ADMINISTRATIVE RULES REVIEW COMMITTEE Rules Digest -- August 1999 Scheduled for committee review - September 15, 1999 - Room #1 For further information, please contact Joe Royce, Legal Counsel, Administrative Rules Review Committee

HIGHLIGHTS IN THIS ISSUE:

ATTORNEY GENERAL Condemnation: statement of rights

DENTAL EXAMINERS Administration of nitrous oxide

ECONOMIC DEVELOPMENT DEPARTMENT CDBG: contingency fund

ECONOMIC DEVELOPMENT DEPARTMENT Community planning & development fund

HUMAN SERVICES DEPARTMENT HAWK-I revisions

INSURANCE DIVISION Viatical settlement contracts

IOWA FINANCE AUTHORITY Low-income housing tax credits

UTILITIES DIVISION "Slamming" & "cramming"

TREASURER LIFT program

As part of the condemnation process House file 476 requires that the acquiring agency provide the owner of the private property with a statement of their individual rights to be included with the notice of condemnation. The attorney general is required to adopt rules prescribing a statement of rights which may be used in substantial form by any person required to provide the statement by this section. This notice enumerates twelve rights, gleaned from Constitution and statute; these include the right to:

• Just compensation;
• An offer not lower than the lowest appraised value;
• Receive a copy of the agency's appraisal;
• Accompany at least one of the agency appraisers;
• Participate in good faith negotiations prior to condemnation proceedings;
• A determination of just compensation by an impartial board and the right to appeal its decision into district court;
• A special review by the board if the land is agricultural and being condemned for industrial purposes;
• Payment of an agreed price or a deposit on the condemnation award before being required to surrender the property;
• Reimbursement for expenses incidental to the transfer of title;
• Reimbursement for certain litigation expenses if the ultimate award is significantly larger than the agency offer;
• At least ninety days written notice to vacate an occupied property;
• Relocation services and payments.

This list does not claim to be all-inclusive; it specifically notes that it is no substitute for the advise of an attorney.

In a previous 1998 rulemaking proposal a hygienist could monitor the condition of patients under nitrous oxide, but only when the dentist was in the "immediate vicinity". Hygienists protested this was unworkable and unfair, noting that the whole point of allowing auxiliary personnel to monitor was to allow the dentist to work elsewhere; they further contended that hygienists, being highly trained, should have greater latitude. In this new version the board requires the dentist to induce the anesthesia but allow the hygienist to monitor and adjust the medication. The dentist must be available for "consultation or treatment".

The Community Development Block Grant fund has long reserved up to $500,000 to fund projects that address an "imminent threat" to public health, safety or welfare requiring immediate corrective action. The department, on an emergency basis now replaces this program with an allocation up to 5 percent of funds for projects addressing threats to public health and safety and opportunities that would be lost without immediate assistance. Note this new provision is far broader than the "imminent threat" language. The new contingency fund assists communities experiencing a threat to public health, safety or welfare "that necessitates immediate corrective action" sooner than can be accomplished through normal CDBG procedures. Additionally, these funds are now available to communities with an immediate community development opportunity that necessitates action sooner than can be accomplished through normal funding procedures. Up to 5 percent of CDBG funds may be used for this purpose. For each of these categories four brief criteria are set out.

The department proposes to combine several existing rural assisting programs into a single chapter. House File 745 has appropriated over $1,000,000 for these various projects. The community planning & development fund is available to local government and economic development groups. Awards may be up to $50,000 over a three year period. Applicants must provide a 25% match. The program is not designed to fund that actual project itself, the program trains participants to develop projects. Funding is available:

• To hire staff or consulting services for community development or for new systems of delivering governmental services;
• To conduct feasibility studies concerning development activities;
• To conduct marketing studies;
• To purchase educational or training material for economic/community development;
• To fund pilot studies for economic/community development;
• For strategic planning.

Application are evaluated according to a point system which has a maximum 700 points; with a minimum of 400 points to be considered for funding. Expenses related to a particular project are not eligible under this program.

This proposal contains a series of amendments to the Hawk-I program. Under the current rules eligibility is based on 185 percent of the poverty guideline, using gross income. The amendment in effect raises this limit by allowing a standard 20% deduction to gross income. The proposal also provides that a child who is voluntarily excluded from the household {under the medicaid program} due to the child's excess income or resources can participate in the HAWK-I program if otherwise eligible.

The Aids epidemic has sparked an upsurge in a previously obscure financial instrument---the viatical settlement. Under this arrangement a terminally-ill individual will assign the death benefit from a life insurance contract to a third party, who pays that individual a sum of money in consideration for that benefit. When the individual dies that third party then collects the death benefit. There is some level of speculation in these contracts, since there value as an investment depends entirely on how long the individual lives. If a terminally ill patient goes into indefinite remission, the viatical contract can be a poor investment indeed. The legislature has enacted Senate File 410 to ensure that the sale of these contracts, or fractional interests in these contracts, is regulated as a security.

The rules emphasize a full disclosure of the risks inherent in these contracts, most specifically the difficulty in predicting a rate of return. The rules then outline a laundry list of issues that must be disclosed to a potential contract buyer, including such things as:

• Who pays the insurance premiums;
• What happens if the insurance policy itself is rendered null and void;
• How has life expectancy been estimated;
• Who is monitoring the insured individuals condition.

The authority proposes a complete revision of its low-income housing tax credit program {Chapter 12}; this proposal will replace the sketchy current provisions, unamended since 1991. This program is actually established by Section 42 of the federal Internal Revenue Code. Iowa Code §16.52 provides that the finance authority is the housing credit agency for the allowance of low-income housing credit under the state housing credit ceiling established by the federal government; the ceiling is population based at the rate of $1.25 per person. Iowa's ceiling for 1999 is $3.6 million in credits. Traditionally, developers submitted application(s) to construct new rental housing projects or to rehabilitate existing buildings. At least 40% of the units must be rented to households earning less than 60% of the median income for a minimum period of 15 years. The applicants receiving an award of tax credits receive ten years of federal income tax benefits, which they sell to investors for approximately 70% to 75% of their total value.

In 1999 several applicants appealed the authority's decision to award credits, triggering a contested case. The litigants contended that statute-mandated rules were not in place to ensure an equitable decision. The authority's rulemaking obligation is specific in Iowa Code § 16.52(2), which provides:

2. The authority shall adopt rules and allocation procedures which will ensure the maximum use of available tax credits in order to encourage development of low-income housing in the state. The authority shall consider the following factors in the adoption and application of the allocation rules:
a. Timeliness of the application
b. Location of the proposed housing project.
c. Relative need in the proposed area for low-income housing.
d. Availability of low-income housing in the proposed area.
e. Economic feasibility of the proposed project.
f. Ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought.
The authority shall adopt rules specifying the application procedure and the allowance of low-income housing credits under the state housing credit ceiling.

As part of those contested cases, all successful applicants were offered an opportunity to intervene in the litigation. Ultimately, the board decided to withdraw all 1999 awards until a proper set of rules were implemented, thus assuring an equitable allocation process.

The stated purpose of the program is to provide a tax-credit incentive to developers to construct, acquire or substantially rehabilitate affordable rental housing units throughout the state for low-income Iowans. Individuals or families must have an income that is at 60 percent or below the area median gross income. The rental units must remain in compliance for a minimum period of fifteen years; note that a project offered at only fifteen years gets no scoring points for that particular criteria. Ten percent of the funds are set-aside for non-profit projects.

The rules set out eight objectives:

• To assist in the creation of affordable housing units for individuals and families at the lowest income levels for the longest periods of time.
• To assist in the creation of affordable housing units in areas of the greatest needs for such housing.
• To encourage the preservation and rehabilitation of existing affordable housing units.
• To encourage the construction of new affordable housing units.
• To encourage the efficient use, leveraging, and coordination of all funding and incentives to finance low-income development.
• To encourage the efficient use of tax credit financing to leverage other forms of public financing.
• To produce the highest number of low-income housing units in the state on an annual basis.
• To assist in the creation of quality, decent, safe and affordable housing units for limited income individuals and families at reasonable costs.

The highlights of this program are the evaluation criteria, set out in rule 12.9, and the "other considerations" set out in rule 12.10. The proposed rules set out detailed application requirements as well as selection and scoring provisions. As set out in rule 12.9, applications are reviewed based on dozens of individual criteria items, each with a scoring point value. Those criteria seem to follow the eight objectives outlined in the introduction to the rules.

The criteria are followed by a series of "other considerations"---circumstances where an application may be rejected regardless of its point ranking {rule 12.10}. These criteria have been applied in the past, but now are being set out in rule form. Some are obvious and non-controversial, such as a previous history of non-compliance with the law, an inability to complete a project, housing market saturation, etc. Others embody more subjective policy decision-making and should be carefully considered. For example, rule 12.10(6) provides that the authority may decide to fund one or two projects per cycle per county. This consideration is ambiguous because the authority may or may not decide to fund multiple projects, in its own discretion. This rules does not channel or outline the agencies discretion in making this decision.

Subrule 12.10(7) provides that no single applicant can receive more than $500,000 in credits or three projects in a single cycle. Subrule (8) provides that no developer may be awarded credits in excess of 10% of the total. Such limitations are perfectly reasonable in that they maximize applicant participation, but those restrictions have nothing to do with the eight basic goals of the program set out in rule 12.2.

Lastly, subrule 2.10(3) states that a project may not be awarded credits if it is not "preferred" by state or federal government units or political subdivisions. That term has no real meaning; it does not exactly mean opposed to the project, but that would seem to be the intent. Perhaps the term should be replaced by a more definitive phrase. Moreover, the subrule does not reveal how this lack of preference is conveyed to the authority.

House File 588 attempts to deal with the telecommunication problems of "slamming" and "cramming". The Act grants the Utilities Division the authority, notwithstanding the deregulation of communications services or facilities, to adopt rules protecting consumers from unauthorized changes in telecommunications service. The unauthorized changes include the designation of a new provider of a telecommunications service to a consumer {slamming}, including the initial selection of a service provider, and includes the addition or deletion of a telecommunications service for which a separate charge is made to a consumer account {cramming}.

Subrule 22.23(2) prohibits "slamming" and "cramming", and provides for verification of all changes to a customer account, along with customer notification of any such changes. Changes made at the request of a provider must be verified using one of the three FCC-approved verification procedures. Changes made as a result of a direct customer request to the executing service provider may be verified using the FCC procedures or through the internal records of the executing service provider, if those records contain sufficient information to establish the date and time of the request and the identity of the requesting customer. The proposed rules require that all verifications must be maintained for at least two years from the date the change is implemented. Verification of a preferred carrier freeze, however, must be maintained for the life of the freeze, since a customer may not be aware of an unauthorized freeze until the customer tries to change the service.

The proposed rules require customer notification of all changes in service within 30 days of the effective date of the change. The notice must clearly and conspicuously identify the change, any charge or fee associated with the change, and the name and toll-free contact number of the service provider responsible for the change.

House File 779 creates a traditional livestock producers linked investment loan program to increase the availability of lower cost loans to "traditional livestock producers". This term means persons who own and operate livestock subject to care and feeding at a livestock operation in which they hold a legal interest. These producers must make daily management decisions and perform physical work which significantly contributes to the care and feeding of the livestock. Each certificate of deposit under this program is for one year and can be renewed for three years. The maximum loan is $300,000.

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Last update: TUE Aug 31 1999
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