood       Organizations

                You also ask whether the 2004 qualified allocation plan’s notice provisions comply
with section 20 of Senate Bill 264. See Request Letter, supra note 1, at l-2 (questions 4 and 5); Act
of June 1,2003,78th Leg., R.S., ch. 330, $20,2003 Tex. Gen. Laws 1407,1418. In section 20, the
legislature amended section 2306.6705, which requires that a housing tax-credit application “must

       16RequestLetter, sup ra note 1, at 1 (question 3).
 The Honorable Robert E. Talton            - Page 12            (GA-0208)

 contain at a minimum   the following written, detailed information in a form prescribed by the board.”
 TEX. GOV’T CODE ANN. $2306.6705          (Vernon Supp. 2004). Section 2306.6705(g) provides that the
application must provide evidence that the applicant has notified certain officials and entities ‘with
respect to the filing of the application,” including “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. $ 2306.6705(9).17

         The 2004 qualified allocation plan requires an applicant to publish notice in the local
newspaper (or newspapers) and to provide notice by letter to certain individuals, including state and
local officials, and neighborhood organizations. See WL 10 TAC s 50.9(f)(8)(A)-(B) (to be codified
at 10 TEX. ADMIN. CODE 3 50.9(f)(8)(A)-(B)).      With respect to neighborhood organizations, the
applicant must provide evidence that the applicant sent a letter requesting information on
neighborhood organizations to the relevant city and county clerks. See id. $50.9(f)(8)(E3)(ii)(I). If
the proposed development is located in an urban or exurban area, the applicant must provide notice
to

                   all entities identified in the letters from the city and county clerks
                   whose listed address has the same zip code as the zip code for the
                   Development.      . . . If any other zip codes exist within a half mile of
                   the Development site, then all entities identified in the letters from the
                   city and county clerks with those adjacent zip codes must also be
                   provided with written notification, and evidence of that notification
                   must be provided.

Id. If the proposed development is located in a rural area, “all entities identified in the letters from
the city and county clerks whose listed address is within a half mile of the Development site must
be provided with written notification.” Id. ‘* The qualified allocation plan also requires an applicant
to post signs regarding the proposed development on the proposed site. See id. 0 50.9(f)(8)(C).
Alternatively, the applicant may mail a written notice to all addresses “required for notification by
local zoning notification requirements” or, ifthe community does not have zoning requirements, “all
addresses within 1,000 feet of any part of the proposed Development site.” Id. $50.9(t)(S)(C)(i)-(ii).

          “See also TEX. GOV’TCODEANN. $9 2306.6704@-l)( 1) (Vernon Supp. 2004) (preapplication process must
require that the applicant has notitied “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”), .671O(b)( l)(B) (scoring
quantifiable community participation 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”).

           “Seealso WL 10 TAC s SO.g(f)(8)(B)(ii)(I) (to be codified at 10 TEX.ADMIN.CODE!j SO.9(f)(S)(B)(ii)(I)) (“If
the Applicant can provide evidence that the proposed Development is not located within the boundaries of an entity on
a list from the clerk(s), then such evidence in lieu of notification may be acceptable. If no reply letter is received from
the city or county clerk by February 25,2004, then the Applicant must submit a statement attesting to that fact. If an
Applicant has knowledge of 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, the Applicant must notify those
organizations. If the Applicant has no knowledge of neighborhood organizations within whose boundaries the
Development is proposed to be located, the Applicant must attest to that fact.“).
The Honorable Robert E. Talton     - Page 13         (GA-0208)

        You ask two questions regarding whether      these notice requirements   comply with section
2306.6705:

                    Whether the notification process for neighborhood organizations
               in Section 50.9 (8)(B)(ii)(I) of the 2004 QAP is in compliance with
               S.B. 264, Section 20, codified at Section 2306.6705, Government
               Code, which requires that neighborhood          organizations  whose
               boundaries include the proposed development be notified, not those
               neighborhood   organizations which are in the same ZIP code or
               neighboring ZIP codes?

                    Whether the signage requirement/written notification alternative,
               provided for in Section 50.9 of the 2004 QAP has basis in statute and
               conforms to the legislative intent of S.B. 264?

Request Letter, supra note 1, at l-2 (questions 4 and 5).

          Section 2306.6705(9)(A)     provides that an application must provide evidence that the
applicant provided notice about “the filing of the application” to “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.” TEX. GOV’T CODEANN. $2306.6705(9)(A) (Vernon Supp.
2004). The 2004 allocation plan requires an applicant to notify all neighborhood organizations
identified in the letters from the city and county clerks whose listed address has the same zip code
as the development’s and, in some cases, adjacent zip codes. See WL 10 TAC s 50.9@)(8)(B)(ii)(I)
(to be codified at 10 TEX. ADMIN. CODE 5 50.9(f)(S)(B)(ii)(I)). It also requires applicants to provide
notice by posting signs at the development site or by mailing notice to addresses in the immediate
vicinity. See id. 9 50.9(f)(8)(C). The brief submitted on your behalf suggests that the plan’s notice
requirements exceed the Department’s statutory authority because the plan may require an applicant
to notify neighborhood organizations whose boundaries do not include the proposed development
and because section 2306.6705 does not require posted signs or mailed notice. See Qpiela Brief,
supra note 15, at 17-18.

         The Department counters that although the statute requires notice to neighborhood
organizations,   neither the state nor the counties maintain records that would identify the
neighborhood organizations whose boundaries contain a proposed development site as specified by
section 2306.6705(9)(A).     See TEX. GOV’T CODE ANN. 5 2306.6705(9)(A) (Vernon Supp. 2004)
(requiring applicant to provide notice to “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”) (emphasis added); TDHCA Brief, supra note 7, at 24-25. Given the difficulty
in implementing section 2306.6705(9)(A), the Department explains that it adopted the signage or
notice by mail requirement to provide notice to neighborhood organizations by alternative methods:

               [T]o avoid the complete failure of the neighborhood organization
               notification requirement because of the lack of state and county
               records, the Department determined to fulfill the legislative intent to
The Honorable Robert E. Talton              - Page     14         (GA-0208)

                    provide notice by signage or mailing. The alternative was to provide
                    no notice, rendering the provision a nullity.

Id. at 25. The qualified allocation plan’s notice requirements appear to establish reasonable methods
to effectuate section 2306,6705(9)(A)‘s purpose. See TEX. GOV’T CODE ANN. 0 3 11.021(2)-(4)
(Vernon 1998) (“In enacting a statute, it is presumed that . . . the entire statute is intended to be
effective [,] a just and reasonable result is intended[, and] a result feasible of execution is intended
       ,,
. . . . 1.

         Furthermore, the Department notes that section 2306.6705 merely outlines minimum
application requirements and expressly authorizes the Department to require additional information
in the qualified allocation plan. See TEX. GOV’T CODE ANN. 5 2306.6705 (Vernon Supp. 2004)
(emphasis added) (“An application must contain at a minimum the following. . . .“), (8) (providing
that an application must contain “any other information required by the board in the qualified
allocation plan”). The Department interprets section 2306.6705 to authorize it to adopt additional
application requirements in the qualified allocation plan. The Department’s construction of section
2306.6705 is reasonable and does not contradict the plain language and, therefore, is entitled to
serious consideration. See Tarrant AppraisaZ Dist., 845 S.W.2d at 823 (“Construction of a statute
by the administrative agency charged with its enforcement is entitled to serious consideration, so
long as the construction is reasonable and does not contradict the plain language of the statute.“).

         Considering the 2004 qualified allocation plan’s notice requirements in light of section
2306.6705 as a whole, we conclude that the provisions requiring notice to neighborhood
organizations in the same and adjacent zip codes and notice by posted signs or mail do not exceed
the Department’s statutory authority. See Gerst, 432 S.W.2d at 706 (in determining whether a rule
is in harmony with a statute’s general objectives, courts look to “all applicable” provisions of that
act, rather than only one “particular section”). By its terms, the section 2306.6705(9)(A) notice
requirement does not preclude the Department from requiring additional notice or notice by different
methods. Moreover, section 2306.6705(8) expressly authorizes the Department to require applicants
to provide additional information in the qualified allocation plan. The 2004 qualified allocation
plan’s notice requirements supplement rather than nullify the section 2306.6705(9)(A)         notice
requirement and are within the Department’s statutory authority to adopt additional application
requirements under section 2306.6705(8).19

          ‘9Section2306.6710(b)( 1) requires the Department to score applications’ “quantifiable community participation
with respect to the development” evaluated by 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.” TEX. GOV’T CODE ANN. 0 2306.6710(b)(l)(B) (Vernon Supp. 2004). This provision does not permit the
Department to consider statements from neighborhood organizations whose boundaries do not contain the proposed
development site. See id. As we have noted, however, federal law and chapter 2306 authorize the Department to
consider other criteria provided that it gives such criteria less weight than the section 2306.67 1O(b)( 1) criteria. See supru
Part 1I.A.
The Honorable Robert E. Talton      - Page   15       (GA-0208)

        D.      Implications   for 2004 Application   Cycle

               Finally, you ask how the Department should respond if we conclude that any aspect
of the 2004 qualified allocation plan does not conform with Senate Bill 264:

                     If the answer to any of the above questions is in the negative,
                what steps must be taken by TDHCA to ensure that the 2004
                application cycle is conducted in accordance with law?

Request Letter, supra note 1, at 2 (question 6). We have concluded that the 2004 qualified allocation
plan scoring criteria do not conform with the scoring criteria required by Government Code, section
2306.67 1O(b)(l), and that the plan exceeds the Department’s authority to the extent it is inconsistent
with section 2306.6710(b). The statutory requirements prevail over the plan the Department has
adopted pursuant to its administrative authority. We understand that the Department is currently
considering applications pursuant to the 2004 qualified allocation plan and the timetable required
by section 2306.6724. The Department is not required to issue final commitments for allocations
until July 3 1. See TEX. GOV’T CODE ANN. $2306.6724(f) (Vernon Supp. 2004). The Department
must score and rank 2004 housing tax-credit applications as required by section 2306.6710(b).
However, it is for the Department, which is charged with administering the housing tax-credit
program, and not this office, to determine in the first instance what steps the Department will take
to ensure that it scores and ranks applications as required by section 2306.6710(b).
The Honorable Robert E. Talton     - Page   16        (GA-0208)

                                        SUMMARY

                       The Department ofHousing and Community Affairs must first
               score and rank applications for low-income housing tax credits
               according to the nine statutory criteria prioritized in descending order
               in Government Code section 2306.67 1O(b)(l), as amended in 2003 by
               Senate Bill 264. It may score and rank applications according to
               other criteria and preferences established in 26 U.S.C. 5 42 and
               chapter 2306 by giving those other criteria and preferences less
               weight than the section 2306.6710(b)(l) criteria. To the extent the
               Department’s 2004 qualified allocation plan for allocating low-
               income housing tax credits gives other criteria and preferences greater
               weight, it is inconsistent with section 2306.671O(b)( 1) and exceeds
               the Department’s statutory authority.

                        The 2004 qualified allocation plan is not required to address
               private activity bond application scoring and ranking and therefore is
               not inconsistent with section 2306.359, as added by Senate Bill 264.
               With respect to providing notice about proposed developments to
               neighborhood organizations in the same and adjacent zip codes and
               by posting signs and mailing notices to addresses in the immediate
               vicinity, the 2004 qualified allocation plan is not inconsistent with
               section 2306.6705, as amended by Senate Bill 264.

                                                 Attorney &en&-al of Texas

BARRY R. MCBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General, Opinion Committee