Montana Administrative Register Notice 8-2-78 No. 1   01/14/2010    
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In the matter of the adoption of New Rule I pertaining to the administration of the Quality Schools Grant Program






TO:  All Concerned Persons


1.  On November 25, 2009, the Department of Commerce published MAR Notice No. 8-2-78 pertaining to the public hearing on the proposed adoption of the above-stated rule at page 2193 of the 2009 Montana Administrative Register, Issue Number 22.


2.  The department has adopted the above-stated rule as proposed: New Rule I (8.2.503).


3.  The department has thoroughly considered the comments and testimony received, and has revised the guidelines for the Quality Schools Project Grants – incorporated by reference in New Rule I – as set forth below.  A summary of the comments received and the department's responses are as follows:


COMMENT #1:  May a school district apply for a single project grant that covers multiple projects at once?


RESPONSE #1:  The Project Grant Guidelines require an applicant's project to fit within one of the six statutory priorities.  If multiple projects are closely related, and can more efficiently or effectively be done in conjunction with one another, those projects can be grouped under one application.  A school may not propose several unrelated projects under one project application.


COMMENT #2:  Please clarify how many points an applicant will need to achieve to secure project funding.


RESPONSE #2:  The Project Grant Program has no set point value that an applicant needs to achieve to secure funding.  During round one of the project grants, the department will determine which applicants will receive a portion of the $10 million appropriation.  During round two and thereafter, the department will recommend grant awards to the Governor.  The Legislature will make the final determination as to the funding appropriation and grant awards.  In order to ensure ranking, each application must meet the minimum requirements necessary to be reviewed and ranked by the department.  (See page 1.5 of the Guidelines.)


COMMENT #3:  The Guidelines and Application are too long.


RESPONSE #3:  The department is sensitive to the needs of school districts to be able to easily access grant funds and comply with the Quality Schools Grant Program requirements, and both the Guidelines and Application contain the minimum information required to give adequate and clear direction as how to apply for and administer a Quality School project grant.  If necessary, eligible applicants can apply for a Quality School planning grant to obtain assistance in preparing a project grant application.


COMMENT #4:  Page 1.1 the date of the DLR study says July 2009, should this read 2008?


RESPONSE #4:  The date should read July 2008.  The Project Grant Guidelines have been corrected on page 1.1.


COMMENT #5:  Please clarify the exact date referred to on Page 1.2 of the Project Grant Guidelines as "the end of the 2011 biennium."


RESPONSE #5:  The 2011 biennium will end on June 30, 2011.  Page 1.2 of the Project Grant Guidelines has been updated to read, "by June 30, 2011 (the end of the 2011 biennium)."  The section was also updated to specify a biennium equals two years.


COMMENT #6:   On page 1.12 of the Project Grant Guidelines, the first bullet states, "The proposed energy efficiency improvements are not the highest priority improvements identified in the district's energy audit or evaluation."  How is "highest priority" evaluated if the audit didn't rank the measures in the report?


RESPONSE #6:  The language identified has been changed to clarify that a lower score of 0-40 will be given to those projects proposing to complete energy efficiency improvements that received a lower priority for completion than other improvements identified in the district's energy audit or evaluation.  If the audit or evaluation did not rank the measures in the report, then a project's ranking will not be reduced under this scoring criterion.


COMMENT #7:  There were several comments regarding the prioritization of energy conservation measures and their scoring under Statutory Priority #4 on page 1.12 of the Project Grant Guidelines.  Specifically, comments were received regarding the proposal to rank projects with "short-term" paybacks higher than projects with "long-term" paybacks, how the department proposed to define "short-term" and "long-term," the difficulties associated with identifying payback periods, and acknowledging the availability of rebates and other programs available for projects with short-term paybacks.  Comments were also received regarding combining short-term and long-term projects together and how those would be ranked. 


RESPONSE #7:  Quality Schools recognizes the importance of both short- and long-term paybacks in regard to energy conservation measures.  Following the recommendations of the K-12 Facility Condition Study performed by the Department of Administration in coordination with DLR Group, Inc., the department will rank projects with short-term paybacks higher than long-term paybacks because many schools in Montana lack even basic energy efficient improvements such as lighting, sensors, and retro-commissioning.  As recognized in the K-12 Facility Condition Assessment, with a meaningful level of implementation of behavioral changes (Level 1 measures) and short-term payback measures (Level 2 measures) alone, the energy costs to Montana schools could reasonably drop by more than 20%, or over $5.4 million annually (prior to utility rate escalation). 


Projects with a short-term payback will typically see cost savings returned within eight years or less, while projects with long-term payments typically will not see costs savings for 15-20 years or more.


Of course, when new construction is scheduled or warranted, in addition to these measures, school districts should additionally consider building orientation, fitting the building to the environment, capitalizing on prevailing wind patterns, evaporative cooling systems, geo-thermal and ground-loop sources, increased use of day-lighting, storm water retention, indigenous landscaping, gray water re-use, and other high performance design concepts intended to result in more sustainable and efficient buildings and campuses. 


The department encourages school districts to leverage all available funds in prioritizing and funding its proposed projects.  Under the statutory attributes, schools that can demonstrate the lack of other available resources for completing projects with short-term paybacks will obtain a higher score in the applicable attribute than districts that have other resources available.


Projects that combine both short-term and long-term paybacks will be ranked as a project with short-term paybacks.


COMMENT #8:  Statutory Priority #4 refers to energy efficiency and payback for its point allocation.  Can payback and energy efficiency be calculated based off a modified-base case?  How are broken (nonfunctioning) systems scored?


RESPONSE #8:  In order to qualify under Statutory Priority #4, the eligible applicant will need to have either completed an energy audit within the past five years or an FCI (Facility Conditions Inventory) report from the K-12 Facility Condition Assessment (July 2008) that specifically identifies the energy efficiency improvement proposed in the application.  These documents, and the analysis contained therein, will be the basis for any energy efficiency project being scored under Statutory Priority #4. 


If a system is broken or nonfunctioning, the project may be eligible under a different statutory priority than energy efficiency.  Under Statutory Priority #4, the energy auditor's findings and recommendations will be the basis for scoring the project.


COMMENT #9:  In regard to building codes, the commenter would like to see the rules award points for going beyond required code measures, so that energy efficiency improvements would show cost-effective paybacks and length of service.


RESPONSE #9:  Statutory Priority #4, energy efficiency improvements, does not relate to building code requirements, but instead is scored based on the analysis in the energy audit provided by the district.  While all improvements to a school facility must meet current building codes, a school proposing energy efficiency improvements – whether they go beyond those codes or not – must support its application through the analysis of paybacks in its energy audit.  Infrastructure improvements proposed to meet current building code requirements are separately ranked under Statutory Priority #2.


COMMENT #10:  It would be helpful to note the four key categories of the ECS in Page 1.15 of the Project Grant Guidelines.  It's not clear how those four key categories (General Data, Site Amenities, Room Types, Building Offering & Amenities) would be used to evaluate projects.


RESPONSE #10:  As set forth in the Project Grant Guidelines ranking scores, the four ECS categories relate to the project site and the school's ability to offer specific amenities related to education requirements of their curriculum, as well as the ability to accommodate extracurricular activities (intramural and competition sports, performance events, etc.).  The four categories, to the extent they relate to infrastructure improvements and are not otherwise addressed under another statutory priority, translate into the four scoring levels identified under Statutory Priority # 5 listed here in order of priority:

(1)  The construction or expansion of classroom space;

(2)  The construction or expansion of Specialized Instructional Spaces;

(3)  Increased school security; and

(4)  The construction or expansion of additional support and resources areas at schools.


COMMENT #11:  A comment was received regarding the timing of subsequent grant award rounds.  Comment was in favor of the proposed schedule for round two and subsequent Quality Schools project grant awards.


RESPONSE #11:  The department accepts the comment.


COMMENT #12:  The proposed requirement to complete MEPA review prior to grant application could be too complicated to complete, and may deter applicants from applying.  A MEPA review should be completed only after a project has been funded.


RESPONSE #12:  In order to complete MEPA review, a school district must complete an environmental checklist, which can be downloaded from Quality Schools web site.  If all impacts identified in the checklist are less than significant, or can be mitigated to a level of insignificance by changing the scope of the project or completing identified mitigation measures, no further environmental review is required.  If the checklist identifies any significant effects that cannot be mitigated to a level of insignificance, then further analysis (EIS) may be required.  This process can be completed as part of the preparation of the project application, public review provided during that period, and a final decision on the environmental document made at the district's hearing approving submission of the project grant application.  This upfront review will help districts identify any potential issues that could arise before further project costs are incurred; allows changes to be made to project scope and implementation plans; and avoids the department and the Legislature spending time and costs on reviewing, ranking, and funding awards before the environmental impacts of a project are known.  A reference to the environmental checklist in the appendices to the Project Grant Guidelines has been added to Chapter 2, Overview.


COMMENT #13: Who is eligible to fill out the environmental checklist? 


RESPONSE #13:  Anyone authorized to perform work on behalf of the school district can prepare the environmental checklist, using all available information and evidence.  The district superintendent or authorized representative must sign the environmental checklist, and the final environmental determination must be made by the school district board of trustees.  The Project Grant Guidelines have been modified to clarify who can submit the environmental checklist.  In addition, eligible applicants can apply for a Quality School planning grant to obtain assistance in preparing a project grant application, including any necessary environmental review.


COMMENT #14: Should the environmental review go to the Environmental Quality Council as well?


RESPONSE #14:  As required by Section 75-1-201, MCA and the department's administrative rules relating to implementation of MEPA, the department is required to submit a copy of all environmental assessments (EAs) to the Environmental Quality Council (EQC).  The department maintains a log of all EAs completed by the agency and submits a list of any new EAs completed to the Governor's Office and the EQC on a quarterly basis.  (ARM 8.2.307(5)).  The Project Grant Guidelines have been modified to require the applicant school district to submit a copy of its EA or EIS to the department, not the EQC.  The department will provide the EQC with a copy of each EA directly.  If the department proposes to adopt an EIS, the department must notify the Governor and the EQC of its decision and provide a statement describing its proposed course of action.


COMMENT #15:  Testing for asbestos containing materials and other hazards is the most commonly over-looked environmental concern.  The environmental section should contain requirements for testing for asbestos containing materials.


RESPONSE #15:  The Asbestos Control Program of the Department of Environmental Quality (DEQ) regulates and permits asbestos abatement projects.  Asbestos abatement activities must be permitted through the Asbestos Control Program and must be conducted by accredited asbestos personnel following proper asbestos inspection, abatement, transportation, and disposal procedures.  Generally speaking, the Asbestos Control Program regulates asbestos projects, building demolition, and building renovation activities that occur in facilities such as any institutional, commercial, public, industrial, or residential structure, installation, or building (including any structure, installation, or building excluding residential buildings having four or fewer dwelling units).  Compliance with state and federal asbestos requirements has been added to the list on Page 2.6 of the Project Grant Guidelines of the various environmental permits that may be required on a Quality Schools infrastructure project from other state agencies.


COMMENT #16:  Page 2.6 of the Project Grant Guidelines refers to environmental permits that may be required.  Will these permits be required in advance of applying for a grant?


RESPONSE #16:   No.  Applicants are responsible for obtaining all proper permits for their project, but such permits do need to be obtained prior to applying for or obtaining approval of a Quality Schools project grant award.


COMMENT #17:  Commenter requests that legal costs, specifically bond counsel, be included in the reimbursable expenses of the project grant.


RESPONSE #17:  The department recognizes that there are additional costs not directly associated with the project that grant applicants will be responsible for.  Quality Schools project grant funds cannot be used for grant administration expenses or financial costs, including bond counsel.  Districts must use other sources of funds, including general funds, for such grant administration costs.


COMMENT #18:  Commenter requests that non-permanent furnishings and fixtures or equipment be included as a reimbursable expense of the Quality Schools Project Grant.


RESPONSE #18:  The Quality Schools Grant Program can fund school facility projects that involve the construction of a school facility; major repairs or deferred maintenance to an existing school facility; major improvements or enhancements to an existing school facility; or information technology infrastructure, including installations, upgrades, or improvements to an existing school facility or facilities.  Accordingly, the school districts may use project grant funds to purchase permanent fixtures related to these types of projects.  However, nonpermanent furnishings, fixtures, or equipment are not a reimbursable expense of the project grant. 


COMMENT #19:  Commenter believes the 10 per cent project contingency amount should be increased to 20-25 per cent at the beginning of the project, and reduced to 10 per cent as the scope of the project becomes more clear.


RESPONSE #19:  The default construction contingency will remain at 10 per cent, with applicants providing the opportunity to justify when and why they propose a higher or lower contingency.


COMMENT #20:  Please define the terms "isolated schools with low population density" and "urban schools with high population density," and clarify how schools fit into these categories and how schools that don’t fit into these categories should fill out these sections.


RESPONSE #20:  These terms come from Title 20, chapter 9 of the Montana Code Annotated.  Schools designated as either are determined by the Office of Public Instruction (OPI).  If a school does not fit into one of these categories, it should leave those sections of the application blank – the department will not be able to adjust its rankings based on those factors for that application.


COMMENT #21:   Commenter would like assurance that smaller schools districts will have an equal opportunity to the grant money, and that rural districts may find the grant administration process too difficult due to limited manpower to properly manage the projects.  What can be done to help the smaller districts to ensure their ability to successfully fulfill the requirements of the grant to properly manage the grant if awarded?


RESPONSE #21:  The Quality Schools Grant Program statute was specifically drafted so that grant awards would be based not on the size of the school, but rather on what statutory priority the grant applicant is applying for and its ability to demonstrate its need for financial assistance; its fiscal capacity to meet the terms and conditions of the grant; its past efforts to ensure sound, effective, long-term planning and management of the school facility and attempts to address school facility needs with local resources; its ability to obtain funds from sources other than the funds provided under this part; and the importance of the project and support for the project from the community.  The project grant ranking criteria reflect this statutory framework.  If necessary, an eligible school district can apply for a Quality Schools planning grant to obtain assistance in preparing its application for a project grant.  This ensures an equal opportunity for all schools to prepare a competitive application.  The department is committed to assisting small schools apply for and administer Quality Schools Program Grants.  In addition, the Quality Schools Grant Program statute allows the department to adjust its initial rankings based on educationally relevant factors, including a school's designation as an "isolated school."


COMMENT #22: How will the educationally relevant factors be used to adjust the ranking?


RESPONSE #22:  The educationally relevant factors will not be considered during the ranking process with the statutory priorities and attributes.  However, after the ranking of all project applications have been made, the department may consider the extent to which an applicant district serves isolated populations, urban populations, students with special needs, American Indian students, or its difficulty in attracting and retaining qualified educators and other personnel in making final funding decisions.  Generally speaking, these factors will help the department make funding decisions between schools that otherwise rank equally in terms of the statutory priorities and attributes, with funding going to schools that can demonstrate greater or more extensive educationally relevant needs.


COMMENT #23: Please describe the timetable for the project grant awards.


RESPONSE #23:  For round one of the project grants, the Project Grant Guidelines and Application will be published January 14, 2010, with an application deadline of February 20, 2010, and awards announced mid-March.  For round two of the project grants, the department is anticipating an application deadline of May 1, 2010, with grant award approvals by the 62nd Legislature at the end of the legislative session in spring 2011.


COMMENT #24: Some schools applied for a Quick Start project but were denied because all Quick Start money had been awarded.  Will those applicants receive special consideration for the $400,000 in the Quality Schools program that flowed over from Quick Start?


RESPONSE #24:  Section 58 of HB 645 (“Quick Start”) provided that any funds not obligated under the Quick Start program by September 30, 2009 "be used as provided in [section 85] for the School Facilities Program Administration and Grants line item appropriation."  Section 85 of HB 645 provided a line-item appropriation "to be used in the same manner as provided in section 10 of HB 152."  Section 10 of HB 152 provided that, "[i]n awarding grants under this subsection, all definitions and requirements of [sections 1 through 8] and rules adopted under [section 9] apply except that the department need not submit its recommendations to the governor and legislative approval is not required for the award of specific grants."  Given these statutory directives, the department must award the $400,000 rollover within the ranking priorities and attributes set forth in the Quality Schools Grant Program statute.  No special consideration may be given to unsuccessful Quick Start program applicants. 


COMMENT #25: Will there be any special consideration for projects currently underway and costs already incurred on those costs?


RESPONSE #25:  An eligible applicant can apply for a project grant for a project currently in progress, but only expenses incurred after the date of the notice of award letter would be eligible expenses for reimbursement through the project grant.  Expenses incurred by a successful applicant prior to the date of the notice of award letter, or incurred by an unsuccessful applicant at any time, are the sole responsibility of the applicant.


COMMENT #26: The Facility Condition Inventory is inadequate to describe all problems, safety concerns, health concerns, or conditions that may need to be addressed by a school.


RESPONSE #26:  While the K-12 Facility Condition Assessment (July 2008) may be used by a school to support its project grant application, that assessment is not a required component in any project grant application.  If a school believes that assessment is inadequate to describe its particular problems, safety concerns, health concerns, or conditions to be addressed, it may provide alternative or additional documentation of those conditions in support of its project grant application.


COMMENT #27: Is a Quality Schools planning grant required in order to get a project grant? 


RESPONSE #27:  No.  A Quality Schools planning grant is not required in order to get a project grant.  However, an eligible school can apply for a planning grant to undergo preliminary design and planning for a proposed project, or use planning grant funds to obtain assistance in preparing a project grant application.



/s/  KELLY A. CASILLAS                             /s/  ANTHONY J. PREITE                

KELLY A. CASILLAS                                   ANTHONY J. PREITE

Rule Reviewer                                               Director

                                                                        Department of Commerce


Certified to the Secretary of State January 4, 2010.



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