Montana Administrative Register Notice 8-111-106 No. 24   12/20/2012    
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In the matter of the amendment of ARM 8.111.602 and 8.111.603 pertaining to the low income housing tax credit program








TO:  All Concerned Persons


1.  On November 8, 2012, the Department of Commerce published MAR Notice No. 8-111-106 pertaining to the proposed amendment of the above-stated rules at page 2231 of the 2012 Montana Administrative Register, Issue Number 21.


2.  The department has amended the above-stated rules as proposed.


3.  The board has thoroughly considered the comments and testimony received.  A summary of the comments received and the board's responses are as follows:


As a preliminary matter, all of the comments received by the board regarding the proposed rule amendments were submitted by the law firm of Crowley Fleck, PLLP, on behalf of Ft. Harrison Veterans Residence, L.P. (FHVR).  FHVR applied for but was not awarded 2012 low income housing tax credits and subsequently filed a lawsuit against the board challenging the board's 2012 tax credit award determination.  The lawsuit is pending and FHVR's comments repeat several of its allegations in the pending litigation.  The board disputes these allegations and the Court has not made a determination regarding these issues.  In addition, a representative of FHVR appeared at the board's October 15, 2012 meeting and presented the same or similar comments to the board at that time. 


COMMENT #1:  The commenter opposes adoption of the 2013 Qualified Allocation Plan (the QAP), proposed to be incorporated by reference into ARM 8.111.602, because the commenter alleges that Evaluation Criteria no. 7, regarding Montana Presence, unconstitutionally discriminates against out-of-state developers and professionals.  The commenter alleges that there is no evidence to support the stated basis for this provision that inclusion of these criteria results in a better quality product or assures the ability of the development team to successfully plan, permit, develop, construct and bring a project into service in the local Montana building environment.


RESPONSE #1:  The board disagrees with the comment. The board does not believe that the Montana Presence provision discriminates against out-of-state developers and professionals.  The provision does not require an applicant, developer, or professional to be a Montana business, entity, or resident. It merely considers whether the applicants and its team members have familiarity and experience with development or project operation in Montana, as demonstrated by owning an affordable housing project in Montana or by maintaining an office, operation, or other presence in Montana.  This provision is only one of many considerations involved in selecting projects for an award of tax credits and does not deprive out-of-state applicants from consideration for or receiving an award of tax credits.  Out-of-state applicants may receive points for Montana Presence and may receive tax credits. 


The board believes that Montana Presence as defined in the QAP provision is a proper and relevant consideration.  Conditions faced by developers and professionals, the particular legal, regulatory, political, environmental hurdles, and other requirements that must be addressed in developing, permitting, constructing, and operating a project vary from state to state.  It is self-evident that having experience and familiarity with planning, permitting, developing, constructing, and operating projects in Montana is beneficial and desirable in applicants seeking to complete a quality project within time limits and in compliance with all requirements.  Again, this is only one of many factors considered, but the board believes it is proper and relevant to consider such experience in selecting projects to receive tax credit awards.  The QAP's Montana Presence will be adopted as proposed.


COMMENT #2:  The commenter also opposes adoption of the 2013 Qualified Allocation Plan (the QAP), proposed to be incorporated by reference into ARM 8.111.602, because the commenter alleges that the QAP as adopted includes vague and ambiguous evaluation criteria which implicitly vest discretion in board staff to make scoring decisions.  The commenter alleges that, in past allocations, the staff have negated or ignored scoring criteria without notice to or review by the board.  The commenter states that the QAP does not address these issues.


RESPONSE #2:  In developing the adopted 2013 QAP, board staff and the board considered FHVR's various allegations regarding both the 2012 and the proposed 2013 QAP language.  The board disagrees that the adopted QAP does not address alleged vagueness and ambiguities pointed out by FHVR.  Although the board and staff did not and do not agree with many of FHVR's allegations in this regard, the QAP evaluation criteria language was substantially revised in many areas to address such alleged ambiguities, vagueness and other matters.  This includes many of the areas that FHVR alleged were deficient.


The board disagrees that the QAP improperly vests discretion in the staff.  The board has tasked the staff with reviewing, evaluating, and scoring the tax credit applications.  What FHVR refers to as the exercise of "discretion" is, in the board's view, merely construction, interpretation, and application of the QAP language, activities properly within the role of board staff in carrying out its authorized tasks.  The QAP language does not authorize board staff to negate or ignore scoring criteria and the board does not believe it is necessary to include any language to address such unauthorized action by staff.  The board will adopt the QAP as proposed.


COMMENT #3:  The commenter opposes the proposed amendment to ARM 8.111.603(5), alleging that it attempts to deny applicants important due process protections.  The commenter requests that the board amend the rule to provide a right to request a full Montana Administrative Procedure Act (MAPA) contested case hearing and review by the board.  The commenter states that these protections at the agency level would give applicants who did not receive a tax credit award an opportunity to resolve the issues before the tax credits are allocated.  The commenter states that the board would also be able to consider the applicant's position without the expense and time required by formal litigation.  If the process was litigated despite the hearing, complying with MAPA provides the reviewing court with the appropriate record, which would likely accelerate the litigation.


RESPONSE #3:  The board disagrees with the comment.  The proposed amendment to ARM 8.111.603(5) is not a substantive change, but merely clarifies the rule language to address FHVR's argument that the reference to a "hearing" triggers a MAPA contested case hearing.  There is no legal requirement that requires a contested case hearing or any similar litigation-style hearing for making the tax credit award determination.  Moreover, there is no property interest in an award of low income housing tax credits and, therefore, there are no due process requirements that the board adopt or follow such formal procedures.  The board does not believe that adoption of formal contested case procedures would result in quicker disposition of any litigation, but likely would create considerable additional expense and delay for applicants and the board, and, ultimately, for the low income Montanans who are the intended beneficiaries of tax credit projects.  The current process allows for informal consideration of issues and positions, and the board does not believe that formal litigation procedures are required or appropriate.  The board declines to adopt such litigation procedures in the tax credit award process and will adopt the rule as proposed.


COMMENT #4:  The commenter states that it supports the proposed amendment to ARM 8.111.603(6), "except to the extent it implicitly allows the board to comply with the requirements to hold a full hearing before awarding credits."


RESPONSE #4:  As indicated in response to Comment 3, there is no legal requirement for a "full" contested case hearing as part of the tax credit award process.  The proposed amendment is designed to assure that, at the tax credit award meeting, applicants are provided with an opportunity to respond to any negative comments regarding their respective projects or applications.  This response opportunity is not a "hearing" right or a right to additional or formal procedure.  It simply provides an applicant an opportunity to address the board at the meeting in response to any negative comments.  This amendment does not otherwise change the award process, and neither establishes any hearing requirement or eliminates any (nonexistent) hearing right.  The board will adopt the rule as proposed.




/s/ Marty Tuttle                                               /s/ Dore Schwinden             

MARTY TUTTLE                                           DORE SCHWINDEN

Rule Reviewer                                               Director

                                                                        Department of Commerce



Certified to the Secretary of State December 10, 2012.


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