TITLE 40.SOCIAL SERVICES AND ASSISTANCE

Part 1. TEXAS DEPARTMENT OF HUMAN SERVICES

Chapter 20. COST DETERMINATION PROCESS

40 TAC §20.112

The Texas Department of Human Services (DHS) proposes an amendment to §20.112, concerning attendant compensation rate enhancement, in its Rate Analysis chapter. The purpose of the amendment is to clarify the definition of an attendant, add the Deaf Blind Multiple Disabilities Waiver program, and clarify the enrollment process. The amendment also revises the enrollment process to allow enrollments to "roll over" unchanged to the following year, unless the provider changes their enrollment status during the open enrollment period and revises the procedures for enrolling new facilities. The proposal states that a contract on vendor hold for 60 days for failure to submit an accountability report will become a nonparticipant until the report is submitted and the recoupments are made. Detail was added to the description of the calculation of the attendant compensation rate component to better describe the actual calculation. The proposal clarifies that, when a provider serves clients in both the Residential Care (RC) program and the Community Based Alternatives (CBA) Assisted Living/Residential Care (AL/RC) program in a single facility, the spending requirement is determined for both programs together and not separately. The proposal also clarifies the effective date for contractors who voluntarily withdraw contracts from being participants or request to reduce the enhancement levels and clarifies the group or individual status of a provider that acquires a participating contract through a contract assignment.

The Texas Health and Human Services Commission (HHSC) is simultaneously proposing a related amendment to 1 TAC §355.112 in this issue of the Texas Register .

Eric M. Bost, Commissioner, has determined that for the first five- year period the section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Mr. Bost also has determined that for each year of the first five years the section is in effect the public benefit anticipated as a result of adoption of the proposed rules will be that providers will be given greater clarification of the definition of direct care staff; the enrollment process will be easier for those providers who do not want to change their enrollment status; the enrollment process has been clarified; and Deaf Blind Multiple Disabilities contracts will be able to participate and receive enhanced rates. This revision will require a provider desiring to enroll as a participant under a new contract to submit an enrollment contract amendment, rather than being enrolled automatically. The proposal will remove a contract from participation and will stop paying higher participation rates if the provider is on vendor hold for more than 60 days for failure to submit an accountability report. The calculation of attendant compensation is described in greater detail under the proposed rule. The proposal clarifies for CBA AL/RC and RC providers that, when they operate both programs in one facility, the spending requirement is based on the entire facility. The proposal clarifies the effective date of a reduction in the reimbursement rate of a contractor who voluntarily withdraws a contract from participation or requests to reduce the enhancement level of a contract. Finally, the proposed rule clarifies the group or individual status of a provider that obtains a contract through a contract assignment. There will be no adverse economic effect on large, small, or micro businesses, because the proposal is a clarification of administrative practices. There is no anticipated economic cost to persons who are required to comply with the proposed section.

Questions about the content of this proposal may be directed to Alisa Jacquet at (512) 438-4952 in DHS's Rate Analysis Department. Written comments on the proposal may be submitted to Supervisor, Rules and Handbooks Unit-120, Texas Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, within 30 days of publication in the Texas Register .

Under §2007.003(b) of the Texas Government Code, the department has determined that Chapter 2007 of the Government Code does not apply to these rules. Accordingly, the department is not required to complete a takings impact assessment regarding these rules.

The amendment is proposed under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Government Code §531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds.

The amendment implements the Human Resources Code, §§22.001- 22.030 and §§32.001-32.042.

§20.112.Attendant Compensation Rate Enhancement.

(a)

Eligible programs. Providers contracted in the Primary Home Care, including Family Care (PHC/FC); Day Activity and Health Services (DAHS); Residential Care (RC); Community Living Assistance and Support Services (CLASS) - Direct Service Agency; Community Based Alternatives (CBA) - Home and Community Support Services (HCSS); Deaf-Blind Multiple Disabilities Waiver (DBMD); Consumer-Managed Personal Assistance Services (CMPAS) and CBA - Assisted Living/Residential Care (AL/RC) programs are eligible to participate in the attendant compensation rate enhancement.

(b)

Definition of attendant. An attendant is the unlicensed caregiver providing direct assistance to the clients with Activities of Daily Living (ADL) and Instrumental Activities of Daily Living (IADL).

(1)

(No change.)

(2)

Attendants do not include the director, administrator, assistant director, assistant administrator, clerical and secretarial staff, professional staff, other administrative staff, licensed staff, attendant supervisors, cooks and kitchen staff, maintenance and groundskeeping staff, activity director, and laundry and housekeeping staff. In the case of PHC/FC, CLASS, CBA HCSS, and DBMD staff other than attendants may deliver attendant services and be considered an attendant if they must perform attendant services that cannot be delivered by another attendant to prevent a break in service.

(3)

(No change.)

(4)

An attendant also includes medication aides in the RC and AL/RC program.

(c)

Attendant compensation cost center. This cost center will include employee compensation, contract labor costs, and personal vehicle mileage reimbursement for attendants as defined in subsection (b) of this section.

(1)

Attendant compensation is the allowable compensation for attendants defined in §20.103(b)(1) of this title (relating to Specifications for Allowable and Unallowable Costs [ Compensation of Employees ]) and required to be reported as either salaries and/or wages, including payroll taxes and workers' compensation, or employee benefits. Benefits required by §20.103(b)(1)(A)(iii) of this title (relating to Specifications for Allowable and Unallowable Costs) to be reported as costs applicable to specific cost report line items, except as noted in paragraph (3) of this subsection, are not to be included in this cost center.

(2)-(3)

(No change.)

(d)

(No change.)

(e)

Open enrollment. Open enrollment begins on the first day of July and ends on the last day of that same July preceding the rate year for which payments are being determined. The Texas Department of Human Services (DHS) may conduct additional enrollment periods during a rate year.

(f)

Enrollment contract amendment. An initial enrollment contract amendment is required from each provider choosing to participate in the attendant compensation rate enhancement. [ All contracted providers must submit an enrollment contract amendment during the open enrollment period. ] On the initial enrollment contract amendment the provider must specify for each contract a [ his ] desire to participate or the desire [ his desire ] not to participate. The participating provider must specify for each program [ if he wishes ] to have all participating contracts be considered as a group or as individuals [ individually ] for purposes related to the attendant compensation rate enhancement. For the PHC/FC program, the participating provider must also specify if he wishes to have either priority 1, nonpriority, or both priority 1 and nonpriority services participating in the attendant compensation rate enhancement. If the PHC/FC provider selects to have their contracts participating as a group, then the provider must select to have either priority 1, nonpriority, or both priority 1 and nonpriority services participate for the entire group of contracts. For providers delivering services to both RC and CBA AL/RC clients in the same facility, participation includes both the RC and CBA AL/RC programs. After initial enrollment, participating and nonparticipating providers may request to modify their enrollment status during any open enrollment period. A nonparticipant can request to become a participant; a participant can request to become a nonparticipant; a participant can request to change its participation level; a provider whose participating contracts are being considered as a group can request to have them considered as individuals; and a provider whose participating contracts are being considered as individuals can request to have them considered as a group. Requests to modify a provider's enrollment status during an open enrollment period must be received by DHS's Rate Analysis Department by the last day of the open enrollment period as per subsection (e) of this section. Providers from which DHS's Rate Analysis Department has not received an acceptable request to modify their enrollment by the last day of the open enrollment period will continue at the level of participation and group or individual status in effect during the open enrollment period within available funds. To be acceptable, an enrollment contract amendment must be completed according to DHS instructions, signed by an authorized signatory as per the DHS Corporate Board of Directors Resolution applicable to the provider's contract or ownership type, and legible. [ The provider also must submit with the contract amendment all required documentation to the DHS in a manner specified by DHS. Any provider failing to submit an acceptable enrollment contract amendment by the end of the open enrollment period will be a nonparticipating contract for the entire rate year following the open enrollment period. ]

(g)

New contracts. For the purposes of this section, for each rate year a new contract is defined as a contract delivering its first day of service to a DHS client on or after the first day of the open enrollment period, as defined in subsection (e) of this section, for that rate year. Contracts that underwent a contract assignment are not considered new contracts. For purposes of this subsection, an acceptable contract amendment is defined as a legible enrollment contract amendment that has been completed according to DHS instructions, signed by an authorized signator as per the Corporate Board of Directors Resolution applicable to the provider's contract or ownership type, and received by DHS's Rate Analysis Department within 30 days of DHS's mailing of notification to the provider that such an enrollment contract amendment must be submitted. New contracts will receive the nonparticipant attendant compensation rate as specified in subsection (m) until: [New contracts. For the purposes of this section, for each rate year a new contract is defined as a contract delivering its first day of service to a DHS client on or after the first day of the open enrollment period, as defined in subsection (e) of this section, for that rate year. Contracts that underwent a contract assignment are not considered new contracts. New contractors must complete the enrollment contract amendment specified in subsection (f) of this section within 30 days of notification by DHS. Any provider failing to submit an acceptable enrollment contract amendment within 30 days of notification by DHS will be a nonparticipating contract for the remainder of the rate year. New contracts will receive the attendant compensation rate as specified in subsection (l) of this section until:]

(1)

for new contractors specifying the desire not to participate on an acceptable enrollment contract amendment, the attendant compensation rate component is as specified in subsection (m) of this section. [ based on the enrollment contract amendment information received, participating contracts will have their attendant compensation rate adjusted effective on the first day of the month following receipt of an acceptable enrollment contract amendment. ]

(2)

for new contractors specifying the desire to participate on an acceptable enrollment contract amendment the [ based on the enrollment contract amendment information received, nonparticipating contracts will have their ] attendant compensation rate component is adjusted as specified in subsections (l) and (n) [ subsection (m) ] of this section retroactive to the first day of their contract.

(3)

for new contracts from which an acceptable enrollment contract amendment is not received, the attendant compensation rate component is as specified in subsection (m) of this section.

(h)

Attendant Compensation Report submittal requirements. Attendant Compensation Reports must be submitted by participating contracted providers as follows.

(1)

Annual report. Participating contracted providers will provide DHS, in a method specified by DHS, an annual Attendant Compensation Report reflecting the activities of the provider while delivering contracted services from the first day of the rate year through the last day of the rate year. This report must be submitted for each participating contract if the provider requested participation individually for each contract; or, if the provider requested participation as a group, the report must be submitted as a single aggregate report covering all participating contracts within one program of the provider. The aggregate report must include contracts that are new, excluded from participation, voluntary withdrawal from participation, and contract assignments, as defined in subparagraphs (B)-(E) of this paragraph, which were part of the group for any portion of the rate year. A participating contract that has been terminated in accordance with subsection (v) of this section or that has undergone a contract assignment in accordance with subsection (w) of this section will be considered to have participated on an individual basis for compliance with reporting requirements for the owner prior to the termination or contract assignment. [ The aggregate report must include excluded from participation, new, and contract assignment contracts (for the legal entity accepting the contract assignment), as defined in subparagraphs (A)-(E) of this paragraph, which were part of the group for any portion of the rate year. A participating contract which has been terminated in accordance with subsection (v) of this section or that has undergone a contract assignment in accordance with subsection (w)(3) of this section will be considered to have participated on an individual basis for compliance with reporting requirements. ] This report will be used as the basis for determining compliance with the spending requirements and recoupment amounts as described in subsection (s) of this section. Contracted providers failing to submit an acceptable annual Attendant Compensation Report within 60 days of the end of the rate year will be placed on vendor hold until such time as an acceptable report is received and processed by DHS. Contracted providers participating for less than a full year must provide Attendant Compensation Reports as follows.

(A)

(No change.)

(B)

In cases where a participating provider changes ownership through a contract assignment [ from one legal entity to another legal entity ], the owner prior to the change of ownership must submit an Attendant Compensation Report, covering the period from the beginning of the rate year to the effective date of the contract assignment as determined by DHS. The owner after the change of ownership must submit an Attendant Compensation report within 60 days of the end of the rate year, covering the period from the effective date of the contract assignment as determined by DHS to the end of the rate year. This report will be used as the basis for determining recoupment as described in subsection (s) of this section.

(C)-(D)

(No change.)

(E)

A participating provider who is a new contractor as per subsection (g) of this section must submit an Attendant Compensation Report within 60 days of the end of the rate year, covering the period from the [ sixty- ]first day of the month following receipt by DHS's Rate Analysis Department of an acceptable enrollment contract amendment as per paragraph (g)(1) of this section [ contract as determined by DHS ] through the end of the rate year.

(2)

Six-month report. Within 60 days of the end of the first six months of the rate year, participating [ Participating ] contracted providers will provide DHS, in a method specified by DHS, a six-month Attendant Compensation Report reflecting the activities of the provider while delivering contracted services from the first day of the rate year through the last day of February of the rate year. [ DHS will place on vendor hold contracted providers failing to submit an acceptable six-month Attendant Compensation Report within 60 days of the last day of February of the rate year until DHS receives and processes an acceptable report. ] The report must be submitted for each participating contract if the provider requested participation individually for each contract; or, if the provider requested participation as a group, the report must be submitted as a single aggregate report covering all participating contracts within one program of the provider. Participating providers will use this six- month report to assist them in determining their level of compliance with the spending requirements and to take any appropriate action necessary to come into compliance with the spending requirements. The provider is responsible for the management of attendant compensation expenditures in compliance with the spending requirements stated in subsection (s) of this section.

(3)

(No change.)

(4)

Vendor hold. DHS will place on hold the vendor payments for any contractor who does not submit an Attendant Compensation Report completed in accordance with all applicable rules and instructions by the due dates described in this subsection. This vendor hold will remain in effect until an acceptable Attendant Compensation Report is received by DHS. Participating contractors who do not submit an annual Attendant Compensation Report completed in accordance with all applicable rules and instructions within 60 days of the vendor hold being placed will become nonparticipants until the first day of the month after all of the following conditions are met:

(A)

the provider submits an acceptable annual Attendant Compensation Report;

(B)

the provider submits a separate Attendant Compensation Report from the beginning of the current rate year to the date they were disenrolled as a participant;

(C)

the provider repays to DHS funds that are identified for recoupment from subsection (s) of this section; and

(D)

DHS receives, in writing by certified mail, a request from the provider to be restored to the participant status.

(i)-(j)

(No change.)

(k)

Enrollment. Providers choosing to participate in the attendant compensation rate enhancement must submit to DHS a signed enrollment contract amendment as described in subsection (f) of this section , before the end of the enrollment period . Participation is determined separately for each program specified in subsection (a) of this section except that for providers delivering services to both RC and CBA AL/RC clients in the same facility, participation includes both the RC and CBA AL/RC programs. For PHC/FC participation is also determined separately for priority 1 and nonpriority services. Participation will remain in effect, subject to availability of funds, until the provider notifies DHS, in accordance with subsection (x) of this section, that it no longer wishes to participate or until DHS excludes the contract from participation for reasons outlined in subsection (u) of this section. Contracts voluntarily withdrawing from participation will have their participation end effective with the date of withdrawal as determined by DHS. Contracts excluded from participation will have their participation end effective on the date determined by DHS.

(l)

Determination of attendant compensation rate component for participating contracts. For each of the programs identified in subsection (a) of this section attendant compensation rate enhancement increments associated with each enhanced attendant compensation level will be determined for participating contracts from subsection (k) of this section. The attendant compensation rate enhancement increments will be determined by taking into consideration quality of care, labor market conditions, economic factors, and budget constraints. The attendant compensation rate enhancement increments will be determined on a per-unit-of-service basis applicable to each program or service. [ Determination of attendant compensation rate component participating contracts. For each of the programs identified in subsection (a) of this section DHS will calculate an attendant compensation rate component from subsection (k) of this section and for the first 60 days of a new contract from subsection (g) of this section as follows. ]

[(1)

Determine for each contract included in the cost report data base used in the determination of rates in effect on September 1, 1999, the attendant compensation cost center from subsection (c) of this section.]

[(2)

Adjust the cost center data from paragraph (1) of this subsection, as specified in §20.108 of this title (relating to Determination of Inflation Indices), to inflate the costs to the prospective rate year.]

[(3)

For each contract included in the cost report data base used in the determination of rates in effect on September 1, 1999, divide the result from paragraph (2) of this subsection by the units of service and multiply the result by 1.044 for all programs in subsection (a) of this section except for RC and AL/RC which are multiplied by 1.07. The result is the attendant compensation rate component for participating contracts and the first 60 days of new contracts.]

[(4)

The cost base from paragraph (1) of this subsection used in determining the attendant compensation rate component will not change over time, except for adjustments for inflation from paragraph (2) of this subsection. DHS may recommend adjustments to the rates in accordance with §20.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs).]

(m)

Determination of attendant compensation rate component for nonparticipating contracts. For each of the programs identified in subsection (a) of this section DHS will calculate an attendant compensation rate component for nonparticipating contracts as follows.

(1)-(2)

(No change.)

(3)

For each contract included in the cost report data base used in determination of rates in effect on September 1, 1999, divide the result from paragraph (2) of this subsection by the corresponding units of service . Provider projected costs per unit of service are rank-ordered from low to high, along with the provider's corresponding units of service. For DAHS the median cost per unit of service is selected. For all other programs the units of service are summed until the median hour of service is reached. The corresponding projected cost per unit of service is the weighted median cost component. The result is multiplied [ and multiply the result ] by 1.044 for all programs in subsection (a) of this section except for RC and AL/RC which is multiplied by 1.07. The result is the attendant compensation rate component for nonparticipating contracts.

(4)

(No change.)

(n)-(r)

(No change.)

(s)

Spending requirements for participating contracts. DHS will determine from the Attendant Compensation Report, as specified in subsection (h) of this section and other appropriate data sources, the amount of attendant compensation spending per unit of service delivered. The providers' compliance with the spending requirement is determined based on the total attendant compensation spending as reported on the Attendant Compensation Report for each participating contract if the provider requested participation individually for each contract. A participating contract that has been terminated in accordance with subsection (v) of this section or that has undergone a contract assignment in accordance with subsection (w)[ (3) ] of this section will be considered to have participated on an individual basis for compliance with the spending requirement for the owner prior to the termination or contract assignment . If the provider specified that he wished to have all participating contracts be considered as a group for purposes related to the attendant compensation rate enhancement, as specified in subsection (f) of this section, compliance with the spending requirement is based on the total attendant compensation as reported on the single aggregate attendant compensation report described in subsection (h) of this section. Compliance with the spending requirement is determined separately for each program specified in subsection (a) of this section , except for providers delivering services to both RC and CBA AL/RC clients in the same facility whose compliance is determined by combining both programs . DHS will calculate recoupment, if any, as follows.

(1)

(No change.)

(2)

The adjusted attendant compensation per unit of service from paragraph (1) of this subsection will be subtracted from the accrued attendant compensation revenue per unit of service to determine the amount to be recouped by DHS. If the adjusted attendant compensation per unit of service is greater than or equal to the accrued attendant compensation revenue per unit of service, there is no recoupment.

(3)

(No change.)

(t)-(v)

(No change.)

(w)

Contract assignments. The following applies to contract assignments.

(1)

Contracts participating under the prior legal entity will continue participation under the legal entity accepting the contract assignment. When the provider or legal entity accepting the contract assignment has their contracts participating as individuals, participation in the attendant compensation rate enhancement confers to the provider or legal entity accepting the contract assignment. When the provider or legal entity accepting the contract assignment has their contracts participating as a group, the contract will participate with the group of the legal entity accepting the contract assignment for purposes related to the attendant compensation rate enhancement. When the new owner has no contracts participating, the individual or group status of participating contracts under the old owner will transfer to the new owner.

[(2)

When the contract assignment is a change only in the organizational structure or name of the legal entity, the provider or legal entity accepting the contract assignment is responsible for the reporting requirements in subsection (h) of this section and for any recoupment amount owed to DHS for the entire rate year identified, even if part of the rate year was under the responsibility of the previous legal entity.]

(2)

[ (3) ] When the contract assignment is an ownership change from one legal entity to a different legal entity, DHS will place a vendor hold on the payments of the existing contracted provider until DHS receives an acceptable Attendant Compensation Report specified in subsection (h)(1)(B) of this section and until funds identified for recoupment from subsection (s) of this section are repaid to DHS. DHS will recoup any amount owed from the provider's vendor payments that are being held. In cases where funds identified for recoupment cannot be repaid by the existing contracted provider's vendor payments that are being held, the responsible entity from subsection (cc) of this section will be jointly and severally liable for any additional payment due to DHS. Failure to repay the amount due [ or submit an acceptable payment plan ] within 60 days of notification will result in placement of a vendor hold on all DHS contracts controlled by the responsible entity and will bar the responsible entity from enacting new contracts with DHS until repayment is made in full.

(x)

Voluntary withdrawal. Participating contracts wishing to withdraw from the attendant compensation rate enhancement must notify DHS in writing by certified mail. The requests will be effective the first of the month following the receipt of the request. Contracts voluntarily withdrawing must remain nonparticipants for the remainder of the rate year [ and are excluded from participation the following rate year ]. Providers whose contracts are participating as a group must request withdrawal of all the contracts in the group.

(y)

Adjusting attendant compensation requirements. Providers that determine that they will not be able to meet their attendant compensation requirements may request to reduce [ a reduction to ] their attendant compensation requirements and associated enhancement payment to a lower participation level by submitting a written request to DHS by certified mail . These requests will be effective the first of the month following [ 30 days from ] the receipt of the request. Providers whose contracts are participating as a group must request the same reduction for all of the contracts in the group.

(z)-(cc)

(No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on May 3, 2001.

TRD-200102530

Paul Leche

General Counsel, Legal Services

Texas Department of Human Services

Earliest possible date of adoption: June 17, 2001

For further information, please call: (512) 438-3108


Part 5. TEXAS VETERANS LAND BOARD

Chapter 175. GENERAL RULES OF THE VETERANS LAND BOARD

The Veterans Land Board of the State of Texas (the "Board") proposes the repeal of Title 40, Part 5, Chapter 175 of the Texas Administrative Code, §175.5 (relating to Appraisal of Land) of the General Rules of the Veterans Land Board and simultaneously proposes a new §175.5 (relating to Appraisal of Land). The proposed new rule provides that property evaluations must be prepared by appraisers approved by the Board, requires that written notice be provided to the seller and the Board when the loan applicant cancels a transaction because of the appraisal, deletes the mandatory requirement that the Board's representative meet a loan applicant on the property to be purchased, permits the applicant to require the appraiser to inspect the property with the applicant, allows the Board to adopt resolutions that establish procedures relating to inspection of property by the loan applicant or the applicant's representative, establishes procedures for requesting re-appraisals, and allows the chairman or executive secretary to waive requirements related to re-appraisals.

The existing rule requires the loan applicant to meet with the Board's appraiser on the property to be purchased. This often introduces unavoidable delays in processing loan applications caused by difficulties in matching the schedule of the loan applicant with the schedule of the appraiser. The proposed new rule requires the loan applicant to personally inspect the land to be purchased, but deletes the requirement that the applicant meet with a representative of the Board. The applicant may require the appraiser to meet the applicant on the tract. Under the proposed new rule, the only instance in which the Board may require the applicant to meet with its representative is in the event of a re-appraisal.

In addition to time delays, in many instances the loan applicant does not live in close proximity to the land being purchased. In such instances, the applicant must miss work and bear the expense of traveling to meet the appraiser on the property.

The Board expects to reduce the time needed to approve loan applications by eliminating the requirement that every loan applicant schedule an appointment to personally meet with the appraiser to inspect the property. The proposed new rule protects the best interests of the Veterans Land Program by describing procedures for personal inspections by the loan applicant, including the requirements for requesting a re-appraisal.

Larry Soward, Chief Clerk of the General Land Office, has determined that for each year of the first five years the proposed repeal and proposed new section are in effect, there will be no negative fiscal implications to state or local government as a result of enforcing or administering the sections.

Larry Soward, Chief Clerk of the General Land Office, has determined that for each year of the first five years the new section as proposed will be in effect, the public will benefit from: (1) a reduction in the amount of time needed to process loan applications, and (2) avoiding the expense of travel and missing work to meet with an appraiser.

Mr. Soward has determined that the proposed repeal and proposed new rule will have no effect on small businesses during each year of the first five years the sections are in effect.

Mr. Soward has also determined that during each year of the first five years the proposed repeal and proposed new rule are in effect, there is no anticipated economic cost to any persons who are required to comply with the sections.

Comments may be submitted to Melinda Tracy, Legal Services, General Land Office of the State of Texas, 1700 N. Congress Avenue, Austin, Texas 78701.

40 TAC §175.5

(Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Veterans Land Board or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The repeal of this section is proposed under the Natural Resources Code, Title 7, Chapter 161, §161.063 and §161.284, which provides authorization for the Board to adopt rules for the Program which it considers necessary and advisable and to adopt rules relating to appraisals.

Natural Resources Code §161.212 and §161.284 are affected by this proposed action.

§175.5.Appraisal of Land.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on May 7, 2001.

TRD-200102562

Larry R. Soward

Chief Clerk, General Land Office

Texas Veterans Land Board

Earliest possible date of adoption: June 17, 2001

For further information, please call: (512) 305-9129


40 TAC §175.5

The new section is proposed under the Natural Resources Code, Title 7, Chapter 161, §161.063 and §161.284, which provides authorization for the Board to adopt rules for the Program which it considers necessary and advisable and to adopt rules relating to appraisals.

Natural Resources Code §161.212 and §161.284 are affected by this proposed action.

§175.5.Appraisal of Land.

(a)

Before property is purchased it shall be appraised for the board by an appraiser approved by the board. The exclusive purpose of the appraisal is to assist the board in determining that its investment will be sufficiently secured. Any improvement existing on the land may be considered by the board in making the appraisal. If improvements are considered in determining the value of the property, the board may in accordance with §175.6(c) of this title (relating to Commitment by the Board) require the purchase of an insurance policy covering fire and hazard losses.

(b)

If the appraisal amount is less than the purchase price agreed upon, the veteran may cancel the transaction. The veteran must provide a written cancellation notice to the seller and the board and request that the board return the down payment and the unused portion of the fee deposits.

(c)

Upon the request of the veteran, the appraiser shall meet with the veteran for a physical inspection of the land to be purchased. Except as provided in subsection (d) of this section, the board may not require that veterans accompany the appraiser. The Board may, by resolution, establish a procedure for veterans to certify they have personally inspected the tracts they are purchasing. This resolution may also provide a procedure for granting a request to permit the veteran's personal representative to inspect the tract for the veteran.

(d)

If the veteran believes that the appraisal contains a mistake, the veteran may request that the land be appraised again. The board shall have the land re-appraised if all the following requirements are satisfied:

(1)

The request for a re-appraisal must be in writing and describe any mistake the veteran believes was made.

(2)

The written request should be accompanied by any documentation supporting the allegation that a mistake was made.

(3)

The re-appraisal fee must be remitted to the board.

(4)

If the board elects to perform another physical inspection of the tract in connection with the re-appraisal, the board may require that the veteran personally accompany the board's representative on that inspection.

(e)

The chairman, or executive secretary, of the board may waive any of the requirements of subsection (d) of this section. The board shall be the sole and final judge regarding any matter associated with the appraisal of the land to be purchased, and the amount of the loan offered to any veteran.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on May 7, 2001.

TRD-200102561

Larry R. Soward

Chief Clerk, General Land Office

Texas Veterans Land Board

Earliest possible date of adoption: June 17, 2001

For further information, please call: (512) 305-9129


40 TAC §175.20

The Veterans Land Board of the State of Texas (the "Board") proposes amendments to Title 40, Part 5, Chapter 175 of the Texas Administrative Code, §175.20 (relating to Delinquencies and Forfeiture Procedures) of the General Rules of the Veterans Land Board. These amendments would change the term "penalty interest" to "delinquent interest," change the term "reinstatement fee" to "reinstatement penalty," define the term "reinstatement penalty," allow the Board to restore the eligibility of a person to participate in the Board's loan programs, allow the Board Chairman to restore in certain instances the eligibility of a person to participate in the Board's loan programs, provide for a usury savings clause, and provide that Board land contracts are subject to the constitution, statutes, and Board rules as they may from time to time be amended.

In the proposed amendments, the term "penalty interest" is being changed to "delinquent interest" because the term "delinquent interest" more accurately describes the interest charged as a result of delinquent payments.

The dollar amount of a "reinstatement fee" is specified in §175.17 (relating to Fees and Deposits), but that rule is currently being proposed for repeal and was published in the April 27, 2001, edition of the Texas Register (26 TexReg 3200), and the simultaneously proposed new §175.17 that will be substituted therefor will not provide for a "reinstatement fee." The term in the proposed amendment to §175.20 is changed to "reinstatement penalty" and is redefined to provide for a penalty amount based on a percentage calculation and is intended to discourage contract forfeitures.

Under current §175.2 (d) (relating to Loan Eligibility Requirements), a person may have only one land loan at a time as a veteran and that loan must be paid in full before he or she may apply for an additional land loan as a veteran. If a person's loan has been forfeited and ordered for sale (and therefore not paid in full), the person would not be eligible to apply for another loan. The proposed amendment to §175.20 (f) (1) would allow the Board to restore the eligibility of a person to participate in the Board's loan programs, notwithstanding §175.2, if that person is able to justify to the Board the circumstances that led to the previous forfeiture and order for sale and that person fulfills the conditions established by the Board for the reinstatement of the eligibility. The proposed amendments to §175.20 (f) (2) and (3) would in certain specified instances allow the Board Chairman, without further approval by the Board, to restore the eligibility of a person to participate in the Board's loan programs. Allowing the Board Chairman to restore the eligibility in these specified instances will provide the Board more time to devote to other Board matters and will allow for a more expeditious restoration of eligibility in the specified instances.

While the Board does not intend to ever charge usurious interest, the proposed amendment to §175.20 (g) to provide for a usury savings clause is to help protect the Board from the negative consequences of any unintended usurious charge.

Board contracts generally refer to the laws and rules of the Board. The proposed amendment to §175.20 (h) to provide that all board contracts are subject to the laws and rules that govern the Board as such laws and rules may from time to time be amended is intended to make Board contracts (at least those entered into on or after the effective date of this proposed amendment) subject to future statutory and rule changes without the need for contract amendments.

The proposed amendments are in the best interest of the Program for the reasons stated above.

Larry Soward, Chief Clerk of the General Land Office, has determined that for each year of the first five years the section as amended is in effect, there will be no negative fiscal implications to state or local government as a result of enforcing or administering the section.

Larry Soward, Chief Clerk of the General Land Office, has determined that for each year of the first five years the section as proposed will be in effect, the public will benefit because the rules will discourage repeated forfeitures and orders for sale, thereby encouraging more efficient loan servicing operations and recouping the costs for time spent on such matters from those who cause the inefficiencies.

Mr. Soward has determined that the proposed amendments will have no effect on small businesses during each year of the first five years the section is in effect.

Mr. Soward has also determined that during each year of the first five years the proposed amendments are in effect, the anticipated economic costs to persons who are required to comply with the section will be minimal, since the deterrent effect of higher penalties will reduce the actual number of recurring forfeitures. In addition, the penalty imposed for a first or second forfeiture are less than that charged under the currently proposed new §175.17, but the penalty for a third or subsequent forfeiture are much higher.

Comments may be submitted to Melinda Tracy, Legal Services, General Land Office of the State of Texas, 1700 N. Congress Avenue, Austin, Texas 78701.

The amendments to the section are proposed under the Natural Resources Code, Title 7, Chapter 161, §§161.061, 161.063, 161.236, 161.317, and 161.320, which authorize the Board to adopt rules for the Program that it considers necessary and advisable, to determine the number of tracts of land that a veteran may purchase, to impose a reinstatement penalty, and to collect interest on delinquent payments.

Natural Resources Code §§161.236, 161.317, and 161.320 are affected by this proposed action.

§175.20.Delinquencies and Forfeiture Procedures.

(a)

Definitions. The following words and terms when used in this section shall have the following meanings, unless the context clearly indicates otherwise:

(1)

Account--The loan account a borrower holds with the Veterans Land Board. The account includes the obligations between the borrower and the board as evidenced by contracts and documents in the borrower's loan file as well as the accounting records of the board. This includes the amount of the unpaid principal balance of the loan, any administrative costs made a part of the loan, unpaid interest, and any delinquent amount.

(2)

Borrower--The person presently obligated to make the loan installment payments set forth in the contract, including the purchaser at a forfeited land sale or the last board-approved assignee of the original veteran purchaser.

(3)

Contract--The contract of sale and purchase between the board and a borrower.

(4)

Current--The account is in good standing with no installments past due.

(5)

Delinquent amount--The total amount needed to bring an account current. This includes all past due installments, administrative costs made part of such past due installments, and all accrued delinquent [ penalty ] interest on all such past due installments. Delinquent [ Penalty ] interest shall accrue on any delinquent amount beginning with the fifth (5th) day after the due date and continuing until the date payment of the entire delinquent amount is received. It does not include the reinstatement penalty [ fee ].

(6)

Forfeiture--The action by which the board declares a borrower to be in breach of his or her contract by virtue of failing to perform a material term of the contract, including, but not limited to, timely payment of the loan installments.

(7)

Installment--The amount of the periodic loan payment specified by the contract.

(8)

Partial Payment Agreement--A borrower's written agreement to clear the delinquent amount on or before a designated date by making payments in addition to the installment amount on scheduled dates as described in the agreement.

(9)

Delinquent [ Penalty ] interest--The interest which accrues on a loan installment which has become delinquent. The delinquent [ penalty ] interest rate is 1.5 percentage points greater than the interest rate on the loan.

(10)

Reinstatement penalty [ fee ]--The amount charged to a borrower (whose contract has been forfeited by the board) in order to reinstate the contract. [ The reinstatement fee covers the costs of notifying the borrower of delinquencies, forfeiture and forfeiture procedures and all other costs of processing the reinstatement of a forfeited contract. ] The reinstatement penalty [ fee ] is in addition to the amount necessary to bring the account current.

(A)

Beginning on the date of the first and any second forfeiture of the contract, each unpaid delinquent installment (of principal and interest combined) will accrue a reinstatement penalty in an amount equal to 1.5 percent per month (or 18 percent per year), until the contract is reinstated.

(B)

Beginning on the date of the third instance and any subsequent forfeiture of the contract, the outstanding principal balance of the contract will accrue a reinstatement penalty in an amount equal to 1.5 percent per month (or 18 percent per year), less the accrued delinquent interest, until the contract is reinstated.

(11)

Sale order date--The date on which the board meets to order a tract advertised for sale, or for lease for mineral development.

(b)

Delinquencies.

(1)

If a scheduled loan installment is not received by the board within four (4) days of the due date stated in the contract, the account becomes delinquent. Any payments received on an account shall be first applied to the delinquent amount. The account continues in a delinquent status until the full amount of the delinquent amount has been received by the board.

(2)

A partial payment agreement may be granted at the discretion of the chairman at any time prior to the date an account is forfeited. From time to time, the board may, by resolution, set guidelines for other conditions under which partial payment agreements may be approved.

(c)

Forfeiture.

(1)

The board is the sole judge whether any contract has been forfeited. An account shall become eligible for forfeiture if:

(A)

it remains in a delinquent status for 30 or more consecutive days; or,

(B)

the contract has been transferred without obtaining the board's permission; or,

(C)

property taxes for all prior years shall not have been paid by May 1 of any year; or,

(D)

the provisions of the Natural Resources Code, Chapter 161, the terms of the contract, or the rules of the board are not satisfied.

(2)

The board must give 30 days written notice to the borrower, the original veteran purchaser (if different from the borrower) and all board approved assignees of the original veteran purchaser, if any, and must specify the reason why the contract is subject to forfeiture. This notice will be sent by certified mail to the last known address of these parties. If the reason for forfeiture is cured or corrected within 30 days the board shall not declare a forfeiture.

(3)

The liability of the original veteran purchaser and any subsequent assignee or assignees is joint and several, but the original veteran purchaser is primarily liable for payment of the money under the contract.

(4)

A forfeiture shall be effective at the same time the board meets and adopts a resolution forfeiting the contract. At that time, the land and all payments previously made are forfeited.

(5)

When the forfeiture is effective, the full title to the land shall revest in the board. Any interest in the mineral estate which the board acquired at purchase shall likewise revest in the board. The board shall recognize, and continue in force and effect, any outstanding valid oil, gas, or mineral lease and collect all rentals, royalties, or other amounts payable under the lease. The board may also lease the land on terms it considers proper. The proceeds received from a lease on a forfeited tract shall be credited to the Veterans Land Fund; however, the chairman is authorized to credit any portion of the lease proceeds to the delinquent amount and unpaid principal of a loan as part of a borrower's attempt to reinstate his or her contract.

(d)

Reinstatement.

(1)

From time to time, the board by resolution may set additional guidelines and reasonable requirements which must be satisfied before reinstatement may be granted (e.g., evidence that there are no delinquent taxes due as of the date and time of reinstatement, etc.).

(2)

The borrower, the original veteran purchaser (if different from the borrower) , and all board approved assignees may reinstate the contract at any time before the sale order date if the reason for forfeiture was failure to keep the account current. If the contract was forfeited for any other reason, the board in its discretion may determine there is no right to reinstate the contract.

(A)

Any person wishing to exercise a right of reinstatement shall submit to the board payment of the delinquent amount, the reinstatement penalty [ fee ] and other costs incident to the reinstatement as prescribed by the board.

(i)

If there is only one person who has a right to reinstate a contract (there having been no board approved assignments of the contract), the chairman of the board may in his or her discretion reinstate the contract immediately upon receipt of payment of the delinquent amount, the reinstatement penalty [ fee ] and other costs prescribed by the board.

(ii)

If more than one person appears to have a right to reinstate the same contract, reinstatement shall not be granted prior to the time the board meets on the sale order date. In this event, all persons wishing to reinstate the same contract are required to submit to the board payment of the delinquent amount, reinstatement penalty [ fee ] and other costs prescribed by the board. Any person failing to satisfy this requirement by the sale order date may, in the board's discretion, be deemed to have failed to exercise his or her right to reinstate the contract. Any monies and documents submitted by such persons shall be returned. If there are still two or more persons who satisfy the requirement to reinstate the same contract, the board shall decide, in its discretion, who may reinstate. Such determinations shall be made on a case by case basis.

(B)

A person who desires to reinstate a contract but is unable to submit full payment of the delinquent amount before the anticipated sale order date, may petition the chairman to postpone the sale order date for the tract. The chairman in his or her sole discretion may grant or deny such a petition.

(i)

In granting such a petition, the chairman may set reasonable conditions which must be satisfied by a stated deadline. Such conditions may include, but are not limited to, the requirement that the requesting party enter into a partial payment agreement.

(ii)

If the requesting party satisfies all conditions set by the chairman by the stated deadline, the account shall be reinstated.

(iii)

If the requesting party fails to satisfy all conditions set by the chairman by the stated deadline, the sale order date for the tract may be reset. If the requesting party thereafter fails to pay the delinquent amount in full prior to the sale order date, all monies paid under the partial payment agreement shall be forfeited to the board.

(3)

Any person failing to make a timely submission shall lose his or her right of reinstatement.

(4)

The right to reinstate a contract is extinguished when the tract has been ordered advertised for sale (or for lease for mineral development). However, the borrower, the original veteran purchaser (if different from the borrower), or any board approved assignee may petition the board to permit reinstatement.

(A)

The board, in its discretion, may reinstate the contract under conditions it deems appropriate, including, but not limited to, requiring that the account be paid in full simultaneously with the reinstatement.

(B)

Stay of Sale.

(i)

The board, in its discretion, may stay (postpone) sale of the tract. The board may set conditions which must be satisfied before reinstatement will be permitted. The chairman is authorized by the board to make a written agreement with the party seeking reinstatement setting forth all conditions for reinstatement, including a date by which each condition must be satisfied. The conditions may include, but are not limited to, the following: payment of the delinquent amount, payment of the reinstatement penalty [ fee ] (including costs incident to the reinstatement), and submission of tax certificates evidencing that there are no delinquent taxes on the land. When the board determines that all conditions set forth in the agreement have been satisfied, it shall reinstate the contract. Until the board's conditions have been satisfied, the contract will remain in a forfeited status, but the sale of the tract shall be stayed.

(ii)

The stay may be revoked at any time by the board if the borrower fails to satisfy any of the conditions set forth in the agreement.

(iii)

The board shall be the sole judge of whether the conditions of the agreement have been satisfied.

(5)

The board expressly authorizes the chairman to reinstate any account at any time prior to receipt of full payment of the delinquent amount if he or she deems it to be in the best interest of the Veterans Land Program.

(e)

Re-amortization.

(1)

The chairman, in his or her discretion, may permit a borrower to re-amortize his or her loan to incorporate all or part of the delinquent amount into the unpaid balance.

(2)

A re-amortization shall be granted only on the condition that the borrower's loan has not been previously re-amortized.

(3)

The chairman's consent to re-amortize shall state the new balance and the term over which it is to be re-amortized.

(f)

Restoring Eligibility to Participate after Order for Sale.

(1)

A person who is ineligible to participate in loan programs because of a past forfeiture and order for sale, may make a written request to the board for a restoration of the person's eligibility. The request must detail the circumstances which led to the prior forfeiture and order for sale and justify such request. If granted, the requestor must fulfill any conditions that the board, in its sole discretion and notwithstanding any other provisions of this chapter, establishes or determines are necessary to restore such eligibility.

(2)

Notwithstanding any other provisions of this chapter, the board authorizes the chairman to restore a person's eligibility to participate in board loan programs, as a veteran or non-veteran as the case may be, without further board action if the person requesting the restoration of eligibility:

(A)

was not the account holder at the time the account was forfeited and ordered for sale, because the board had earlier approved a transfer of the account to a new account holder and the account was current at the time of transfer; or

(B)

was the account holder at the time of forfeiture and order for sale and:

(i)

the board has sold the property that was the subject of the forfeited account; and

(ii)

the person requesting the restoration of eligibility pays to the board the unpaid interest, including delinquent interest, and reinstatement penalty that had accrued on the forfeited account as of the date the account was ordered for sale.

(g)

Savings clause. Interest charged and collected on any contract will not exceed the maximum rate or amount of nonusurious interest that may be contracted for, taken, reserved, charged, or received under any law. Any interest in excess of that maximum amount will be credited on the principal amount of the contract or, if the principal amount has been paid, refunded to the borrower. On any acceleration or required or permitted prepayment any excess interest will be canceled automatically as of the acceleration or prepayment or, if the excess interest has already been paid, credited on the principal amount or, if the principal amount has been paid, refunded to the borrower. This subsection shall prevail over other provisions in this chapter and any instruments concerning the debt.

(h)

All contracts are subject to the provisions of the constitution, statutes, and rules governing the board, as such constitution, statutes, and rules may from time to time be amended.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on May 7, 2001.

TRD-200102563

Larry R. Soward

Chief Clerk, General Land Office

Texas Veterans Land Board

Earliest possible date of adoption: June 17, 2001

For further information, please call: (512) 305-9129