Volume 35 Number 2 January 8, 2010 Pages 141 - 298

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Secretary of State – Hope Andrade

Director – Dan Procter

a section of the Staff Office of the Secretary of State Leti Benavides P.O. Box 13824 Dana Blanton Austin, TX 78711-3824 Kris Hogan (512) 463-5561 Belinda Kirk FAX (512) 463-5569 Roberta Knight Jill S. Ledbetter http://www.sos.state.tx.us Juanita Ledesma [email protected] Preeti Marasini

IN THIS ISSUE GOVERNOR LICENSING AND ENFORCEMENT--SPECIFIC Appointments...... 147 SUBSTANTIVE RULES ATTORNEY GENERAL 22 TAC §203.30...... 178 TEXAS DEPARTMENT OF INSURANCE Requests for Opinions...... 149 Opinions...... 149 PROPERTY AND CASUALTY INSURANCE PROPOSED RULES 28 TAC §5.4101...... 180 28 TAC §5.4201...... 180 TEXAS HEALTH AND HUMAN SERVICES COMMISSION 28 TAC §5.4401...... 181 REIMBURSEMENT RATES 28 TAC §5.4501...... 181 1 TAC §355.8043...... 153 28 TAC §§5.4902 - 5.4908, 5.4911...... 181 1 TAC §355.8043...... 153 OFFICE OF INJURED EMPLOYEE COUNSEL TEXAS DEPARTMENT OF AGRICULTURE GENERAL ADMINISTRATION MARKETING AND PROMOTION 28 TAC §276.6...... 201 4 TAC §17.60...... 155 ADOPTED RULES TEXAS DEPARTMENT OF BANKING STATE OFFICE OF ADMINISTRATIVE HEARINGS PREPAID FUNERAL CONTRACTS RULES OF PROCEDURE FOR APPRAISAL REVIEW BOARD APPEALS 7 TAC §25.13...... 156 1 TAC §§165.1, 165.3, 165.5, 165.7, 165.9, 165.11, 165.13, 165.15, 7 TAC §25.14...... 158 165.17, 165.19, 165.21, 165.23, 165.25, 165.27, 165.29 ...... 203 OFFICE OF CONSUMER CREDIT COMMISSIONER TEXAS DEPARTMENT OF BANKING CONSUMER LOANS PREPAID FUNERAL CONTRACTS 7 TAC §83.310...... 161 7 TAC §§25.1 - 25.5, 25.7 ...... 204 MOTOR VEHICLE INSTALLMENT SALES TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE 7 TAC §84.205...... 164 LENDING 7 TAC §84.611...... 166 MORTGAGE BANKER REGISTRATION AND RULES OF OPERATION FOR PAWNSHOPS RESIDENTIAL MORTGAGE LOAN OFFICER LICENSING 7 TAC §85.211...... 169 7 TAC §§81.1 - 81.6 ...... 215 PROPERTY TAX LENDERS 7 TAC §§81.7 - 81.9 ...... 215 7 TAC §81.10...... 216 7 TAC §89.310...... 172 7 TAC §81.11...... 216 TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS 7 TAC §81.12, §81.13...... 216 ADMINISTRATION 7 TAC §81.14...... 216 10 TAC §1.23...... 175 7 TAC §81.15...... 217 TEXAS HIGHER EDUCATION COORDINATING 7 TAC §81.16...... 217 BOARD 7 TAC §81.17...... 217 RULES APPLYING TO ALL PUBLIC INSTITUTIONS 7 TAC §81.18...... 217 OF HIGHER EDUCATION IN TEXAS 7 TAC §81.19...... 218 19 TAC §§4.285 - 4.293 ...... 175 TEXAS DEPARTMENT OF HOUSING AND STUDENT SERVICES COMMUNITY AFFAIRS 19 TAC §21.2100...... 177 COMPLIANCE ADMINISTRATION TEXAS FUNERAL SERVICE COMMISSION 10 TAC §60.102, §60.105...... 218

TABLEOFCONTENTS 35TexReg143 PUBLIC UTILITY COMMISSION OF TEXAS 34 TAC §7.81...... 253 SUBSTANTIVE RULES APPLICABLE TO RULE REVIEW ELECTRIC SERVICE PROVIDERS Proposed Rule Reviews 16 TAC §25.475...... 221 Texas Department of Banking ...... 255 TEXAS DEPARTMENT OF LICENSING AND Finance Commission of Texas ...... 255 REGULATION Public Utility Commission of Texas...... 255 REGISTRATION OF PROPERTY TAX CONSULTANTS Adopted Rule Review 16 TAC §66.20...... 232 Office of the Fire Fighters’ Pension Commissioner ...... 256 USED AUTOMOTIVE PARTS RECYCLERS TABLES AND GRAPHICS 16 TAC §§87.1, 87.10, 87.15, 87.20 - 87.26, 87.30, 87.40, 87.44 ­ ...... 257 87.47, 87.50, 87.65, 87.70 - 87.81, 87.85, 87.90 - 87.92...... 232 IN ADDITION POLYGRAPH EXAMINERS Coastal Coordination Council 16 TAC §§88.1, 88.10, 88.20 - 88.24, 88.26 - 88.29, 88.40, 88.70 ­ 88.80, 88.90, 88.91, 88.100 ...... 235 Notice and Opportunity to Comment on Requests for Consistency Agreement/Concurrence Under the Texas Coastal Management Pro­ POLYGRAPH EXAMINERS BOARD gram ...... 269 POLYGRAPH EXAMINER INTERNSHIP Comptroller of Public Accounts 22 TAC §§391.1 - 391.10 ...... 244 Notice of Availability and Request for Applications...... 269 GENERAL Notice of Availability and Request for Applications...... 270 22 TAC §§393.1, 393.3 - 393.7, 393.9 - 393.11 ...... 244 Office of Consumer Credit Commissioner CODE OF OPERATING PROCEDURE OF Notice of Rate Ceilings...... 270 POLYGRAPH EXAMINERS Notice of Rate Ceilings...... 271 22 TAC §§395.1 - 395.6, 395.8 - 395.11, 395.13 - 395.16, 395.18.245 Texas Education Agency GENERAL RULES OF PRACTICE AND Request for Early Reading Diagnostic Instruments...... 271 PROCEDURE Request for Grade 3 Early Reading Diagnostic Instruments...... 271 22 TAC §§397.1 - 397.33 ...... 245 Request for Proficiency Tests for the Assessment of Limited English GRIEVANCE POLICY Proficient Students ...... 272 22 TAC §401.1...... 246 Texas Commission on Environmental Quality TEXAS PARKS AND WILDLIFE DEPARTMENT Enforcement Orders...... 273 FINANCE Notice of a Proposed Amendment and Renewal of a General Permit Authorizing the Discharge of Hydrostatic Test Water ...... 277 31 TAC §53.13, §53.16...... 246 Notice of Water Quality Applications...... 278 LAW ENFORCEMENT Notice of Water Quality Applications...... 279 31 TAC §55.675...... 248 Notice of Water Rights Applications ...... 280 FISHERIES Notice of Water Rights Applications ...... 280 31 TAC §57.157...... 249 Proposal for Decision...... 281 WILDLIFE Texas Facilities Commission 31 TAC §65.175...... 249 Request for Proposals #303-0-10138-A...... 281 31 TAC §65.611...... 253 Request for Proposals #303-0-10792...... 281 31 TAC §65.611...... 253 Request for Proposals #303-0-10888...... 281 COMPTROLLER OF PUBLIC ACCOUNTS General Land Office PREPAID HIGHER EDUCATION TUITION PROGRAM Notice of Approval of Coastal Boundary Survey ...... 282

TABLEOFCONTENTS 35TexReg144 Notice of Approval of Coastal Boundary Survey ...... 282 Announcement of Application for an Amendment to its State-Issued Certificate of Franchise Authority ...... 293 Notice of Approval of Coastal Boundary Survey ...... 282 Announcement of Application for an Amendment to its State-Issued Notice of Proposed Amendments to the Texas Coastal Impact Assis­ Certificate of Franchise Authority ...... 293 tance Plan Relating to the State of Texas FY 2007 and FY 2008 Allo­ cations ...... 282 Announcement of Application for an Amendment to its State-Issued Certificate of Franchise Authority ...... 293 Texas Health and Human Services Commission Notice of Application for Approval of Accelerated Depreciation Rate Notice of Public Hearing on Proposed Medicaid Payment Rates....283 ...... 293 Department of State Health Services Notice of Application for Approval of Revised Depreciation Rates, an Extension of the Public Comment Period for the Proposed Rules Con­ Accelerated Amortization Rate, and Notification of New Depreciation cerning the Regulation of Public Interactive Water Features and Foun­ Rate ...... 294 tains in Texas...... 283 Notice of Application for Designation as an Eligible Telecommunica­ Texas Department of Insurance tions Carrier ...... 294 Company Licensing ...... 283 Notice of Application to Amend Certificated Service Area Boundaries ...... 294 Third Party Administrator Applications ...... 283 Public Notice of Request for Comment on Strawman Rule ...... 295 Third Party Administrator Applications ...... 284 Texas Department of Transportation Texas Lottery Commission Public Hearing Notice - Statewide Transportation Improvement Pro­ Instant Game Number 1237 "Red, White & Blue Cash"...... 284 gram ...... 295 Instant Game Number 1265 "Veterans Winnings"...... 288 Public Notice: Request for Comment on Draft Priorities for Authoriza­ Texas Public Finance Authority tion of the Surface Transportation Program...... 296 Notice of Request for Proposals ...... 292 The University of North Texas System Public Utility Commission of Texas Invitation for Consultants to Provide Proposal for Consulting Services Related to Executive Compensation Program Development...... 296 Announcement of Application for Amendment to a State-Issued Cer­ tificate of Franchise Authority ...... 292 Stephen F. Austin State University Announcement of Application for Amendment to a State-Issued Cer­ Notice of Consultant Contract Amendment...... 297 tificate of Franchise Authority ...... 293

TABLEOFCONTENTS 35TexReg145 Open Meetings

Statewide agencies and regional agencies that extend into four or more counties post meeting notices with the Secretary of State.

Meeting agendas are available on the Texas Register's Internet site: http://www.sos.state.tx.us/open/index.shtml

Members of the public also may view these notices during regular office hours from a computer terminal in the lobby of the James Earl Rudder Building, 1019 Brazos (corner of 11th Street and Brazos) Austin, Texas. To request a copy by telephone, please call 512-463-5561. Or request a copy by email: [email protected]

For items not available here, contact the agency directly. Items not found here: • minutes of meetings • agendas for local government bodies and regional agencies that extend into fewer than four counties • legislative meetings not subject to the open meetings law

The Office of the Attorney General offers information about the open meetings law, including Frequently Asked Questions, the Open Meetings Act Handbook, and Open Meetings Opinions. http://www.oag.state.tx.us/opinopen/opengovt.shtml

The Attorney General's Open Government Hotline is 512-478-OPEN (478-6736) or toll- free at (877) OPEN TEX (673-6839).

Additional information about state government may be found here: http://www.state.tx.us/

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Meeting Accessibility. Under the Americans with Disabilities Act, an individual with a disability must have equal opportunity for effective communication and participation in public meetings. Upon request, agencies must provide auxiliary aids and services, such as interpreters for the deaf and hearing impaired, readers, large print or Braille documents. In determining type of auxiliary aid or service, agencies must give primary consideration to the individual's request. Those requesting auxiliary aids or services should notify the contact person listed on the meeting notice several days before the meeting by mail, telephone, or RELAY Texas. TTY: 7-1-1.

Appointments be duly elected and qualified, Renee F. McElhaney of San Antonio. Ms. McElhaney is replacing Judge Andy Mireles who is deceased. Appointments for December 17, 2009 Designating Lee W. "Bill" McNutt, III as presiding officer of the Texas Appointed to Humanities Texas for a term to expire December 12, Commission on the Arts for a term at the pleasure of the Governor. 2010, Maceo C. Dailey, Jr. of El Paso (Dr. Dailey is being reappointed). Mr. McNutt is replacing Billye Proctor Shaw of Abilene as presiding Appointed to Humanities Texas for a term to expire December 12, officer. 2010, Joy Ann Havran of Fort Worth (replacing Nancy Cain Marcus Appointed to the Texas Commission on the Arts for a term to expire Au­ of Dallas whose term expired). gust 31, 2015, Linda Lowes Hatchel of Woodway (replacing William Appointed to the Adoption Review Committee, pursuant to HB 2225, Collins, Jr. of Fort Worth whose term expired). 81st Legislature, Regular Session, for a term at the pleasure of the Gov­ Appointed to the Texas Commission on the Arts for a term to expire ernor, Ann Bradford of Midland. August 31, 2015, Patty Huffines of Austin (replacing Mary Teeple of Appointed to the Adoption Review Committee, pursuant to HB 2225, Spicewood whose term expired). 81st Legislature, Regular Session, for a term at the pleasure of the Gov­ Appointed to the Texas Commission on the Arts for a term to expire Au­ ernor, Penelope Tower Cook of Dallas. gust 31, 2015, Liza B. Lewis of San Antonio (replacing Nelson Balido, Appointed to the Adoption Review Committee, pursuant to HB 2225, Jr. of San Antonio whose term expired). 81st Legislature, Regular Session, for a term at the pleasure of the Gov­ Appointed to the Texas Commission on the Arts for a term to expire ernor, Heidi Bruegel Cox of Fort Worth. August 31, 2015, Jacoba-Jetske "Cobie" Russell of Dallas (Ms. Russell Appointed to the Adoption Review Committee, pursuant to HB 2225, is being reappointed). 81st Legislature, Regular Session, for a term at the pleasure of the Gov­ Appointed to the Texas Commission on the Arts for a term to expire ernor, Matthew Kouri of Austin. August 31, 2015, George R. Snead of El Paso (Mr. Snead is being Appointed to the Adoption Review Committee, pursuant to HB 2225, reappointed). 81st Legislature, Regular Session, for a term at the pleasure of the Gov­ Appointed to the Texas Commission on the Arts for a term to expire ernor, Russell Rogers of Terrell. August 31, 2015, S. Shawn Stephens of Houston (replacing Dorothy Appointed to the Interim Committee to Study Dyslexia and Related Caram of Houston whose term expired). Disorders, pursuant to HB 461, 81st Legislature, Regular Session, for Appointed to the State Board for Educator Certification for a term to a term at the pleasure of the Governor, Linda Sue Gladden of Austin. expire February 1, 2013, Laurie Bricker of Houston (replacing Stefani Appointed to the Interim Committee to Study Dyslexia and Related Carter of Dallas who resigned). Disorders, pursuant to HB 461, 81st Legislature, Regular Session, for Appointed to the Public Safety Commission, effective December 31, a term at the pleasure of the Governor, Elliot Goldman of Fort Worth. 2009, for a term to expire December 31, 2015, Allan B. Polunsky of Appointed to the Interim Committee to Study Dyslexia and Related San Antonio. Mr. Polunsky is being reappointed. Disorders, pursuant to HB 461, 81st Legislature, Regular Session, for Appointed to the OneStar Foundation for a term at the pleasure of the a term at the pleasure of the Governor, Rebecca N. Jones of Comanche. Governor, Robert G. Wright, II of Dallas (replacing Janine Turner of Appointed to the Interim Committee to Study Dyslexia and Related Colleyville). Disorders, pursuant to HB 461, 81st Legislature, Regular Session, for Appointed to the OneStar National Service Commission for a term to a term at the pleasure of the Governor, Joyce S. Pickering of Dallas. expire March 15, 2010, Charles B. Wall, Jr. of San Antonio (replacing Appointed to the Interim Committee to Study Dyslexia and Related Joseph Zavaletta, Jr. of Brownsville who resigned). Disorders, pursuant to HB 461, 81st Legislature, Regular Session, for a Rick Perry, Governor term at the pleasure of the Governor, Karen Sue Vickery of Commerce. TRD-200906075 Appointments for December 28, 2009 Appointed as Judge of the 73rd Judicial District Court, Bexar County ♦ ♦ ♦ for a term until the next General Election and until her successor shall

GOVERNOR January 8, 2010 35 TexReg 147 Requests for Opinions Texas House of Representatives RQ-0846-GA Post Office Box 2910 Requestor: Austin, Texas 78768-2910 Dr. Raymund A. Paredes Re: Authority of a city to reacquire extraterritorial jurisdiction that it previously relinquished pursuant to chapter 42 of the Local Govern­ Commissioner of Higher Education ment Code (RQ-0798-GA) Texas Higher Education Coordinating Board SUMMARY Post Office Box 12788 While a city must generally comply with the requirements of chapter Austin, Texas 78711-2788 42 of the Local Government Code when acquiring extraterritorial ju­ risdiction ("ETJ"), a determination as to whether a city complied with Re: Authority of a community college to purchase liability insurance relevant law in the situation about which you inquire would require the to cover claims arising from the operation of a child care center (RQ­ application of law to a set of disputed facts. This office cannot, in an 0846-GA) attorney general opinion, investigate and resolve disputed questions of Briefs requested by January 18, 2010 fact or mixed questions of law and fact. RQ-0847-GA Further, this office cannot determine in an attorney general opinion, un­ der the circumstances of your request, whether a city may validly hold Requestor: ETJ property for the purpose of relinquishing it to another city once its The Honorable Jo Anne Bernal jurisdiction lawfully extends to the tract. First, as a matter of general law, Texas courts do not look at a city’s motive to determine the valid­ El Paso County Attorney ity of the city’s legislative acts. Second, in the particular instance about 500 East San Antonio, Room 503 which you inquire, the resolution of the legal issues raised involve un­ resolved factual issues. El Paso, Texas 79901 Opinion No. GA-0751 Re: Whether the El Paso County Attorney may provide legal advice and representation to the El Paso County Ethics Commission (RQ­ The Honorable Edgar J. Garrett, Jr. 0847-GA) Delta County Attorney Briefs requested by January 25, 2010 Post Office Box 462 For further information, please access the website at Cooper, Texas 75432 www.oag.state.tx.us or call the Opinion Committee at (512) 463-2110. TRD-200906074 Re: Whether a county employee may legally use a county vehicle to transport a passenger who is not a county officer or employee (RQ­ Stacey Napier 0807-GA) Deputy Attorney General Office of the Attorney General SUMMARY Filed: December 30, 2009 The legality of a county employee’s use of county property will depend ♦ ♦ ♦ upon the facts associated with the use. This office does not resolve questions of fact in the opinion process. Opinions Opinion No. GA-0752 Opinion No. GA-0750 The Honorable Mark Homer The Honorable Mark Homer Chair, Committee on Culture, Recreation and Tourism Chair, Committee on Culture, Recreation and Tourism

ATTORNEY GENERAL January 8, 2010 35 TexReg 149 Texas House of Representatives 700 Main Street Post Office Box 2910 Kerrville, Texas 78028 Austin, Texas 78768-2910 Re: Whether a peace officer who has taken a person into custody under chapter 573 of the Health and Safety Code may be required to transport Re: Whether multiple contiguous lots may be claimed as part of a that individual to a medical facility for evaluation prior to taking that homestead exemption under section 11.13(j) of the Tax Code (RQ­ person to a mental health facility (RQ-0809-GA) 0808-GA) SUMMARY SUMMARY An inpatient mental health facility or a mental health facility is not Section 11.13(j) of the Tax Code defines "residence homestead" for statutorily authorized to require a peace officer to transport a person purposes of the payment of property taxes to include "a structure . . . in custody under chapter 573, Health andSafetyCode, toamedical together with the land, not to exceed 20 acres," regardless of whether facility for a medical evaluation prior to taking that person to the mental any part of the property is located in a platted subdivision. If the chief facility. appraiser finds that contiguous lots totaling less than twenty acres are being used as a residence homestead, the taxpayer is entitled to an ex­ For further information, please access the website at emption on the entire property. Whether any particular group of con­ www.oag.state.tx.us or call the Opinion Committee at (512) 463-2110. tiguous lots would qualify as a "residence homestead" is a question of TRD-200906073 fact. Stacey Napier Opinion No. GA-0753 Deputy Attorney General Ms. Ilse Bailey Office of the Attorney General Filed: December 30, 2009 Acting Kerr County Attorney ♦ ♦ ♦ County Courthouse, Suite BA-103

35 TexReg 150 January 8, 2010 Texas Register TITLE 1. ADMINISTRATION executive staff approved the development of language to imple­ ment this change. PART 15. TEXAS HEALTH AND The Centers for Medicare and Medicaid Services (CMS) ap­ HUMAN SERVICES COMMISSION proved Medicaid state plan amendment (SPA) 04-29 to include physician practice groups organized by, or under contract with, a CHAPTER 355. REIMBURSEMENT RATES governmental hospital in Tarrant County effective November 26, 2004. HHSC has been paying eligible physician groups in Tar- SUBCHAPTER J. PURCHASED HEALTH rant County affiliated with John Peter Smith Hospital retroactive SERVICES to this date in compliance with the SPA. The current rule does not reflect this approved SPA. This rule proposal amends the rule to DIVISION 3. PHYSICIAN SERVICES reflect the approved SPA. The Health and Human Services Commission (HHSC) proposes At the same time CMS approved this SPA, CMS agreed to allow to repeal §355.8043, concerning Supplemental Payments to HHSC to convert from an Average Commercial Rate (ACR) Certain Physicians, and replace it with new §355.8043, con­ methodology to a Medicare Fee Conversion Factor (MFCF) cerning Supplemental Payments for Physician Services, in methodology (145% of the applicable Medicare fee) as the basis Chapter 355 of Title 1 of the Texas Administrative Code. This for computing supplemental payments for physician services. rule establishes the methodology by which HHSC calculates The current rule does not reflect this approved methodology. As supplemental Medicaid Upper Payment Limit (UPL) payments a result, this rule proposal applies the MFCF methodology to all for physician services. eligible providers. HHSC is repealing current §355.8043 and proposing new HHSC has submitted a SPA that would expand the types of §355.8043 because of substantive changes regarding eligibility physician groups that are eligible for supplemental payments. of physicians, updates to the computation methodology for No supplemental payments will be made to newly eligible physi­ supplemental payments, and addition of new conditions of cian groups under this rule until CMS approves the related Med­ participation. icaid SPA. Background and Purpose HHSC is adding language to the rule to reflect the proposed SPA Certain provisions of current §355.8043 were carried over to the to allow HHSC to make supplemental payments for services pro­ proposed new rule. In addition, new language was added to: 1) vided by 1) physician groups employed by a governmental hos­ reflect the current Medicaid state plan relating to supplemental pital; and 2) physicians employed by or under contract with a payments for physicians, which expands the types of physician physician group practice organized by, under the control of, or groups whose services are eligible for supplemental payments; under contract with a governmental hospital in a county that has 2) clarify the methodology HHSC uses to compute Medicaid sup­ a hospital district created under Chapter 281 of the Texas Health plemental payments for certain physicians; and 3) add new con­ and Safety Code. HHSC Rate Analysis staff worked with the ditions of participation. The title of the rule has also been mod­ potentially eligible Chapter 281 government hospitals to deter­ ified to reflect that Medicaid supplemental payments are made mine which physician groups would choose to participate in the for physician services supplemental payment program and the fiscal impact associated with those supplemental payments. Language was added to in­ Under current §355.8043, only Medicaid-enrolled physicians clude the requirement that affiliated public entities and private employed by an eligible physician grouppracticethatis physician groups submit program certification forms annually as state-owned or -operated are eligible to receive Medicaid sup­ a condition of participation in the physician UPL program. HHSC plemental payments. clarified that supplemental payments will be computed effective HHSC presented a proposed amendment to §355.8043 at the the first day of the federal fiscal quarter after HHSC receives September 11, 2008, Medical Care Advisory Committee (MCAC) completedcertification forms for new participating entities or as meeting. Members of the committee requested that HHSC add otherwise authorized by state and federal law. language to the rule to allow supplemental payments to be made Language has been added to reflect the supplemental payment for services of the following additional physicians: 1) those physi­ reimbursement methodology approved by CMS. The amend­ cians employed by a governmental hospital; and 2) physicians ment explains the type of Medicare fee schedule (facility vs. employed by or under contract with a physician group practice non-facility) that will be used to compute each provider’s UPL organized by, under the control of, or under contract with a gov­ payments. HHSC has also added language to clarify the supple­ ernmental hospital in a county that has a hospital district created mental payment calculation for physician anesthesia services under Chapter 281 of the Texas Health and Safety Code. HHSC

PROPOSED RULES January 8, 2010 35 TexReg 151 and other physician services and to define pricing adjustments Subsection (f)(1) was added to describe the data source for ex­ and non-payable, non-physician services. Additionally, HHSC tracting physician service code information used in the supple­ added language that explains the appropriate setting in which mental payment calculation. services must be rendered in order for the claim to be eligible Subsection (f)(2) adds language to describe the method used for supplemental payment. HHSC added language to allow for to determine the appropriate Medicare fee schedule (facility vs. supplemental payments for the professional component of a non-facility rates) used to compute supplemental payments. claim billed as a global service. Subsection (f)(3) adds language to distinguish the methodol­ HHSC added language to require the participating entities to ogy to compute the Medicaid Final Equivalent Units for anesthe­ submit, upon request, all documentation deemed necessary for sia vs. non-anesthesia Current Procedural Terminology (CPT) the proper oversight of this supplemental payment program. In codes. addition, HHSC added a definition section to clarify the terminol­ ogy used in the rule. Language also was added to explain the Subsection (f)(4) adds language to describe the calculation of change in the source of claims that areusedtomakepayment the Medicare Fee Equivalent Payment. calculations from a date of service to an adjudicated methodol­ Subsection (f)(5) adds language to describe the reductions ap­ ogy. plied to the Medicare Fee Equivalent Payment related to modi­ The state matching funds required to draw down federal dollars fiers or pricing adjustments made to a Medicaid claim. will be provided through intergovernmental transfers of public Subsection (f)(6) describes the calculation of the Medicare Pay­ funds by eligible governmental entities affiliatedwitheachphysi­ ment Ceiling Amount as the product of the Medicare Fee Equiva­ cian group. lent Payment and the Medicare Fee Conversion Factor (145%). Section-by-Section Summary Subsection (f)(7) describes the calculation of the total supple­ Subsection (a) is an introduction describing the rule. mental payment by subtracting the total Medicaid payments for all eligible CPT codes from the Payment Ceiling Amount. Subsection (b) sets forth the definitions applicable to §355.8043. Subsection (g) states that for services paid using a global fee, Subsection (c) identifies Medicaid providers that are eligible to only the professional component of the service is eligible to re­ receive supplemental payments under this rule. Subsection (c) ceive supplemental payment. states that payments are available only for services performed by doctors of medicine and osteopathy licensed in Texas who Subsection (h) was added to clarify the timing of the supplemen­ are affiliated with enrolled Texas Medicaid providers in one of tal payments and to inform providers of their responsibility to sub­ the ways listed in paragraphs (1) - (3). mit requested documentation in support of the payment. Subsection (c)(1) provides for supplemental payments for ser­ Subsection (i) adds new language to inform providers of their vices by physicians employed by a physician group practice responsibility to submit supporting documentation for reconcilia­ that is state-owned or -operated to participate in the physician tion and audits upon request by HHSC. supplemental payment program. The language makes clear Fiscal Note that supplemental payments may not be made for services provided by physicians under contract with a state-owned or Greta Rymal, Deputy Executive Commissioner for Financial Ser­ -operated physician group practice. The 11 state-owned or vices, has determined that during the first five-year period the -operated hospitals that currently participate in the physician proposal is in effect there will be a fiscal impact to state govern­ supplemental payment program are listed in paragraph (1). ment of $11,053,573 all funds each year for state fiscal year (FY) 2010 through FY 2014. This increase is due to adding physi­ Subsections (c)(2) and (c)(3) were added to include in the UPL cian groups under contract with a governmental hospital in Tar- program payment for services provided by physicians employed rant County, adding physicians and physician groups associated by a governmental hospital, or employed by or under contract with a governmental hospital in a county that has a hospital dis­ with a physician group practice organized by, under the control trict created under Chapter 281 of the Health and Safety Code, of, or under contract with a Chapter 281 governmental hospital. and changing the physician supplemental payment calculation This language also makes private physician groups under con­ to 145% of the Medicare rate. The change from the current hos­ tract with these Chapter 281 governmental hospitals eligible for pital-specific Medicare conversion rate to the new 145% of the supplemental payments. MFCF methodology will result in a net increase in funds paid to Subsection (d) states that the source of state matching funds for each individual university system. However, some individual uni­ the supplemental payments will be intergovernmental transfers. versity campuses within some university systems will see a re­ duction in payments as a result of changing to the MFCF method­ Subsection (e) contains a new requirement that private physician ology. groups and affiliated governmental entities each submit fully exe­ cuted certification forms annually to HHSC before supplemental The non-federal share of the estimated costs above will be payments are made for services performed by physicians em­ provided though intergovernmental transfers from the Tarrant ployed by or under contract with a private physician group prac­ County Hospital District and the other Chapter 281 hospital tice. districts and through fund transfers from the University of Texas, University of North Texas and Texas Tech University. Subsection (f) outlines the Medicare Fee Conversion Factor (MFCF) methodology that has been approved by CMS to Small Business and Micro-Business Impact Analysis compute the supplemental payments for all eligible physician Ms. Rymal has also determined that there is no adverse eco­ groups. nomic effect on small businesses or micro-businesses, or on businesses of any size, as a result of enforcing or administer­

35 TexReg 152 January 8, 2010 Texas Register ing the proposal. The providers that are impacted by this rule authority to propose and adopt rules governing the determina­ whocouldbede fined as a small or micro business are receiving tion of Medicaid reimbursements. additional funds as a result of this rule change. No other statutes, articles or codes are affected by the proposal. Cost to Persons and Effect on Local Economies §355.8043. Supplemental Payments to Certain Physicians. HHSC does not anticipate that there will be any economic cost This agency hereby certifies that the proposal has been reviewed to persons who are required to comply with this proposal. The by legal counsel and found to be within the agency’s legal author­ proposal will not affect a local economy. ity to adopt. Public Benefit Filed with the Office of the Secretary of State on December 28, Kevin Nolting, Acting Director of Rate Analysis, determined that for the first five years the proposal is in effect, the public benefit 2009. expected as a result of enforcing the proposal is that state-owned TRD-200906039 physician group practices, physician group practices under con­ tract with a governmental hospital in Tarrant County and physi­ Steve Aragon cians and physician group practices under contract with a gov­ Chief Counsel ernmental hospital in a county that has a hospital district created Texas Health and Human Services Commission under Chapter 281 of the Texas Health and Safety Code will re­ Earliest possible date of adoption: February 7, 2010 cover more of their cost of treating Medicaid patients. For further information, please call: (512) 424-6900 Regulatory Analysis ♦ ♦ ♦ HHSC has determined that this proposal is not a "major environ­ 1 TAC §355.8043 mental rule" as defined by §2001.0225 of the Texas Government Code. A "major environmental rule" is definedtomeanarulethe Statutory Authority specific intent of which is to protect the environment or reduce The new rule is proposed under Texas Government Code risk to human health from environmental exposure and that may §531.033, which provides the Executive Commissioner of adversely affect, in a material way, the economy, a sector of the HHSC with broad rulemaking authority; Human Resources economy, productivity, competition, jobs, the environment, or the Code §32.021 and Texas Government Code §531.021(a), public health and safety of a state or a sector of the state. This which provide HHSC with the authority to administer the federal proposal is not specifically intended to protect the environment medical assistance (Medicaid) program in Texas, to administer or reduce risks to human health from environmental exposure. Medicaid funds, and to adopt rules necessary for the proper Takings Impact Assessment and efficient operation of the Medicaid program; and Texas Government Code §531.021(b), which provides HHSC with the HHSC has determined that this proposal does not restrict or limit authority to propose and adopt rules governing the determina­ an owner’s right to his or her property that would otherwise exist tion of Medicaid reimbursements. in the absence of government action and, therefore, does not constitute a taking under Texas Government Code, §2007.043. No other statutes, articles or codes are affected by the proposal. Public Comment §355.8043. Supplemental Payments for Physician Services. Written comments on the proposal may be submitted to Jill (a) Introduction. Enrolled Medicaid providers that are iden­ Seime, Rate Analysis Department-Hospital Reimbursement, tified in subsection (c) of this section may receive supplemental pay­ TexasHealthand HumanServices Commission, P.O. Box ments for physician services provided to Medicaid-eligible patients. 85200, MC H-400, Austin, TX 78708-5200; by facsimile to (512) (b) Definitions. For purposes of this section, the following def­ 491-1863; or by e-mail to [email protected] within 30 initions apply: days of publication in the Texas Register. (1) Adjudicated claim--A fee-for-service physician claim 1 TAC §355.8043 for a covered Medicaid service that is paid or adjusted by HHSC. (Editor’s note: The text of the following section proposed for repeal (2) Approved place of service--A hospital-sponsored loca­ will not be published. The section may be examined in the offices of the tion, such as an inpatient hospital, outpatient hospital, hospital-based Texas Health and Human Services Commission or in the Texas Register clinic, or hospital-affiliated clinic. office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) (3) Calculation period--The federal fiscal quarter de­ termined by HHSC for which supplemental payment amounts are Statutory Authority calculated. The repeal is proposed under Texas Government Code (4) Facility setting--An inpatient or outpatient hospital. §531.033, which provides the Executive Commissioner of HHSC with broad rulemaking authority; Human Resources (5) Global payment--The payment amount for a defined Code §32.021 and Texas Government Code §531.021(a), subset of services encompassing the combined technical and profes­ which provide HHSC with the authority to administer the federal sional components rendered during an episode of care. medical assistance (Medicaid) program in Texas, to administer (6) Governmental hospital--A hospital or hospital system Medicaid funds, and to adopt rules necessary for the proper affiliated with a hospital district created under Health and Safety Code, and efficient operation of the Medicaid program; and Texas Chapter 281. Government Code §531.021(b), which provides HHSC with the (7) HHSC--The Texas Health and Human Services Com­ mission or its designee.

PROPOSED RULES January 8, 2010 35 TexReg 153 (8) Medicaid Final Equivalent Units--Elements of measure the enrolled Medicaid provider identified in subsection (c) of this sec­ used by HHSC to assign values to an individual physician service in tion. the Medicaid program relative to the same individual physician service (e) Required certification. Before a private physician practice in the Medicare program. Medicaid Final Equivalent Units are deter­ group may receive supplemental payments under this section, the ap­ mined using the methodologies described in subsection (f)(3) of this propriate governmental entity and the private physician practice group section and are a factor in calculating supplemental payment amounts. must certify certain facts, representations, and assurances regarding (9) Medicare anesthesia base units--Elements of measure program requirements. used by Medicare to assign values to anesthesia services with time- (1) The appropriate governmental entity must certify, based fees. The base units are a factor used in calculating the Medicaid among other things, that all funds transferred to HHSC via intergov­ Final Equivalent Units. ernmental transfer for use as the state share of supplemental payments (10) Medicare Fee Conversion Factor (MFCF)--A CMS- are public funds. approved factor (145% of Medicare rates) used to convert the applica­ (2) The appropriate governmental entity and the physician ble Medicare fee to a fee that represents what commercial payors would practice group must certify, among other things, that no part of any reimburse physicians for eligible professional services. supplemental payment received under this section will be returned to (11) Nonfacility setting--A location other than an inpatient the governmental entity that made the intergovernmental transfer. or outpatient hospital. (3) The physician practice group is eligible for supplemen­ (12) Public funds--Funds derived from taxes, assessments, tal payments for services provided beginning on the first day of the fed­ levies, investments, and other public revenues within the sole and un­ eral fiscal quarter after HHSC receives completed certification forms restricted control of the governmental entity that owns or is affiliated from the appropriate governmental entity and the private physician with the enrolled Medicaid provider identified in subsection (c) of this practice group, or as otherwise authorized by state and federal law. section. Public funds do not include gifts, grants, trusts, or donations, (4) The physician practice group and the appropriate gov­ the use of which is conditioned on supplying a benefit solely to the ernmental entity must resubmit certification forms annually on or be­ donor or grantor of the funds, such as the private operator of a hospital fore September 30th unless the certification was executed during that district’s facility. federal fiscal year. The physician practice group and the appropriate (c) Availability of supplemental payments. Supplemental pay­ governmental entity also must resubmit certification forms as other­ ments are available under this section only for physician services per­ wise requested by HHSC. formed by doctors of medicine and osteopathy licensed in Texas and (f) Calculation of supplemental payments. For each enrolled affiliated with an enrolled Medicaid provider in one of the following Medicaid provider identified in subsection (c) of this section that is ways: participating in this program, HHSC will calculate the supplemental (1) Employed by an eligible physician group practice that payments for physicians’ services under this section using the follow­ is state-owned or -operated. Physicians under contract with such a ing methodology: physician group practice are not included in supplemental payment cal­ (1) HHSC will identify Medicaid claims adjudicated dur­ culations. Eligible state-owned or -operated physician group practices ing the calculation period for services performed by eligible physicians consist of those affiliated with: at approved places of service. (A) University of Texas--Southwestern; (A) The identification of claims will be based on indi­ (B) University of Texas--San Antonio; vidual Current Procedural Terminology (CPT) codes contained in the Texas Medicaid Management Information System. (C) University of Texas--Tyler; (B) Supplemental payments for physician services are (D) University of Texas--Houston; available only for benefits covered by Medicare. (E) University of Texas Medical Branch--Galveston; (2) HHSC will determine the appropriate Medicare fee (F) University of Texas--MD Anderson Cancer Center; schedule based on the following criteria: (G) University of North Texas; (A) If more than 50 percent of the claims identified in the calculation period were performed in a nonfacility setting, HHSC (H) Texas Tech University--Amarillo; will use the nonfacility Medicare physician fee schedule for that physi­ (I) Texas Tech University--El Paso; cian group. (J) Texas Tech University--Lubbock; or (B) If 50 percent or more of the claims identified in the calculation period were performed in a facility setting, HHSC will use (K) Texas Tech University--Odessa. the facility Medicare physician fee schedule for that physician group. (2) Employed by a governmental hospital; or (C) If a Medicare fee schedule is not available for a par­ (3) Employed by or under contract with a physician group ticular service, HHSC may use an alternative applicable Medicare fee practice organized by, under the control of, or under contract with a schedule for those physician services. governmental hospital. (D) HHSC will use the Medicare fee schedule in effect (d) Source of funds for supplemental payments. State funding at the time the supplemental payments are calculated. for supplemental payments authorized under this section will be lim­ (3) Using all eligible procedures identified in paragraph (1) ited to public funds transferred to HHSC through intergovernmental of this subsection, HHSC will determine the Medicaid Final Equivalent transfers from the governmental entity that owns or is affiliated with Units in one of the following ways, depending on whether the CPT code is related or unrelated to anesthesia.

35 TexReg 154 January 8, 2010 Texas Register (A) Related to Anesthesia Steve Aragon (i) For each anesthesia CPT code and unique set of Chief Counsel modifiers that is paid using a time-based fee, the Medicaid Final Equiv­ Texas Health and Human Services Commission alent Units are derived using the following formula: (number of occur­ Earliest possible date of adoption: February 7, 2010 rences of CPT code with modifiers x Medicare anesthesia base units) + For further information, please call: (512) 424-6900 the sum of the Medicaid paid units for that CPT code with modifiers; ♦ ♦ ♦ (ii) For those limited anesthesia codes that are not paid using a time-based fee, the Medicaid Final Equivalent Units equal TITLE 4. AGRICULTURE the sum of the Medicaid paid units for that CPT code with modifiers. PART 1. TEXAS DEPARTMENT OF (B) Unrelated to Anesthesia. The Medicaid Final Equivalent Units equal the sum of the Medicaid paid units for that AGRICULTURE CPT code with modifiers. CHAPTER 17. MARKETING AND (4) HHSC will calculate the Medicare Fee Equivalent Pay­ ment as follows: PROMOTION (A) For anesthesia services with time-based fees, SUBCHAPTER C. GO TEXAN AND DESIGN HHSC will multiply the Medicaid Final Equivalent Units, calcu­ MARK lated under paragraph (3)(A)(i) of this subsection, by the Medicare anesthesia conversion factor assigned to the "Rest of Texas" locality 4 TAC §17.60 by the Centers for Medicare and Medicaid (CMS). HHSC will not The Texas Department of Agriculture (the department) proposes compensate for regional variations in practice costs. an amendment to §17.60, concerning the GO TEXAN Restau­ (B) For all other services, HHSC will multiply the Med­ rant Program. The amendment to §17.60 is proposed so that icaid Final Equivalent Units by the applicable Medicare fee. restaurants with multiple locations operating under the same name that choose to participate in the program will submit an (5) HHSC will reduce the Medicare Fee Equivalent Pay­ application and fee of $25 for the first location, with the option of ment determined under paragraph (4) of this subsection by applying submitting an additional fee of $10 for each additional restaurant Medicaid pricing modifier reductions and assistant surgeon pricing ad­ location operating under the same name that the applicant justments in accordance with Texas Medicaid policy. wants to participate in the program. The proposed amended (6) HHSC will calculate the Payment Ceiling Amount by section will apply to all restaurants, including independent, fran­ adding the Medicare Fee Equivalent Payments for all eligible CPT chise, and chain restaurants with multiple locations operating codes and multiplying the total by the Medicare Fee Conversion Factor under the same name. Additionally, §17.60 is being revised of 145%. to clarify the current rule to clearly provide that a restaurant’s participation in the program is contingent upon purchasing and (7) HHSC will calculate the supplemental payment amount using agricultural food, or wine products that have been grown, by subtracting the Medicaid payments for all eligible CPT codes from made, processed or value-added in Texas. the Payment Ceiling Amount. Gene Richards, assistant commissioner for marketing and pro­ (g) When a global payment that includes a technical compo­ motion, has determined that for the first five years the proposed nent is made for physician services, supplemental payment is avail­ amended section is in effect, there will be an increase in rev­ able only for the professional component and only when a doctor of enue for state government as a result of the anticipated increase medicine or doctor of osteopathy rendered those services. in fees to be collected by the Go Texan Restaurant Program. (h) For each calculation period, physicians and physician For the first year the proposed amended section is in effect, groups must submit to HHSC requested documentation necessary to Mr. Richards has determined there will be an estimated 364 calculate supplemental payments. The documentation is due to HHSC Go Texan Restaurant Program members who will be required to by the deadlines established by HHSC. Failure to submit the requested submit an initial or renewal application for the program and pay documentation may result in forfeiture of supplemental payments for a $25 fee. Of those 364 Go Texan Restaurant Program mem­ that calculation period. bers, there will be an estimated 257 additional member restau­ rant locations operating under the same name that will be re­ (i) As a condition of participation, physicians, physician quired to pay an extra fee of $10 per location. Accordingly, esti­ groups, and affiliated hospitals must submit to HHSC upon request in mated additional first year revenue resulting from the proposed an accurate and timely fashion all documentation that HHSC deems amended section will be $2,570, for total revenue of $11,670. necessary to support all internal and external reviews and audits of For the second year, there will be an estimated 400 new or re­ this supplemental payment program. newing Go Texan Restaurant Program members who will be re­ This agency hereby certifies that the proposal has been reviewed quired to pay a $25 fee. Of those 400 members, there will be by legal counsel and found to be within the agency’s legal author­ an estimated 337 additional member restaurant locations oper­ ity to adopt. ating under the same name. Accordingly, estimated additional second year revenue resulting from the proposed amended sec­ Filed with the Office of the Secretary of State on December 28, tion will be $3,370, for total revenue of $13,370. For the third year, there will be an estimated 450 new or renewing Go Texan 2009. Restaurant Program members who will be required to pay a $25 TRD-200906038 fee. Ofthose450 members, therewillbeanestimated 347ad­ ditional member restaurant locations operating under the same name. Accordingly, estimated additional third year revenue re-

PROPOSED RULES January 8, 2010 35 TexReg 155 sulting from the proposed amended section will be $3,470, for (c) - (d) (No change.) total revenue of $14,720. For the fourth year, there will be an (e) Application Process: estimated 475 members who will be requiredtopaya $25 fee. Of those 475 members, there will be an estimated 352 additional (1) - (3) (No change.) member restaurant locations operating under the same name. (4) An applicant [Restaurants] mustsubmita [the]GO Accordingly, estimated additional fourth year revenue resulting TEXAN Restaurant Program Member application and a [in addition from the proposed amended section will be $3,520, for total rev­ to the] $25 annual GO TEXAN membership fee for each restaurant enue of $15,395. For the fifth year, there will be an estimated 500 that applicant would like to participate in the GO TEXAN Restaurant Go Texan Restaurant Program members who will be required to Program. If an applicant operates multiple restaurant locations under pay a $25 fee. Of those 500 members, there will be an estimated the same name, the applicant must submit a GO TEXAN Restaurant 357 additional member restaurant locations operating under the Program Member application and a $25.00 annual GO TEXAN same name. Accordingly, estimated additional fifth year revenue membership fee for the first or initial restaurant location, as identified resulting from the proposed amended section will be $3,570, for in the application. Should the applicant choose to enroll additional total revenue of $16,070. There will be no fiscal implications to locations under the same name, the applicant shall pay an additional local government as a result of enforcing or administering the $10.00 annual fee for each additional restaurant location that operates proposed amended section. under the same name and that is enrolled in the program. GO TEXAN Mr. Richards has also determined that for each year of the first Restaurant Program Members[. Restaurants] will be billed the annual five years the proposed amended section is in effect, the public registration membership fees on an annual basis [the annual registra­ benefit anticipated as a result of enforcing the amended sections tion fee ] of $25 each membership year thereafter. will be an increase in the use of Texas grown or processed prod­ (5) (No change.) ucts by restaurants in Texas. It is anticipated that increased fees collected as a result of the proposed amended section will result This agency hereby certifies that the proposal has been reviewed in a slight fiscal impact or economic cost to independent restau­ by legal counsel and found to be within the agency’s legal author­ rants, franchise restaurants, and chain restaurants that operate ity to adopt. multiple locations under the same name. The cost will depend on the number of locations that are registered by an applicant Filedwiththe Office of the Secretary of State on December 22, under the Program. However, Go Texan Restaurant Program 2009. membership is voluntary, and non-members are not required to pay any fees under existing rules, or the proposed amended sec­ TRD-200906012 tion. Dolores Alvarado Hibbs The department is proposing to adopt the amendment to Title 4, General Counsel Chapter 17, Subchapter C, §17.60(e)(4) of the Texas Adminis­ Texas Department of Agriculture trative Code, so that the amended section takes effect on March Earliest possible date of adoption: February 7, 2010 1, 2010. For further information, please call: (512) 463-4075 Comments on the proposal may be submitted to Gene Richards, ♦ ♦ ♦ Assistant Commissioner for Marketing and Promotion, Texas Department of Agriculture, P.O. Box 12847, Austin, Texas TITLE 7. BANKING AND SECURITIES 78711. Comments must be received no later than 30 days from thedateofpublication of the proposal in the Texas Register. PART 2. TEXAS DEPARTMENT OF The amendment to §17.60 is proposed under the Texas Agri­ BANKING culture Code, §12.0175, which provides the department the au­ thority to establish programs by rule to promote and market agri­ CHAPTER 25. PREPAID FUNERAL cultural products and other products grown, processed, or pro­ CONTRACTS duced in the state, and charge a membership fee, as provided by department rule, for each participant in a program, and adopt SUBCHAPTER B. REGULATION OF rules to administer a program established under §12.0175. LICENSES Thecodeeffected by the proposal is the Texas Agriculture Code, 7 TAC §25.13 Chapter 12. The Finance Commission of Texas (the commission), on behalf §17.60. GO TEXAN Restaurant Program. of the Texas Department of Banking (the department), proposes (a) (No change.) new §25.13, concerning Annual Report Filing. (b) Restaurant Requirements: To be eligible for the GO The new rule is proposed to comply with new statutory provi­ TEXAN Restaurant Program, members shall meet and agree to the sions. following requirements: House Bill (HB) 3762, adopted by the 81st Texas Legislature in (1) Restaurant members shall purchase and use product(s) 2009, amended Finance Code §154.052(a) to specify that the made, grown, processed or value added in Texas, as well as products form of the annual report required from prepaid funeral contract produced by GO TEXAN members. If a restaurant does not purchase permit holders (permit holders) with outstanding contracts shall or use product(s) made, grown, processed or value added in Texas, the be adopted by commission rule. The annual report form currently restaurant’s GO TEXAN membership will be revoked and the restau­ required has not been adopted by rule. Therefore, this new rule rant will not be allowed to participate in the program. is necessary to comply with the statute. (2) - (3) (No change.)

35 TexReg 156 January 8, 2010 Texas Register The proposed new rule sets out the date a permit holder must simply adopts the filing deadline and content that permit holders file its annual report and the required contents of the report. Cur­ have used for many years, the new rule will not require any sub­ rently, permit holders file annual reportsusingaformpromul­ stantial change to current practice. gated by the department. The proposed new rule adopts the con­ There will be no adverse economic effect on small businesses or tent of the current annual report form without material change. micro-businesses. There will be no difference in the cost of com­ The proposed new rule also adopts the current filing deadline for pliance for small businesses as compared to large businesses. the annual report of March 1. To be considered, comments on the proposed new section must Pre-proposal consultation with stakeholders. be submitted no later than 5:00 p.m. on February 8, 2010. Com­ Thedepartmentprovidedadraft ofthe proposed ruletopo­ ments should be addressed to General Counsel, Texas Depart­ tentially affected permit holders, consumer representatives, in­ ment of Banking, Legal Division, 2601 North Lamar Boulevard, dustry associations, and attorneys known to practice before the Suite 300, Austin, Texas 78705-4294. Comments may also be department in this area. The department invited those parties submitted by email to [email protected]. to submit comments in writing and/or orally at a meeting which New §25.13 is proposed under Finance Code §154.051, which was held on September 21, 2009. Twelve people attended the authorizes the commission to adopt reasonable rules concern­ September meeting, in addition to department staff. Subsequent ing the filing of reports and any other matter relating to the en­ to the meeting, the department received written comments from forcement and administration of Chapter 154 Finance Code, and an industry group. The department deleted one requirement of §154.052(a), which provides that the department may require a the rule in response to the comments received. permit holder that has outstanding contracts for prepaid funeral On November 16-17, 2009, the advisory committee created by benefits to submit an annual report in the form required by rule the 81st Legislature as set forth in new Finance Code §154.208 of the commission. (advisory committee) held its first meeting. The advisory com­ Finance Code §§154.052(a), 154.055, 154.352, and 154.3525 mittee is composed of four representatives of permit holders that are affected by the proposed new section. actively sell insurance-funded prepaid funeral contracts in Texas, two representatives of funeral providers that actively sell insur­ §25.13. Annual Report Filing. ance-funded prepaid funeral contracts in Texas, and two repre­ sentatives of the department. The advisory committee currently (a) Date of filing. Each permit holder with outstanding prepaid includes the two largest sellers of insurance-funded prepaid fu­ funeral benefit contracts must file an annual report with the Department neral contracts in Texas. Current advisory committee industry by March 1 of each year for the preceding calendar year. representatives are responsible for forty-three percent of all out­ (b) Contents of filing. The Annual Report filing must be sworn standing insurance-funded contracts in Texas. to by an authorized agent or corporate officer of the permit holder be­ The advisory committee’s purpose is to review and make recom­ fore a notary and must provide: mendations regarding the technical procedures and processes (1) the name and permit number of the permit holder; the department uses to regulate insurance-funded prepaid fu­ neral benefits and to monitor compliance of sellers of insurance- (2) a contact name and contact information for the permit funded prepaid funeral benefits contracts under Chapter 154. holder; These recommendations specifically include those relating to the (3) a recapitulation of the prepaid funeral benefits contract relevance and usefulness of records the department requires activity for the preceding calendar year, including beginning balances, sellers to maintain for examination purposes. additions, deletions, adjustments, and ending balances; Department staff presented the proposed rule to the advisory (4) a copy of the permit holder’s in-force policy run or con­ committee for consideration. The advisory committee unani­ trol ledger as of December 31 that substantiates the ending balances; mously recommended that the rule be proposed. (5) an explanation for any material variances between the On November 18, 2009, the department sent the proposed rule, ending balances in the recapitulation described in subsection (b)(3) of as recommended by the advisory committee, to potentially af­ this section, and those in the in-force policy run or control ledger de­ fected permit holders, consumer representatives, industry asso­ scribed in subsection (b)(4) of this section; ciations, and attorneys known to practice before the department in this area. The department provided these stakeholders with (6) a sworn affidavit completed and signed by the insur­ the opportunity to provide informal, pre-proposal comments by ance company or depository institution attesting to the permit holder’s December 1, 2009. The Department received no comments. holdings, balances, or accounts as of December 31; and Deputy Commissioner Stephanie Newberg has determined that (7) the Guaranty Fund assessment, if applicable. for the first five-year period the proposed new rule is in effect, This agency hereby certifies that the proposal has been reviewed there will be no fiscal implications for state government or for by legal counsel and found to be within the agency’s legal author­ local government as a result of enforcing or administering the ity to adopt. rule. Ms. Newberg also has determined that, for each year of the first Filed with the Office of the Secretary of State on December 18, five years the new rule as proposed is in effect, the public benefit 2009. anticipated as a result of enforcing the rule is compliance with a TRD-200905974 new statutory provision. For each year of the first five years that the new rule will be in ef­ fect, there will be no economic costs to persons required to com­ ply with the rule as proposed. Because the proposed new rule

PROPOSED RULES January 8, 2010 35 TexReg 157 A. Kaylene Ray isfactory until the permit holder receives a risk rating of 1 or 2 to General Counsel qualify for the 18-month examination period. Texas Department of Banking In general, proposed new §25.14 is based upon the existing Proposed date of adoption: February 19, 2010 rating system described in Supervisory Memorandum 1015, as For further information, please call: (512) 475-1300 clarified and modified to meet new statutory requirements and provide greater guidance. In addition, as more fully described in ♦ ♦ ♦ subsequent paragraphs, the proposed rule adds a financial con­ 7 TAC §25.14 dition attribute to the rating system. The Finance Commission of Texas (the commission), on behalf Proposed §25.14(a) provides that permit holders are subject to of the Texas Department of Banking (the department), proposes periodic examination as provided by Finance Code §154.053, new §25.14, concerning Uniform Risk Ratings. The rule is pro­ and states that a performance rating of 3, 4 or 5 is considered posed to comply with new statutory provisions. less than satisfactory for purposes of determining examination frequency. Proposed §25.14(a) also provides that the uniform House Bill (HB) 3762, enacted in 2009 by the 81st Texas Leg­ risk rating assigned as a result of examination will be based on islature, amended §154.053 of the Finance Code regarding the an evaluation of the overall risk profile of the permit holder. standards governing frequency of required examinations of pre­ paid funeral permit holders (permit holders). Among other mat­ Proposed §25.14(b) describes three interrelated attributes of the ters, the amendments recognize the usefulness of the uniform overall risk profile of a permit holder, although these attributes risk rating standards employed by the department, currently pub­ or components are not separately rated. The three attributes lished in the form of a supervisory memorandum to industry, and are management, compliance, and financial condition. The pro­ require the standards to be adopted byrule. posed management and compliance components capture the four attributes currently evaluated to determine the applicable As part of the examination process, the department currently as­ risk rating in the manner described by Supervisory Memoran­ signs an overall uniform risk rating of 1 to 5 to the examined per­ dum 1015. The proposed financial condition attribute is new, mit holder, as more fully described in Supervisory Memorandum and is included as a result of recent amendments to Finance 1015. The rating represents the department’s judgment of the Code §154.109 that condition annual permit renewal on a finding overall risk profile presented by the permit holder based on eval­ that the permit holder’s financial condition warrants the continu­ uation of four attributes: (1) the quality of administration of the ing confidence of the public, among other factors. The financial prepaid funeral contracts and related trust funds or insurance condition attribute represents a judgment regarding the extent policies; (2) compliance with statutory and regulatory require­ and sufficiency of the financial resources available to a permit ments; (3) adequacy of recordkeeping; and (4) adherence to holder to fulfill its responsibilities and obligations over the life of statutory fiduciary principles. A rating of 1 indicates the strongest the prepaid funeral contracts under its control, including those level of compliance and the least degree of supervisory concern. currently outstanding and those reasonably anticipated to exist A rating of 5 indicates the highest degree of supervisory concern in the future. due to critical deficiencies in administration and/or compliance and a correspondingly high level of risk to contract holders. Proposed §25.14(c) provides that the uniform risk rating is a sin­ gle number, 1 to 5, that is based upon a qualitative analysis of Each permit holder is advised of the tentative rating assigned the overall risk profile of the permit holder. The rating is not de­ by the examiner and the basis for the rating at the conclusion of termined through application of a mathematical formula, but rep­ an examination. The tentative rating is reviewed by the depart­ resents a judgment that balances assessment of the attributes ment during preparation and review of the report of examination, described in subsection (b) in light of all other relevant factors, and affirmed or revised and communicated to the permit holder such as the size of the permit holder, and the complexity of its orally and in the final report of examination delivered to the per­ operations. As proposed, subsection (c) describes the meaning mit holder. Because summarizing the quality and condition of a of each of the five ratings in numbered paragraphs that include permit holder into a single number necessarily includes review examples of the qualities expected in management, compliance, and analysis of information regarding a permit holder’s financial and financial condition that would merit that rating. A rating of 1 condition, assigned risk ratings are not a matter of public infor­ indicates strong overall condition, 2 indicates satisfactory over­ mation, and are held confidential as an integral part of the report all condition, 3 indicates marginal overall condition, 4 indicates of examination. poor overall condition, and 5 indicates critically deficient overall Prior to amendment by HB 3762, Finance Code §154.053 re­ condition. quired annual examinations of permit holders, plus such addi­ Stephanie Newberg, Deputy Commissioner of the Texas Depart­ tional examinations as the department considered necessary. ment of Banking, has determined that for the first five-year period As amended, §154.053 requires examination of a permit holder theproposedruleisineffect,therewill beno fiscal implications once in every 18-month period, except that the department can for state or local government as a result of enforcing or adminis­ examine a permit holder more frequently if, among other mat­ tering the rules. ters, the permit holder received a less than satisfactory rating as a result of its most recent examination. The proposed new Ms. Newberg also has determined that, for each year of the rule establishes that a rating of 3, 4, or 5 is considered less than first five years the rule as proposed is in effect, the public bene­ satisfactory. The banking commissioner retains discretion to re­ fit anticipated as a result of enforcing the rule will be to provide quire additional examinations as necessary to safeguard the in­ more consistent dissemination of information regarding an effec­ terests of purchasers and beneficiaries and to efficiently enforce tive and proven supervisory tool as a result of its codification into applicable law. The department intends to conduct an annual the Texas Administrative Code. Permit holders will benefitfrom full-scope examination of any permit holder rated less than sat­ being abletoascertainthe meaningattributableto a number rat­

35 TexReg 158 January 8, 2010 Texas Register ing that represents a comprehensive risk assessment based on (2) Compliance. This attribute or portion of the evaluation examination. involves judgment of the degree to which the permit holder adminis­ ters prepaid funeral contracts in accordance with governing instruments For each year of the first five years that the rule will be in effect, and applicable laws and regulations and the degree to which the per­ there will be no economic costs to persons required to comply mit holder adheres to sound fiduciary principles. The examiner will with the rule as proposed. There will be no adverse economic consider the extent and nature of violations discovered during the ex­ effect on small businesses or micro-businesses. There will be amination, and will assess the manner and methods by which the permit no difference in the cost of compliance for small businesses as holder discovers and corrects violations. Correction of violations cited compared to large businesses. Because the proposed new rule in previous examinations will also be considered. is based upon the rating system that has been used by depart­ ment examiners for many years and is familiar to permit holders, (3) Financial condition. This attribute or portion of the the new rule will not require any substantial change to current evaluation involves judgment of the overall financial condition of the practice. Although a permit holder that fails to maintain suffi­ permit holder in relation to the risks imposed by its size and the na­ cient financial resources may receive a different uniform risk rat­ ture and complexity of its activities. An important consideration is the ing as a result of including financial condition as a new attribute extent of the financial resources available to the permit holder for the of the overall risk profile, any adverse impact is a result of statu­ purpose of fulfilling its responsibilities and obligations over the life tory changes made by HB 3762. To remain in the prepaid fu­ of the prepaid funeral contracts under its control, including those cur­ neral contract business, such a permit holder may need to ac­ rently outstanding and those reasonably anticipated to exist in the fu­ quire additional financial resources to satisfy the requirements ture. Availability of financial resources can be demonstrated through of amended Finance Code §154.109(b) to renew its permit. or enhanced by undertakings of a parent company or associated hold­ ing company. To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on February 8, 2010. Com­ (c) Uniform risk ratings. The uniform risk rating is a single ments should be addressed to General Counsel, Texas Depart­ number, 1 to 5, that is based upon a qualitative analysis of the overall ment of Banking, Legal Division, 2601 North Lamar Boulevard, risk profile of the permit holder. The rating is not determined through Suite 300, Austin, Texas 78705-4294. Comments may also be application of a mathematical formula, but is instead based upon a judg­ submitted by email to [email protected]. ment that balances an assessment of the attributes described in subsec­ tion (b) of this section in light of all other relevant factors, such as the The new section is proposed under Finance Code, §154.051, size of the permit holder and the complexity of its operations. which authorizes the commission to adopt reasonable rules relating to the enforcement and administration of Chapter 154; (1) Rating "1" (Strong Overall Condition). Permit holders Finance Code §154.053, which requires periodic examination assigned a uniform risk rating of 1 are sound in every respect; any of the records of permit holders, and requires the commission adverse findings or comments are of a minor nature and can be resolved to adopt standards for a uniform risk rating process by rule; in the normal course of business by management. Permit holders in this §154.103, which sets out the requirements for issuance of a group give no cause for supervisory concern. permit to sell prepaid funeral benefits; and §154.109, which sets (A) Management. out the grounds for cancellation, suspension or refusal to renew a permit to sell prepaid funeral contracts. (i) Consistently and effectively identifies, measures, monitors, and controls potential problems and risks. Demonstrates Finance Code, Chapter 154, Subchapters B and C are affected the ability to promptly and successfully address existing and potential by the proposed new sections. problems and risks. §25.14. Uniform Risk Ratings. (ii) Demonstrates strong management practices and (a) In general. All prepaid funeral benefit permit holders are procedures relative to the size of the permit holder and the nature and subject to periodic examination. As a result of the examination, the complexity of its activities. permit holder will be assigned a confidential uniform risk rating of 1 to 5 as further described in this section. The uniform risk rating rep­ (iii) Demonstrates a willingness and ability to com­ resents a judgment of the overall risk profile presented by the permit ply with applicable laws and regulations. holder in relation to the purposes of regulation. In general, a rating (B) Compliance. of 1 indicates the highest level of compliance and the least degree of supervisory concern, and a rating of 5 indicates the lowest level of com­ (i) Administers prepaid funeral contracts in accor­ pliance and the highest degree of supervisory concern. A rating of 3, 4 dance with governing instruments and applicable laws and regulations. or 5 is considered less than satisfactory for purposes of Finance Code (ii) Demonstrates adherence to sound fiduciary prin­ §154.053(b)(1)(A). ciples. (b) Overall risk profile. Evaluation of the overall risk profile (iii) Any noted violations are isolated, technical in of the permit holder can be described as involving three interrelated nature and easily correctable. attributes or components, although these attributes are not separately rated. (iv) Corrects any violations in a timely manner and correction may occur after self evaluation. (1) Management. This attribute or portion of the evaluation involves judgment of the ability, skill, and motivation of management (C) Financial condition. and staff of the permit holder to identify, measure, monitor, and control (i) The overall financial condition of the permit potential problems and risks. Competent management should be able to holder is strong in relation to the risks imposed by its size and the develop and apply management practices and procedures suitable to the nature and complexity of its activities. size of the permit holder and the nature and complexity of its activities. In addition, the willingness and ability of management to comply with applicable laws and regulations are important considerations.

PROPOSED RULES January 8, 2010 35 TexReg 159 (ii) Demonstrates more than sufficient financial re­ (i) Compliance practices are less than satisfactory. sources available for the purpose of fulfilling the permit holder’s re­ Contract administration may be in substantial noncompliance with gov­ sponsibilities and obligations over the life of the prepaid funeral con­ erning instruments, and applicable laws. tracts under its control, including those currently outstanding and those (ii) May fail to consistently adhere to sound fidu­ reasonably anticipated to exist in the future. ciary principles. (2) Rating "2" (Satisfactory Overall Condition). Permit (iii) Violations may be in evidence, some of which holders assigned a uniform risk rating of 2 are generally satisfactory may be repeat criticisms. but may reflect a few weaknesses. To the extent that deficiencies are correctable in the normal course of business, supervisory concern is (iv) May fail to correct violations in a timely manner. not warranted. (C) Financial condition. (A) Management. (i) The overall financial condition of the permit (i) In general, effectively identifies, measures, moni­ holder is less than satisfactory in relation to the risks imposed by its tors, and controls potential problems and risks. Minor weaknesses may size and the nature and complexity of its activities. exist, but are not material to the soundness of the permit holder and are (ii) Financial resources may not be sufficient for the being addressed. purpose of fulfilling the permit holder’s responsibilities and obligations (ii) Demonstrates satisfactory management prac­ over the life of the prepaid funeral contracts under its control, includ­ tices and procedures relative to the size of the permit holder and the ing those currently outstanding and those reasonably anticipated to ex­ nature and complexity of its activities. ist in the future. The permit holder’s financial condition needs to be improved. (iii) Demonstrates a willingness and ability to com­ ply with applicable laws and regulations. (4) Rating "4" (Poor Overall Condition). Permit holders assigned a uniform risk rating of 4 exhibit poor operating and compli­ (B) Compliance. ance weaknesses. Permit holders in this group require increased super­ (i) Administers prepaid funeral contracts in substan­ visory attention to assure prompt corrective action. tial compliance with governing instruments and applicable laws and (A) Management. regulations. (i) The level of problems and risk exposure is exces­ (ii) Demonstrates adherence to sound fiduciary prin­ sive. Problems and risks are inadequately identified, measured, mon­ ciples. itored, or controlled and require immediate action by management to (iii) Any noted violations are generally technical in preserve the soundness of the permit holder. Identified criticisms are nature and few in number. not being addressed or resolved. (iv) Corrects violations in a timely manner. (ii) Management practices and procedures are inad­ equate relative to the size of the permit holder and the nature and com­ (C) Financial condition. plexity of its activities. (i) The overall financial condition of the permit (iii) May demonstrate an unwillingness or inability holder is satisfactory in relation to the risks imposed by its size and to take all necessary steps to comply with applicable laws and regula­ the nature and complexity of its activities. tions. (ii) Demonstrates sufficient financial resources (B) Compliance. available for the purpose of fulfilling the permit holder’s responsibili­ ties and obligations over the life of the prepaid funeral contracts under (i) The level of compliance problems is significant. its control, including those currently outstanding and those reasonably Contract administration may be notably deficient and in substantial anticipated to exist in the future. noncompliance with governing instruments, and applicable laws. (3) Rating "3" (Marginal Overall Condition). Permit hold­ (ii) May fail to consistently adhere to sound fidu­ ers assigned a uniform risk rating of 3 exhibit operating and compli­ ciary principles. ance weaknesses ranging from moderate to marginally severe. Permit (iii) Substantive violations exist and may remain un­ holders in this group require more than normal supervision to assure corrected from previous examinations. correction of deficiencies and are considered less than satisfactory. (iv) May fail to correct violations in a timely manner. (A) Management. (C) Financial condition. (i) May inadequately identify, measure, monitor, or control potential problems and risks. The capabilities or resources of (i) The overall financial condition of the permit management may be insufficient to address existing and potential prob­ holder is deficient or deteriorating in relation to the risks imposed by lems and risks. its size and the nature and complexity of its activities. (ii) Management practices and procedures need im­ (ii) Demonstrates insufficient financial resources provement or are less than satisfactory in relation to the size of the available for the purpose of fulfilling the permit holder’s responsi­ permit holder and the nature and complexity of its activities. bilities and obligations over the life of the prepaid funeral contracts under its control, including those currently outstanding and those (iii) May demonstrate a reluctance to take all neces­ reasonably anticipated to exist in the future. The permit holder’s sary steps to comply with applicable laws and regulations. financial condition needs to be improved. (B) Compliance.

35 TexReg 160 January 8, 2010 Texas Register (5) Rating "5" (Critically Deficient Overall Condition). PART 5. OFFICE OF CONSUMER Permit holders assigned a uniform risk rating of 5 exhibit performance or conditions which are critically deficient in numerous major respects. CREDIT COMMISSIONER Permit holders in this group are of the greatest supervisory concern and as such, require ongoing supervisory attention. CHAPTER 83. CONSUMER LOANS (A) Management. SUBCHAPTER C. APPLICATION (i) Problems and risks are inadequately identified, PROCEDURES measured, monitored, or controlled and now threaten the continued vi­ 7 TAC §83.310 ability of the permit holder or the ability to perform as contracted. In­ competent or neglectful administration and inadequate resources may The Office of Consumer Credit Commissioner (OCCC) proposes have contributed to existing problems. Management has not demon­ amendments to §83.310, concerning Fees for regulated lenders. strated the ability to promptly and successfully address existing and In general, the purpose of these amendments to current assess­ potential problems and risks. ment fees is to update and revise fees in order to proportionately cover the costs of regulation. For related amendments, please (ii) Management practices and procedures are criti­ refer to the proposals regarding §84.611, concerning Fees for cally deficient relative to the size of the permit holder and the nature motor vehicle sales finance licensees, §85.211, concerning Fees and complexity of its activities, and may evidence a flagrant disregard for pawnshops, and §89.310, concerning Fees for property tax for the interests of contract purchasers and beneficiaries. lenders, published separately inthisissueofthe Texas Register. (iii) May demonstrate an unwillingness or inability The OCCC supports its operations exclusively from the fees col­ to take all necessary steps to comply with applicable laws and regula­ lected by its regulated industries. No tax dollars are used in the tions. operations of the agency. Within the agency’s budget structure, (B) Compliance. costs are allocated within each type of regulated industry. Gen­ erally, these allocations are computed by evaluating the num­ (i) The level of compliance problems is critically de­ ber of licensed entities within each area and the staff resources ficient. Contract administration may be critically deficient or incom­ required for licensing, examination, and enforcement functions. petent and there is a flagrant disregard for the terms of the governing The evaluation results in an allocation to each regulated area instruments, and interests of contract beneficiaries. that represents each group’s fair share of the costs of regula­ (ii) May frequently engage in transactions that com­ tion. Then within each area the aggregate cost is apportioned promise its duties and sound fiduciary principles. among the total number of licenses by a formula. Typically, the formula consists of a fixed component and a variable component (iii) Numerous substantive violations exist and may which corresponds to the licensee’s volume of activity. be flagrant or repeated. The agency does not have a built in adjustment mechanism, sim­ (iv) Fails to correct violations in a timely manner. ilar to the rate bracket adjustment found in nearly every one of (C) Financial condition. its regulated areas. Thus, periodically the agency reviews and adjusts the fees and the allocation to account for changes in the (i) The overall financial condition of the permit economy, the industries, and other pertinent factors, and to en­ holder is critically deficient in relation to the risks imposed by its size sure that each group covers its fair share. Clearly, the agency and the nature and complexity of its activities. hopes to avoid the situation where one industry is substantially (ii) Demonstrates insufficient financial resources subsidizing the costs of regulation for another industry. The last available for the purpose of fulfilling the permit holder’s responsibili­ time the fees were adjusted was 2002. For comparison, the rate ties and obligations over the life of the prepaid funeral contracts under adjustment bracket, as mentioned above, increased 20% from its control, including those currently outstanding and those reasonably 2002 to 2009 for the pawn industry and 140% for the regulated anticipated to exist in the future. The continued viability of the permit loan industry. The increase in regulated loan industry is partly holder is threatened. due to a statutory change. The OCCC is fiscally conservative and strives to carefully manage its funds to deliver an efficient This agency hereby certifies that the proposal has been reviewed and effective system of regulation at the lowest cost. by legal counsel and found to be within the agency’s legal author­ ity to adopt. From 2002 to 2009, the agency has experienced increased costs of regulation. Examples of these increased regulatory Filed with the Office of the Secretary of State on December 18, costs include: additional state legislative burdens (authority over new licensees, transactions, products, and additional 2009. regulatory responsibilities), review of federal requirements TRD-200905975 (e.g., Gramm-Leach-Bliley Act; Talent Amendment), increased A. Kaylene Ray expenses in conducting field examinations (fuel, hotel ac­ commodations, meals), increased costs related to examiner General Counsel retention and providing greater continuity in the examination Texas Department of Banking process, increased complexity and time-intensive complaints Proposed date of adoption: February 19, 2010 arising from recession-related issues, and increased costs For further information, please call: (512) 475-1300 relatedtoinflation. ♦ ♦ ♦ In reference to motor vehicle sales finance (MVSF) licensees, the agency began regulation of this industry after the 2001 leg­ islative session. The MVSF industry is in a unique position with respect to OCCC licensees as it is the largest licensee base

PROPOSED RULES January 8, 2010 35 TexReg 161 (over 7,500 licenses). It is also a mature industry unaccustomed censees, as the exact costs are unknown and will vary as ad­ to financial regulation until recent years. Additionally, this indus­ vancesaremadeinthe fingerprinting process. try has a larger turnover than the other financial industries that Leslie L. Pettijohn, Consumer Credit Commissioner, has deter­ the OCCC regulates (i.e., more applications and license expira­ mined that for the first five-year period the amendments are in tions). The agency’s examination experience over the past five effect there will be no fiscal implications for state or local govern­ years has shown that regulation of the MVSF area constitutes ment as a result of administering the amendments. over 50% of the agency’s time and resources. The MVSF as­ sessments, however, do not cover half of the agency’s regulatory Commissioner Pettijohn also has determined that for each year costs. The proposed fee adjustments serve to better proportion of the first five years the amendments are in effect, the public the amount of MVSF fees to correspond with the agency time benefit anticipated as a result of the changes will be continued and costs spent regulating this industry. regulation of the respective industries in Texas and the licensees’ proportionate financial burden of the agency’s costs of regula­ Also with regard to MVSF licensees, the agency has been re­ tion. quested by stakeholders to consider a variable or volume-based fee. While §84.611 currently allows the agency to charge a vari­ It is estimated that the following numbers of small businesses able fee, the agency has not exercised that option to date. The may be subject to these proposed new rules: for regulated agency specifically invites comments on the implementation of lenders, between 500 and 1,000 businesses; for MVSF li­ a variable fee structure for the motor vehicle industry, including censees, between 3,500 and 4,500 businesses; for pawnshops, how the agency would receive the necessary financial informa­ between 500 and 1,000 businesses; and for property tax tion to accurately and fairly assess the industry, how the industry lenders, more than half of the 67 licensees. would provide the information, and how the variable fee should It is anticipated that there will be adverse economic effects on be allocated. small or micro businesses, but the agency has taken steps to re­ One key factor affecting the regulated loan industry is a dramatic duce those effects. The agency has reduced its staff and over­ decrease in the number of licensees generating fees over the head below that approved by the legislature in the agency’s ap­ past three years. Numerous regulated lenders have decided to propriations bill from last session. This reduction recognizes the not renew their OCCC licensees. The estimated total decline difficult economic environment that the agency’s regulated in­ from the end of fiscal year 2006 to the end of fiscal year 2009 is dustries must operate in at the present time. approximately 36%. The agency can no longer support the cost The anticipated cost to persons who are required to comply with of regulation of the remaining industry at the existing assessment the amendments as proposed will vary from licensee to licensee, level, and further must adjust the aggregate resource allocation depending on regulated area, number of licenses held, types of to align properly with the license population levels. licenses held (active or inactive), and number of new applica­ The OCCC takes a very serious and cautious approach regard­ tions submitted. The most common increase experienced will ing the expenditure of its funds, as the agency’s funds are indus­ be the annual assessments for active licenses. The agency try funds. In fact, the agency was able to discount assessments has considered the impact to each individual licensed location in during multiple years for three of the four groups of licensees proposing the increase in assessment fees and has attempted (regulated lenders in 2005 and 2007; pawnshops in 2002, 2005, to structure the changes so that it does not have a significant and 2007; and MVSF licensees in 2003, 2004, 2005, and 2007). negative effect on each licensed location. The proposed in­ The OCCC strives to be proper stewards of the fees entrusted crease in assessments for active regulated lenders and prop­ to the agency but can no longer maintain the current level of as­ erty tax lenders is $170 per licensed location. For pawnshops, sessments given the increased costs of regulation and changed the proposed increase in the annual assessments for active li­ circumstances. censees is $195 per licensed location. Hence, the increases as proposed for regulated lenders, property tax lenders, and pawn­ Therefore, as a result of all the factors outlined in the preceding shops would be less than $200 per location per year. paragraphs, the agency has determined that the following ad­ justments to the assessment fees for regulated lenders, MVSF li­ Duetofactorsdis cussed in this rule proposal, the MVSF area censees, pawnshops, and property tax lenders are necessary to constitutes over 50% of the agency’s resources; thus, the an­ proportionately cover the costs of regulation. With regard to the ticipated cost to MVSF licensees is greater in order to provide proposed amendments for all four sections, adjustments have theproperfairshare fee allocation. The increase in active as­ been made to assessment fees for active and inactive licenses sessments for MVSF licensees is $385 per licensed location and and to license transfer fees. It has been the agency’s policy to $420 per registered office. stagger the due dates for the annual assessments, as autho­ The increased regulatory cost may be viewed from the stand­ rized by Texas Finance Code, §341.501. The proposed amend­ pointofthevol ume of transactions conducted by licensees over ments do not affect the renewal due dates for these fees, which a year. The agency performed an analysis in order to quantify will remain as currently scheduled for all licensees. Additionally, the increased costs on a per transaction basis. These figures technical corrections have been made throughout each rule to are based on annual report data submitted to the agency for cal­ improve grammar, formatting, and clarity. endar year 2008. The fingerprinting fees for each rule have also been amended For example, for lenders primarily engaged in the business of to accommodate the increased fees that will be charged to the making loans under Chapter 342, Subchapter F, the median agency for electronic fingerprinting and other federal require­ number of transactions reported in 2008 was 1,686 per year. ments. The language revised in each section ("fee as prescribed Spreading the $170 assessment increase across that loan by the commissioner will be charged to recover to costs of in­ volume results in a cost of $0.10 per transaction. The agency vestigating each principal party’s fingerprint record") is intended conducted a similar analysis for pawnshops, utilizing the 2008 to allow the agency to pass through the appropriate costs to li­ annual report information. For pawnshops, the median number

35 TexReg 162 January 8, 2010 Texas Register of transactions reported was 2,842 per year. Dividing that The agency is not aware of a more economic way to support median number by the $195 assessment increase results in a the agency’s regulatory mandates as provided by the legislature. cost of $0.07 per transaction. But in order to obtain more complete information, the agency in­ vites comments from interested stakeholders and the public on The agency explored other possible fee structures, but those any adverse economic impacts on small businesses and on any alternatives would not accomplish the purpose of the amend­ more efficient or alternative methods of achieving the purpose ments, which is to generate sufficient revenue to cover the costs of the proposal while minimizing adverse impacts on small busi­ of regulation and apportion that cost fairly to each licensee base. nesses. The agency reviewed the possibility of installment payments. Using MVSF licensees as an example, it is estimated that it costs Comments on the proposed amendments may be submitted the agency over $25,000 to conduct an annual renewal mailing in writing to Laurie Hobbs, Assistant General Counsel, Of­ and processing of licensee responses. This figure includes print­ fice of Consumer Credit Commissioner, 2601 North Lamar ing and mailing renewal letters, receiving the responses from Boulevard, Austin, Texas 78705-4207 or by email to lau­ licensees, processing the payments, and the cost of supplies. [email protected]. To be considered, a written Each step of this process is labor intensive. There are additional comment must be received on or before the 30th day after the costs for second notices as well. To segment this process into a date the proposed amendments are published in the Texas system with two installment payments would be cost prohibitive. Register. At the conclusion of the 30th day after the proposed amendments are published in the Texas Register, no further The agency has also attempted to lessen the potential costs written comments will be considered or accepted by the com­ of these amendments on small businesses through several mission. previous actions. Concerning variable or volume-based fees, the agency currently charges volume-based fees for regulated These amendments are proposed under Texas Finance Code lenders and pawnshop licensees, which serves to correlate a §11.304, which authorizes the Finance Commission to adopt portion of the fee with the size of the business. Consequently, rules to enforce Title 4 of the Texas Finance Code. Texas Fi­ smaller businesses pay smaller fees. As noted earlier, the nance Code, §342.551 grants the Finance Commission the au­ agency has been requested to consider a variable fee for MVSF thority to adopt rules to enforce the consumer loan chapter. licensees. A variable fee had not been utilized for the motor The statutory provisions affected by the proposal are contained vehicle industry in the past in part because MVSF licensees are in Texas Finance Code, Chapter 342. not required by statute to file an annual report containing yearly volume information. If comments support the interest in such a §83.310. Fees. fee, oneoptionfor theagency to obtain the necessary volume information would be to require an annual report for MVSF (a) New licenses. licensees by rule. The agency specifically invites comments (1) Investigation fees. A $200 non-refundable investiga­ on the implementation of a variable fee structure for the motor tion fee is assessed each time an application for a new license is filed. vehicle industry. (2) Assessment fees. An assessment fee of $600 [$430] Regarding recordkeeping for regulated lenders and MVSF li­ per active license and $250 [$125] per inactive license is assessed each censees, the agency has reduced costs by providing flexibility in time an application for a new license is filed. This assessment fee will the recordkeeping rules, allowing paper, electronic, or optically be refunded if the application is not approved. imaged systems. The agency has also allowed some licensees to utilize centralized recordkeeping, where the records for mul­ (b) License transfers. An applicant must pay a $200 non-re­ tiple locations are examined at a centralized collections facility. fundable investigation fee for each [the first] license transfer [and a In addition, as examination for property tax lenders have only $50 non-refundable investigation fee on each additional license trans­ recently begun, the same recordkeeping flexibility has been ap­ fer filed simultaneously]. plied in the absence of specificrules. (c) Fingerprint processing. A [The] non-refundable fee as pre­ In reference to all licensees, the agency has promulgated numer­ scribed by the commissioner will be charged to recover to costs of in­ ous sample forms, including plain language contracts and disclo­ vestigating [to investigate] each principal party’s fingerprint record [is sures. Standardized forms increase the economies of scale and $40 per individual]. allow businesses of all sizes the ability to reduce costs and op­ (d) License amendments. A fee of $25 must be paid each time erate more efficiently. A licensee’s documentation cost is lower a licensee amends a license by inactivating [rendering]a license[inac­ and a licensee’s litigation cost is also lower through the develop­ tive], activating an inactive license, changing the assumed name of the ment of the forms by the agency and the use of those forms by a licensee, or relocating an office. licensee. In previous rulemaking actions regarding these forms, the agency has continually worked with licensees in drafting, re­ (e) License duplicates. The fee for a license duplicate is $10. vising, and refining the forms to provide the best language pos­ (f) Costs of hearings. The commissioner may assess the costs sible. The consumer forms written in plain language produced of an administrative appeal pursuant to Texas Finance Code, §14.207 by the agency have served to lessen consumer confusion, and for a hearing afforded under §83.307(d) of this title (relating to Process­ thus, lower potential costs of disputes. In addition, the agency ing of Application), including the cost of the administrative law judge, has frequently provided delayed compliance dates, often a year the court reporter, and agency staff representing the OCCC [agency]at or longer, to licensees to exhaust the supply of their current forms a hearing. inventory in order to minimize the costs of discarding obsolete forms. Furthermore, the agency has reviewed a number of soft­ (g) Annual renewal and assessment fees [fee]. ware programs for statutory compliance and has listed those pro­ (1) An annual assessment fee is required for each license grams on its website for the industry’s convenience. consisting of: (A) a fixed fee of $600 [$430]; and

PROPOSED RULES January 8, 2010 35 TexReg 163 (B) a volume fee based upon the type of lending activity reasonable amount for handling documents relating to the sale conducted and the volume of business of that consists of an amount that and financing of a motor vehicle. is the greater of: Additionally, HB 3621 authorizes the agency to review the (i) $0.03 per each $1,000 transacted for license amount of a documentary fee charged for reasonableness and holders whose regulated operations consist of negotiating or brokering to set standards concerning reasonable amounts. The purpose transactions on behalf of others in accordance with the most recent of this rule proposal is to provide reasonableness standards annual report filing (Schedule E, Brokered Loans) required by Texas for the agency’s review of a retail seller’s proposed increase to Finance Code, §342.559; a documentary fee. Due to the complex nature of this issue, the agency has conducted two rounds of pre-comment with (ii) $0.03 per each $1,000 advanced for license interested stakeholders. This proposal incorporates sugges­ holders whose regulated operations occur within Texas Finance Code, tions received from these informal comments. Having greatly Chapter 342, Subchapter F, in accordance with the most recent annual benefitted from the pre-comment process, the resulting pro­ report filing (Schedule D, Lines 2 and 3) required by Texas Finance posal provides increased clarity and consistency to licensees Code, §342.559; or regarding the reasonableness standards for documentary fees. (iii) $0.05 per each $1,000 made or acquired under Section 84.205(a) provides the statutory authority for the Texas Finance Code, Chapter 342, except amounts made or acquired agency’s review of documentary fees under Texas Finance by license holders covered by clauses (i) or (ii) of this subparagraph, or Code, §348.006(e). Subsection (a) also includes applicability Texas Finance Code, Chapter 346, in accordance with the most recent language limiting the section to retail sales as defined by the annual report filing (Schedule D, Lines 1, 4, 6 and 8) required by Texas Texas Transportation Code. Finance Code, §342.559. Section 84.205(b) describes permissible documentary fee costs, (2) The annual assessment fee for an inactive license is stating that such costs must directly relate to the retail seller’s $250 [$125]. handling and processing of documents for the sale and financing (3) The maximum annual assessment fee for each licensed of a motor vehicle in compliance with state and federal law. entity will [shall] not averagemorethan$1,200 [$1,000] per active Section 84.205(c) discusses the costs directly relating to the sale licensed location. of a motor vehicle. For a cost directly relating to the sale of a This agency hereby certifies that the proposal has been reviewed motor vehicle to be included in a documentary fee, it must be by legal counsel and found to be within the agency’s legal author­ incurred either concurrently or after (and not before) the nego­ ity to adopt. tiation and preparation of the buyer’s order, the bill of sale, or the purchase agreement. Costs may also directly relate to the Filed with the Office of the Secretary of State on December 18, evaluation by the retail seller of the creditworthiness of the retail buyer, the completion and execution of the contract, or the per­ 2009. fection of the lien against a motor vehicle. TRD-200905966 Section 84.205(d) outlines costs excluded from a reasonable Leslie L. Pettijohn documentary fee. Subsection (d) is divided into four paragraphs, Commissioner providing: (1) the general rule that costs are prohibited from in­ Office of Consumer Credit Commissioner clusion if incurred after the actual transfer of title or when the title Earliest possible date of adoption: February 7, 2010 is legally obligated to have been transferred, whichever is ear­ For further information, please call: (512) 936-7621 lier (applicable to both the purchased vehicle and any trade-in); (2) the exclusion of the costs associated with negotiation or as­ ♦ ♦ ♦ signment of the contract; (3) the exclusion of the costs of other CHAPTER 84. MOTOR VEHICLE parties incurred for the credit evaluation of the retail buyer; and (4) a list of other excluded costs (e.g., advertising, processing of INSTALLMENT SALES manufacturer or distributor’s rebates). SUBCHAPTER B. RETAIL INSTALLMENT Section 84.205(e) details three critical tests that must be met for CONTRACT a documentary fee to be considered reasonable. To be reason­ able, proposed costs must be: (1) allowable, (2) allocable, and 7 TAC §84.205 (3) meet the prudent business person standard. Much of the lan­ guage in subsection (e) is patterned after Office of Management The Finance Commission of Texas (commission) proposes new and Budget Circular A-87 (OMB Circular A-87) used by various §84.205, concerning Documentary Fee Reasonableness Stan­ federal agencies, including the U.S. Department of Housing Ur­ dards, with regard to motor vehicle installment sales. ban and Development. OMB Circular A-87 establishes auditing The maximum documentary fee for motor vehicle dealers had criteria under which grants, cost-reimbursement contracts, and been $50 for more than 15 years. Due to the additional costs other agreements are reviewed. of federal requirements to protect consumer information placed Also included in §84.205(e) is information concerning the on dealers during this time, the costs of processing motor vehicle agency’s review of a documentary fee. The commissioner will retail installment sales contracts has risen and been absorbed by only review a documentary fee for reasonableness if it is above the industry. The 81st Texas Legislature enacted House Bill (HB) $125. Texas Finance Code, §348.006(f) states: "A documentary 3621 in order to remove the $50 cap on the documentary fee fee charged in accordance with this section before September charged on contracts under Chapter 348 of the Texas Finance 1, 2009, is considered reasonable for purposes of this section." Code. The bill requires that a documentary fee not exceed a Thus, $50 is the statutory safe harbor remaining for dealers that do not increase their documentary fees. A dealer, however,

35 TexReg 164 January 8, 2010 Texas Register must provide the Office of Consumer Credit Commissioner written comments will be considered or accepted by the com­ (OCCC) with written notice before charging a documentary fee mission. in excess of $50. A documentary fee filing above $50 up to and The new rule is proposed under Texas Finance Code, including $125 will be considered reasonable by the OCCC. §348.006(h) (Acts 2009, 81st Leg.), which authorizes the Although the statutory safe harbor is $50, the agency acknowl­ commission to adopt rules relating to the standards for a edges the increased costs of compliance with state and federal reasonableness determination or disclosures. The new rule laws that have evolved over the 15-year period the $50 cap is also proposed under Texas Finance Code, §11.304, which was in place in arriving at the $125 amount for the reasonable authorizes the commission to adopt rules to enforce Title 4 of documentary fee. These increased costs include: compliance the Texas Finance Code. Additionally, Texas Finance Code, with Federal Trade Commission regulations, compliance with §348.513 grants the commission the authority to adopt rules to the Specially Designated Nationals List regulation, compliance enforce the motor vehicle installment sales chapter. with the Gramm-Leach-Bliley Act, compliance with the Texas Department of Transportation’s titling requirements, and cal­ The statutory provisions affected by the proposal are contained culation of the proper registration fees (over 1,600 different in Texas Finance Code, Chapter 348. registration fees). §84.205. Documentary Fee Reasonableness Standards. Section 84.205(f) outlines the commissioner’s authority to re­ duce or suspend unreasonable documentary fees. (a) Generally. When reviewing a seller’s documentary fee in­ crease for reasonableness under Texas Finance Code, §348.006(e), the Leslie L. Pettijohn, Consumer Credit Commissioner, has deter­ commissioner may consider the resources required by the seller to per­ mined that for the first five-year period the rule is in effect there form the seller’s duties under state and federal law with respect to the will be no fiscal implications for state or local government as a handling and processing of documents relating to the sale and financing result of administering the rule. of a motor vehicle. This section only applies to retail sales as defined Commissioner Pettijohn has also determined that for each year by the Texas Transportation Code. of the first five years the new rule is in effect the public bene­ (b) Permissible documentary fee costs. For a cost to be in­ fit anticipated will be that the commission’s rules will implement cluded in a documentary fee, a cost must directly relate to the retail recent legislative concepts in order to provide greater clarity for seller’s handling and processing of documents for the sale and financ­ licensees by outlining the framework under which the agency will ing of a motor vehicle in compliance with state and federal law. review requests to increase documentary fees. Additional public benefits resulting from the proposed new rule will be consistency (c) Costs relating to sale of motor vehicle. For a cost to be in the financing of motor vehicles and enhanced protection for included in a documentary fee, the cost must be incurred either concur­ consumers. rently or after the negotiation and preparation of the buyer’s order, the bill of sale, or the purchase agreement and must directly relate to the Licensees will have the option of not increasing their documen­ sale of a motor vehicle. Any costs or resources expended prior to the tary fees, in which case there will be little to no fiscal implications negotiation and preparation of the buyer’s order, the bill of sale, or the for those licensees for approximately one year. As stated in the purchase agreement may not be included in the documentary fee. The agency’s Motor Vehicle Advisory Bulletin from August 31, 2009, cost may also directly relate to the evaluation by the retail seller of the licensees who elect to not increase their documentary fees may creditworthiness of the retail buyer, the completion and execution of use their current contract forms until August 31, 2010. For li­ the retail installment sales contract by the retail seller, or the perfection censees who decide to increase their fees, nominal costs may of the lien against a motor vehicle. result to update their programming and produce new contracts. However, it is anticipated that the one-time costs of updating con­ (d) Costs excluded. tracts will be exceeded by the increased documentary fees that (1) Generally. A documentary fee may not include any licensees will then be able to charge on each and every new con­ costs or resources expended after the title of a purchased motor vehicle tract issued. Therefore, a neutral cost will result to persons who is actually transferred or when the title is legally obligated to have been arerequiredtocomply with the new rule contained in the pro­ transferred, whichever is earlier. If the sale includes a trade-in vehicle, posal. There will be no effect on individuals required to comply the documentary fee may not include costs or resources expended after with the new rule as proposed. the title of the trade-in is actually transferred or when the title is legally The agency is not aware of any adverse economic effect on small obligated to have been transferred, whichever is earlier. or micro-businesses resulting from this proposal. But in order to (2) Costs associated with negotiation or assignment of con­ obtain more complete information concerning the economic ef­ tract. The retail seller cannot include any costs associated with either fect of the new rule, the agency invites comments from interested the negotiation of or the assignment of the retail installment sales con­ stakeholders and the public on any economic impacts on small tract to another financial institution or related finance company. businesses, as well as any alternative methods of achieving the purpose of the proposal while minimizing adverse impacts on (3) Costs of credit evaluation by other parties. A retail small businesses. seller may not include the cost of any resource or expense in the docu­ mentary fee analysis that relates to the evaluation of the creditworthi­ Comments on the proposed new rule may be submitted in writing ness of the prospective retail buyer by an entity that may purchase the to Laurie Hobbs, Assistant General Counsel, Office of Consumer underlying retail installment sales contract. Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to [email protected]. (4) Other excluded costs. The retail seller may not include To be considered, a written comment must be received on or any costs associated with advertising, the retail seller’s credit arrange­ before the 30th day after the date the new rule is published ments for the purchase of its inventory, the processing of manufacturer in the Texas Register. At the conclusion of the 30th day after or distributor’s rebates, the compensation of a person for the sale of the theproposedruleispublishedin the Texas Register, no further motor vehicle, the price of any report on the condition or history of the motor vehicle to be purchased or traded-in, or the cost associated with

PROPOSED RULES January 8, 2010 35 TexReg 165 the disbursement of money (i.e., certified checks or capital expenses). a reasonable amount retroactively. The order to reduce a documentary A retail seller cannot increase any authorized charge or expense from fee retroactively will require the seller to provide restitution to all retail a third party associated with the documentary fee. buyers who were charged a fee in excess of the amount the commis­ sioner determines to be reasonable over $125. The commissioner may (e) Reasonable documentary fee. also suspend by order a seller’s ability to charge any documentary fee (1) To be reasonable, a documentary fee cannot exceed the above $50 for a specified period of time. amount necessary to cover the cost of performing the processing and This agency hereby certifies that the proposal has been reviewed handling of the documents required for the sale and financing of a motor by legal counsel and found to be within the agency’s legal author­ vehicle. ity to adopt. (2) To be considered reasonable, proposed costs must meet three critical tests: Filedwiththe Office of the Secretary of State on December 18, (A) Allowable. For a cost to be allowable, it must meet 2009. the following criteria: TRD-200905972 (i) be necessary for the proper and efficient sale and Leslie L. Pettijohn financing of a motor vehicle; Commissioner (ii) be authorized or not prohibited under state or lo­ Office of Consumer Credit Commissioner cal laws or regulations or be necessary in order to comply with a local, Earliest possible date of adoption: February 7, 2010 state, or federal law or regulation; For further information, please call: (512) 936-7621 (iii) be determined in accordance with generally ac­ ♦ ♦ ♦ cepted accounting principles; and SUBCHAPTER F. LICENSING (iv) be adequately documented, including any appli­ cable credits. 7 TAC §84.611 (B) Allocable. Allocable costs are logically related to, The Office of Consumer Credit Commissioner (OCCC) pro­ or required in the performance of the handling and processing of doc­ poses amendments to §84.611, concerning Fees for motor uments relating to the sale and financing of a motor vehicle. In de­ vehicle sales finance licensees. In general, the purpose of these termining whether a cost is allocable, consideration will be given to amendments to current assessment fees is to update and revise whether the goods or services involved are chargeable or assignable to fees in order to proportionately cover the costs of regulation. the objective of processing and handling of the documents required for For related amendments, please refer to the proposals regard­ the sale and financing of a motor vehicle in accordance with relative ing §83.310, concerning Fees for regulated lenders, §85.211, benefits received. concerning Fees for pawnshops, and §89.310, concerning Fees for property tax lenders, published separately in this issue of (C) Prudent business person. The prudent business per­ the Texas Register. son standard is the amount a prudent business person would pay in a competitive marketplace. A cost can be allowable and allocable, and The OCCC supports its operations exclusively from the fees col­ still not be what a prudent business person would pay (e.g., hiring a lected by its regulated industries. No tax dollars are used in the limousine to deliver documents). In determining whether a given cost operations of the agency. Within the agency’s budget structure, is prudent, consideration will be given to: costs are allocated within each type of regulated industry. Gen­ erally, these allocations are computed by evaluating the num­ (i) whether the cost is of a type generally recognized ber of licensed entities within each area and the staff resources as ordinary, customary, and necessary for the processing and handling required for licensing, examination, and enforcement functions. of the documents for the sale and financing of a motor vehicle; The evaluation results in an allocation to each regulated area (ii) the restraints or requirements imposed by such that represents each group’s fair share of the costs of regula­ factors as sound business practices, arms-length bargaining, and fed­ tion. Then within each area the aggregate cost is apportioned eral, state and other laws and regulations; among the total number of licenses by a formula. Typically, the formula consists of a fixed component and a variable component (iii) market prices for comparable goods or services; which corresponds to the licensee’s volume of activity. and The agency does not have a built in adjustment mechanism, sim­ (iv) the necessity for the cost. ilar to the rate bracket adjustment found in nearly every one of (3) The Office of Consumer Credit Commissioner will re­ its regulated areas. Thus, periodically the agency reviews and view any written notice of an increased documentary fee over $125 adjusts the fees and the allocation to account for changes in the provided by a seller. The review may include an analysis of the re­ economy, the industries, and other pertinent factors, and to en­ sources required by the seller to perform the seller’s duties under state sure that each group covers its fair share. Clearly, the agency and federal law with respect to the handling and processing of docu­ hopes to avoid the situation where one industry is substantially ments relating to the sale and financing of a motor vehicle. The review subsidizing the costs of regulation for another industry. The last may result in a determination of the maximum amount of a documen­ time the fees were adjusted was 2002. For comparison, the rate tary fee that a specific seller may charge. A retail seller must comply adjustment bracket, as mentioned above, increased 20% from with the Truth in Lending Act (15 U.S.C. §1601, et seq.) when disclos­ 2002 to 2009 for the pawn industry and 140% for the regulated ing a documentary fee in cash and financed transactions. loan industry. The increase in regulated loan industry is partly due to a statutory change. The OCCC is fiscally conservative (f) Reduction or suspension of unreasonable documentary fee. and strives to carefully manage its funds to deliver an efficient The commissioner may order a seller to reduce its documentary fee to and effective system of regulation at the lowest cost.

35 TexReg 166 January 8, 2010 Texas Register From 2002 to 2009, the agency has experienced increased been made to assessment fees for active and inactive licenses costs of regulation. Examples of these increased regulatory and to license transfer fees. It has been the agency’s policy to costs include: additional state legislative burdens (authority stagger the due dates for the annual assessments, as autho­ over new licensees, transactions, products, and additional rized by Texas Finance Code, §341.501. The proposed amend­ regulatory responsibilities), review of federal requirements ments do not affect the renewal due dates for these fees, which (e.g., Gramm-Leach-Bliley Act; Talent Amendment), increased will remain as currently scheduled for all licensees. Additionally, expenses in conducting field examinations (fuel, hotel ac­ technical corrections have been made throughout each rule to commodations, meals), increased costs related to examiner improve grammar, formatting, and clarity. retention and providing greater continuity in the examination The fingerprinting fees for each rule have also been amended process, increased complexity and time-intensive complaints to accommodate the increased fees that will be charged to the arising from recession-related issues, and increased costs agency for electronic fingerprinting and other federal require­ relatedtoinflation. ments. The language revised in each section ("fee as prescribed In reference to motor vehicle sales finance (MVSF) licensees, by the commissioner will be charged to recover to costs of in­ the agency began regulation of this industry after the 2001 leg­ vestigating each principal party’s fingerprint record") is intended islative session. The MVSF industry is in a unique position with to allow the agency to pass through the appropriate costs to li­ respect to OCCC licensees as it is the largest licensee base censees, as the exact costs are unknown and will vary as ad­ (over 7,500 licenses). It is also a mature industry unaccustomed vances are made in the fingerprinting process. to financial regulation until recent years. Additionally, this indus­ Leslie L. Pettijohn, Consumer Credit Commissioner, has deter­ try has a larger turnover than the other financial industries that mined that for the first five-year period the amendments are in the OCCC regulates (i.e., more applications and license expira­ effect there will be no fiscal implications for state or local govern­ tions). The agency’s examination experience over the past five ment as a result of administering the amendments. years has shown that regulation of the MVSF area constitutes over 50% of the agency’s time and resources. The MVSF as­ Commissioner Pettijohn also has determined that for each year sessments, however, do not cover half of the agency’s regulatory of the first five years the amendments are in effect, the public costs. The proposed fee adjustments serve to better proportion benefit anticipated as a result of the changes will be continued the amount of MVSF fees to correspond with the agency time regulation of the respective industries in Texas and the licensees’ and costs spent regulating this industry. proportionate financial burden of the agency’s costs of regula­ tion. Also with regard to MVSF licensees, the agency has been re­ quested by stakeholders to consider a variable or volume-based It is estimated that the following numbers of small businesses fee. While §84.611 currently allows the agency to charge a vari­ may be subject to these proposed new rules: for regulated able fee, the agency has not exercised that option to date. The lenders, between 500 and 1,000 businesses; for MVSF li­ agency specifically invites comments on the implementation of censees, between 3,500 and 4,500 businesses; for pawnshops, a variable fee structure for the motor vehicle industry, including between 500 and 1,000 businesses; and for property tax how the agency would receive the necessary financial informa­ lenders, more than half of the 67 licensees. tion to accurately and fairly assess the industry, how the industry It is anticipated that there will be adverse economic effects on would provide the information, and how the variable fee should small or micro businesses, but the agency has taken steps to re­ be allocated. duce those effects. The agency has reduced its staff and over­ One key factor affecting the regulated loan industry is a dramatic head below that approved by the legislature in the agency’s ap­ decrease in the number of licensees generating fees over the propriations bill from last session. This reduction recognizes the past three years. Numerous regulated lenders have decided to difficult economic environment that the agency’s regulated in­ not renew their OCCC licensees. The estimated total decline dustries must operate in at the present time. from the end of fiscalyear2006tothe endof fiscal year 2009 is The anticipated cost to persons who are required to comply with approximately 36%. The agency can no longer support the cost the amendments as proposed will vary from licensee to licensee, of regulation of the remaining industry at the existing assessment depending on regulated area, number of licenses held, types of level, and further must adjust the aggregate resource allocation licenses held (active or inactive), and number of new applica­ to align properly with the license population levels. tions submitted. The most common increase experienced will The OCCC takes a very serious and cautious approach regard­ be the annual assessments for active licenses. The agency ing the expenditure of its funds, as the agency’s funds are indus­ has considered the impact to each individual licensed location in try funds. In fact, the agency was able to discount assessments proposing the increase in assessment fees and has attempted during multiple years for three of the four groups of licensees to structure the changes so that it does not have a significant (regulated lenders in 2005 and 2007; pawnshops in 2002, 2005, negative effect on each licensed location. The proposed in­ and 2007; and MVSF licensees in 2003, 2004, 2005, and 2007). crease in assessments for active regulated lenders and prop­ TheOCCC strivestobeproperstewardsofthe fees entrusted erty tax lenders is $170 per licensed location. For pawnshops, to the agency but can no longer maintain the current level of as­ the proposed increase in the annual assessments for active li­ sessments given the increased costs of regulation and changed censeesis$195 per licensed location. Hence, the increases as circumstances. proposed for regulated lenders, property tax lenders, and pawn­ shops would be less than $200 per location per year. Therefore, as a result of all the factors outlined in the preceding paragraphs, the agency has determined that the following ad­ Due to factors discussed in this rule proposal, the MVSF area justments to the assessment fees for regulated lenders, MVSF li­ constitutes over 50% of the agency’s resources; thus, the an­ censees, pawnshops, and property tax lenders are necessary to ticipated cost to MVSF licensees is greater in order to provide proportionately cover the costs of regulation. With regard to the the proper fair share fee allocation. The increase in active as- proposed amendments for all four sections, adjustments have

PROPOSED RULES January 8, 2010 35 TexReg 167 sessments for MVSF licensees is $385 per licensed location and erate more efficiently. A licensee’s documentation cost is lower $420 per registered office. and a licensee’s litigation cost is also lower through the develop­ ment of the forms by the agency and the use ofthoseformsbya The increased regulatory cost may be viewed from the stand­ licensee. In previous rulemaking actions regarding these forms, point of the volume of transactions conducted by licensees over the agency has continually worked with licensees in drafting, re­ a year. The agency performed an analysis in order to quantify vising, and refining the forms to provide the best language pos­ the increased costs on a per transaction basis. These figures sible. The consumer forms written in plain language produced are based on annual report data submittedtotheagency forcal­ by the agency have served to lessen consumer confusion, and endar year 2008. thus, lower potential costs of disputes. In addition, the agency For example, for lenders primarily engaged in the business of has frequently provided delayed compliance dates, often a year making loans under Chapter 342, Subchapter F, the median or longer, to licensees to exhaust the supply of their current forms number of transactions reported in 2008 was 1,686 per year. inventory in order to minimize the costs of discarding obsolete Spreading the $170 assessment increase across that loan forms. Furthermore, the agency has reviewed a number of soft­ volume results in a cost of $0.10 per transaction. The agency ware programs for statutory compliance and has listed those pro­ conducted a similar analysis for pawnshops, utilizing the 2008 grams on its website for the industry’s convenience. annual report information. For pawnshops, the median number The agency is not aware of a more economic way to support of transactions reported was 2,842 per year. Dividing that the agency’s regulatory mandates as provided by the legislature. median number by the $195 assessment increase results in a But in order to obtain more complete information, the agency in­ cost of $0.07 per transaction. vites comments from interested stakeholders and the public on The agency explored other possible fee structures, but those any adverse economic impacts on small businesses and on any alternatives would not accomplish the purpose of the amend­ more efficient or alternative methods of achieving the purpose ments, which is to generate sufficient revenue to cover the costs of the proposal while minimizing adverse impacts on small busi­ of regulation and apportion that cost fairly to each licensee base. nesses. The agency reviewed the possibility of installment payments. Comments on the proposed amendments may be submitted Using MVSF licensees as an example, it is estimated that it costs in writing to Laurie Hobbs, Assistant General Counsel, Of­ the agency over $25,000 to conduct an annual renewal mailing fice of Consumer Credit Commissioner, 2601 North Lamar and processing of licensee responses. This figure includes print­ Boulevard, Austin, Texas 78705-4207 or by email to lau­ ing and mailing renewal letters, receiving the responses from [email protected]. To be considered, a written licensees, processing the payments, and the cost of supplies. comment must be received on or before the 30th day after the Each step of this process is labor intensive. There are additional date the proposed amendments are published in the Texas costs for second noticesaswell. To segmentthisprocessinto a Register. At the conclusion of the 30th day after the proposed system with two installment payments would be cost prohibitive. amendments are published in the Texas Register, no further The agency has also attempted to lessen the potential costs written comments will be considered or accepted by the com­ of these amendments on small businesses through several mission. previous actions. Concerning variable or volume-based fees, These amendments are proposed under Texas Finance Code the agency currently charges volume-based fees for regulated §11.304, which authorizes the Finance Commission to adopt lenders and pawnshop licensees, which serves to correlate a rules to enforce Title 4 of the Texas Finance Code. Texas Fi­ portion of the fee with the size of the business. Consequently, nance Code, §348.513 grants the commission the authority to smaller businesses pay smaller fees. As noted earlier, the adopt rules to enforce the motor vehicle installment sales chap­ agency has been requested to consider a variable fee for MVSF ter. licensees. A variable fee had not been utilized for the motor vehicle industry in the past in part because MVSF licensees are The statutory provisions affected by the proposal are contained not required by statute to file an annual report containing yearly in Texas Finance Code, Chapter 348. volume information. If comments support the interest in such a §84.611. Fees. fee, one option for the agency to obtain the necessary volume information would be to require an annual report for MVSF (a) New licenses. licenseesbyrule. The agency specifically invites comments on the implementation of a variable fee structure for the motor (1) Investigation fees. A $200 [$100] non-refundable in­ vehicle industry. vestigation fee is assessed each time an application for a new license is filed. Regarding recordkeeping for regulated lenders and MVSF li­ censees, the agency has reduced costs by providing flexibility in (2) Registered office fees. The fee for each registered office the recordkeeping rules, allowing paper, electronic, or optically is $25. imaged systems. The agency has also allowed some licensees (b) License transfers. An applicant must pay a non-refundable to utilize centralized recordkeeping, where the records for mul­ investigation fee of $200 [$100] for the transfer of a license. tiple locations are examined at a centralized collections facility. In addition, as examination for property tax lenders have only (c) Fingerprint processing. A [The] non-refundable fee as pre­ recently begun, the same recordkeeping flexibility has been ap­ scribed by the commissioner will be charged to recover to costs of in­ plied in the absence of specificrules. vestigating [to investigate] each principal party’s [applicant’s] finger­ print record [is $40 per set]. This fee must be paid for each fingerprint In reference to all licensees, the agency has promulgated numer­ record [set of fingerprints] filed with an application for a new license ous sample forms, including plain language contracts and disclo­ or a license transfer. sures. Standardized forms increase the economies of scale and allow businesses of all sizes the ability to reduce costs and op­ (d) License amendments.

35 TexReg 168 January 8, 2010 Texas Register (1) License amendment fees. A fee of $25 must be paid operations of the agency. Within the agency’s budget structure, each time a licensee amends [seeks to amend] a license by inactivating costs are allocated within each type of regulated industry. Gen­ [rendering]alicense[inactive], activating an inactive license, changing erally, these allocations are computed by evaluating the num­ the assumed name of the licensee, or relocating a licensed location. ber of licensed entities within each area and the staff resources required for licensing, examination, and enforcement functions. (2) Registered office amendment fees. The fee for amend­ The evaluation results in an allocation to each regulated area ing or relocating a registered office is $10. that represents each group’s fair share of the costs of regula­ (e) Annual renewal and assessment fees [examination assess­ tion. Then within each area the aggregate cost is apportioned ments]. among the total number of licenses by a formula. Typically, the formula consists of a fixed component and a variable component (1) An annual assessment [renewal]fee is required for each which corresponds to the licensee’s volume of activity. licensee consisting of: The agency does not have a built in adjustment mechanism, sim­ (A) a licensed location fee of $460 [$75]; ilar to the rate bracket adjustment found in nearly every one of (B) a registered office fee of $430 [$10] per location; its regulated areas. Thus, periodically the agency reviews and and adjusts the fees and the allocation to account for changes in the economy, the industries, and other pertinent factors, and to en­ (C) a variable fee based upon the annual dollar volume sure that each group covers its fair share. Clearly, the agency of contracts originated or acquired during the preceding calendar year. hopes to avoid the situation where one industry is substantially (2) The maximum annual assessment for each active li­ subsidizing the costs of regulation for another industry. The last cense will [shall]benomorethan$1,200 [$250] excluding the reg­ time the fees were adjusted was 2002. For comparison, the rate istered office fees. adjustment bracket, as mentioned above, increased 20% from 2002 to 2009 for the pawn industry and 140% for the regulated (f) Licensed location or registered office duplicate certificates. loan industry. The increase in regulated loan industry is partly The fee for a duplicate certificate is $10. due to a statutory change. The OCCC is fiscally conservative (g) Costs of hearings. The commissioner may assess the costs and strives to carefully manage its funds to deliver an efficient of an administrative appeal pursuant to Texas Finance Code, §14.207 and effective system of regulation at the lowest cost. for a hearing afforded under §84.608 of this title (relating to Processing From 2002 to 2009, the agency has experienced increased of Application), including the cost of the administrative law judge, the costs of regulation. Examples of these increased regulatory court reporter, and agency staff representing the OCCC at a hearing. costs include: additional state legislative burdens (authority This agency hereby certifies that the proposal has been reviewed over new licensees, transactions, products, and additional by legal counsel and found to be within the agency’s legal author­ regulatory responsibilities), review of federal requirements ity to adopt. (e.g., Gramm-Leach-Bliley Act; Talent Amendment), increased expenses in conducting field examinations (fuel, hotel ac­ Filed with the Office of the Secretary of State on December 18, commodations, meals), increased costs related to examiner retention and providing greater continuity in the examination 2009. process, increased complexity and time-intensive complaints TRD-200905969 arising from recession-related issues, and increased costs Leslie L. Pettijohn relatedtoinflation. Commissioner In reference to motor vehicle sales finance (MVSF) licensees, Office of Consumer Credit Commissioner the agency began regulation of this industry after the 2001 leg­ Earliest possible date of adoption: February 7, 2010 islative session. The MVSF industry is in a unique position with For further information, please call: (512) 936-7621 respect to OCCC licensees as it is the largest licensee base (over 7,500 licenses). It is also a mature industry unaccustomed ♦ ♦ ♦ to financial regulation until recent years. Additionally, this indus­ CHAPTER 85. RULES OF OPERATION FOR try has a larger turnover than the other financial industries that the OCCC regulates (i.e., more applications and license expira­ PAWNSHOPS tions). The agency’s examination experience over the past five SUBCHAPTER B. PAWNSHOP LICENSE years has shown that regulation of the MVSF area constitutes over 50% of the agency’s time and resources. The MVSF as­ 7 TAC §85.211 sessments, however, do not cover half of the agency’s regulatory costs. The proposed fee adjustments serve to better proportion The Office of Consumer Credit Commissioner (OCCC) proposes the amount of MVSF fees to correspond with the agency time amendments to §85.211, concerning Fees for pawnshops. In and costs spent regulating this industry. general, the purpose of these amendments to current assess­ ment fees is to update and revise fees in order to proportionately Also with regard to MVSF licensees, the agency has been re­ cover the costs of regulation. For related amendments, please quested by stakeholders to consider a variable or volume-based refer to the proposals regarding §83.310, concerning Fees for fee. While §84.611 currently allows the agency to charge a vari­ regulated lenders, §84.611, concerning Fees for motor vehicle able fee, the agency has not exercised that option to date. The sales finance licensees, and §89.310, concerning Fees for prop­ agency specifically invites comments on the implementation of erty tax lenders, published separately in this issue of the Texas a variable fee structure for the motor vehicle industry, including Register. how the agency would receive the necessary financial informa­ tion to accurately and fairly assess the industry, how the industry The OCCC supports its operations exclusively from the fees col­ lected by its regulated industries. No tax dollars are used in the

PROPOSED RULES January 8, 2010 35 TexReg 169 would provide the information, and how the variable fee should lenders, between 500 and 1,000 businesses; for MVSF li­ be allocated. censees, between 3,500 and 4,500 businesses; for pawnshops, between 500 and 1,000 businesses; and for property tax One key factor affecting the regulated loan industry is a dramatic lenders, more than half of the 67 licensees. decrease in the number of licensees generating fees over the past three years. Numerous regulated lenders have decided to It is anticipated that there will be adverse economic effects on not renew their OCCC licensees. The estimated total decline small or micro businesses, but the agency has taken steps to re­ from the end of fiscal year 2006 to the end of fiscal year 2009 is duce those effects. The agency has reduced its staff and over­ approximately 36%. The agency can no longer support the cost head below that approved by the legislature in the agency’s ap­ of regulation of the remaining industry at the existing assessment propriations bill from last session. This reduction recognizes the level, and further must adjust the aggregate resource allocation difficult economic environment that the agency’s regulated in­ to align properly with the license population levels. dustries must operate in at the present time. The OCCC takes a very serious and cautious approach regard­ The anticipated cost to persons who are required to comply with ing the expenditure of its funds, as the agency’s funds are indus­ the amendments as proposed will vary from licensee to licensee, try funds. In fact, the agency was able to discount assessments depending on regulated area, number of licenses held, types of during multiple years for three of the four groups of licensees licenses held (active or inactive), and number of new applica­ (regulated lenders in 2005 and 2007; pawnshops in 2002, 2005, tions submitted. The most common increase experienced will and 2007; and MVSF licensees in 2003, 2004, 2005, and 2007). be the annual assessments for active licenses. The agency The OCCC strives to be proper stewards of the fees entrusted has considered the impact to each individual licensed location in to the agency but can no longer maintain the current level of as­ proposing the increase in assessment fees and has attempted sessments given the increased costs of regulation and changed to structure the changes so that it does not have a significant circumstances. negative effect on each licensed location. The proposed in­ crease in assessments for active regulated lenders and prop­ Therefore, as a result of all the factors outlined in the preceding erty tax lenders is $170 per licensed location. For pawnshops, paragraphs, the agency has determined that the following ad­ the proposed increase in the annual assessments for active li­ justments to the assessment fees for regulated lenders, MVSF li­ censees is $195 per licensed location. Hence, the increases as censees, pawnshops, and property tax lenders are necessary to proposed for regulated lenders, property tax lenders, and pawn­ proportionately cover the costs of regulation. With regard to the shops would be less than $200 per location per year. proposed amendments for all four sections, adjustments have been made to assessment fees for active and inactive licenses Duetofactorsdiscussedinthisrule proposal, theMVSFarea and to license transfer fees. It has been the agency’s policy to constitutes over 50% of the agency’s resources; thus, the an­ stagger the due dates for the annual assessments, as autho­ ticipated cost to MVSF licensees is greater in order to provide rized by Texas Finance Code, §341.501. The proposed amend­ the proper fair share fee allocation. The increase in active as­ ments do not affect the renewal due dates for these fees, which sessments for MVSF licensees is $385 per licensed location and will remain as currently scheduled for all licensees. Additionally, $420 per registered office. technical corrections have been made throughout each rule to The increased regulatory cost may be viewed from the stand­ improve grammar, formatting, and clarity. point of the volume of transactions conducted by licensees over The fingerprinting fees for each rule have also been amended a year. The agency performed an analysis in order to quantify to accommodate the increased fees that will be charged to the the increased costs on a per transaction basis. These figures agency for electronic fingerprinting and other federal require­ are based on annual report data submitted to the agency for cal­ ments. The language revised in each section ("fee as prescribed endar year 2008. by the commissioner will be charged to recover to costs of in­ For example, for lenders primarily engaged in the business of vestigating each principal party’s fingerprint record") is intended making loans under Chapter 342, Subchapter F, the median to allow the agency to pass through the appropriate costs to li­ number of transactions reported in 2008 was 1,686 per year. censees, as the exact costs are unknown and will vary as ad­ Spreading the $170 assessment increase across that loan vances are made in the fingerprinting process. volume results in a cost of $0.10 per transaction. The agency Concerning §85.211 for pawnbrokers, clarification has been conducted a similar analysis for pawnshops, utilizing the 2008 added to the expiration language in subsection (e)(5) in order annual report information. For pawnshops, the median number to better track the statutory provisions found in Texas Finance of transactions reported was 2,842 per year. Dividing that Code, §371.064. median number by the $195 assessment increase results in a cost of $0.07 per transaction. Leslie L. Pettijohn, Consumer Credit Commissioner, has deter­ mined that for the first five-year period the amendments are in The agency explored other possible fee structures, but those effect there will be no fiscal implications for state or local govern­ alternatives would not accomplish the purpose of the amend­ ment as a result of administering the amendments. ments, which is to generate sufficient revenue to cover the costs of regulation and apportion that cost fairly to each licensee base. Commissioner Pettijohn also has determined that for each year The agency reviewed the possibility of installment payments. of the first five years the amendments are in effect, the public Using MVSF licensees as an example, it is estimated that it costs benefitanticipated as a result of the changes will be continued the agency over $25,000 to conduct an annual renewal mailing regulation of the respective industries in Texas and the licensees’ and processing of licensee responses. This figure includes print­ proportionate financial burden of the agency’s costs of regula­ ing and mailing renewal letters, receiving the responses from tion. licensees, processing the payments, and the cost of supplies. It is estimated that the following numbers of small businesses Each step of this process is labor intensive. There are additional may be subject to these proposed new rules: for regulated

35 TexReg 170 January 8, 2010 Texas Register costs for second notices as well. To segment this process into a Register. At the conclusion of the 30th day after the proposed system with two installment payments would be cost prohibitive. amendments are published in the Texas Register, no further written comments will be considered or accepted by the com­ The agency has also attempted to lessen the potential costs mission. of these amendments on small businesses through several previous actions. Concerning variable or volume-based fees, These amendments are proposed under Texas Finance Code the agency currently charges volume-based fees for regulated §11.304, which authorizes the Finance Commission to adopt lenders and pawnshop licensees, which serves to correlate a rules to enforce Title 4 of the Texas Finance Code. Texas Fi­ portion of the fee with the size of the business. Consequently, nance Code, §371.006 authorizes the commission to adopt rules smaller businesses pay smaller fees. As noted earlier, the for enforcement of the Texas Pawnshop Act (Chapter 371). agency has been requested to consider a variable fee for MVSF The statutory provisions affected by the proposal are contained licensees. A variable fee had not been utilized for the motor in Texas Finance Code, Chapter 371. vehicle industry in the past in part because MVSF licensees are not required by statute to file an annual report containing yearly §85.211. Fees. volume information. If comments support the interest in such a (a) New licenses. A $500 non-refundable investigation fee is fee, one option for the agency to obtain the necessary volume assessed each time an application for a new license is filed [and is information would be to require an annual report for MVSF non-refundable]. In addition, the applicant is initially required to pay licensees by rule. The agency specifically invites comments the initial assessment fee [fees] required by subsection (e)(6) of this on the implementation of a variable fee structure for the motor section. This assessment fee will be refunded if the application is not vehicle industry. approved. Regarding recordkeeping for regulated lenders and MVSF li­ (b) Subsequent licenses. A $250 non-refundable investigation censees, the agency has reduced costs by providing flexibility in fee is assessed each time an application for a new license of an exist­ the recordkeeping rules, allowing paper, electronic, or optically ing licensee is filed or if the application involves substantially identical imaged systems. The agency has also allowed some licensees principals and owners of a licensed pawnshop [and is non-refundable]. to utilize centralized recordkeeping, where the records for mul­ In addition, the applicant is initially required to pay the initial assess­ tiple locations are examined at a centralized collections facility. ment fee [fees] required by subsection (e)(6) of this section. This as­ In addition, as examination for property tax lenders have only sessment fee will be refunded if the application is not approved. recently begun, the same recordkeeping flexibility has been ap­ plied in the absence of specificrules. (c) License transfers. An investigation fee of $500 for the first license transfer and $250 on each additional license transfer sought si­ In reference to all licensees, the agency has promulgated numer­ multaneously is required [and is non-refundable]. If the application in­ ous sample forms, including plain language contracts and disclo­ volves substantially identical principals and owners of a licensed pawn­ sures. Standardized forms increase the economies of scale and shop, then the fee is $250 for the first license transfer. License transfer allow businesses of all sizes the ability to reduce costs and op­ fees are nonrefundable. erate more efficiently. A licensee’s documentation cost is lower and a licensee’s litigation cost is also lower through the develop­ (d) Fingerprint processing [checks]. A non-refundable [The] ment of the forms by the agency and the use of those forms by a fee as prescribed by the commissioner will be charged to recover to licensee. In previous rulemaking actions regarding these forms, costs of investigating [to investigate]eachprincipal party’s [appli­ the agency has continually worked with licensees in drafting, re­ cant’s] fingerprint record [is $40 per set and is non-refundable]. This vising, and refining the forms to provide the best language pos­ fee must be paid for each fingerprint record [set of fingerprints] filed sible. The consumer forms written in plain language produced with applications for new licenses or license transfers. by the agency have served to lessen consumer confusion, and (e) Annual renewal and [examination] assessment fees. thus, lower potential costs of disputes. In addition, the agency has frequently provided delayed compliance dates, often a year (1) An annual assessment [renewal] fee is required for each or longer, to licensees to exhaust the supply of their current forms licensed pawnshop of: inventory in order to minimize the costs of discarding obsolete (A) A fixed fee of $625 [$430]; and forms. Furthermore, the agency has reviewed a number of soft­ ware programs for statutory compliance and has listed those pro­ (B) A volume fee of $0.05 per each $1,000 loaned as grams on its website for the industry’s convenience. calculated from the most recent annual [examination] report as de­ scribed in §85.502 of this title (relating to Annual Report [annual ex­ The agency is not aware of a more economic way to support amination report]). the agency’s regulatory mandates as provided by the legislature. But in order to obtain more complete information, the agency in­ (2) The minimum annual assessment for each active vites comments from interested stakeholders and the public on license will [shall] benolessthan$625 [$430]. any adverse economic impacts on small businesses and on any (3) The maximum annual assessment for each active li­ more efficient or alternative methods of achieving the purpose cense will [shall] be no more than $1,200 [$1,000]. of the proposal while minimizing adverse impacts on small busi­ nesses. (4) The minimum annual assessment for each inactive li­ cense will [shall]benolessthan$ 250 [$125]. Comments on the proposed amendments may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Of­ (5) A pawnshop license will [shall] expire on the later of fice of Consumer Credit Commissioner, 2601 North Lamar June 30 or the 16th day after the written notice of delinquency is given Boulevard, Austin, Texas 78705-4207 or by email to lau­ unless the annual assessment fees have [has]been paid. [email protected]. To be considered, a written (6) Upon approval of a new pawnshop license pursuant to comment must be received on or before the 30th day after the §85.206 of this title (relating to Processing of Application),thefi rst date the proposed amendments are published in the Texas year’s fixed [operational assessment]fee will [shall]be$625 [$430].

PROPOSED RULES January 8, 2010 35 TexReg 171 (f) License amendments [amendment]. A fee of $25 must be ber of licensed entities within each area and the staff resources paid each time a licensee amends [seeks to amend] a license by inacti­ required for licensing, examination, and enforcement functions. vating [rendering] a license [inactive], activating an inactive license in The evaluation results in an allocation to each regulated area a county with a population of less than 250,000, changing the assumed that represents each group’s fair share of the costs of regula­ name of the licensee, or relocating an officein a county with a popula­ tion. Then within each area the aggregate cost is apportioned tion of less than 250,000. An activation or relocation in a county with a among the total number of licenses by a formula. Typically, the population of 250,000 or more will [shall] require a $250 investigation formula consists of a fixed component and a variable component fee and other fees as may be required of a new license applicant. which corresponds to the licensee’s volume of activity. (g) License duplicates [duplicate]. The fee for a license dupli­ The agency does not have a built in adjustment mechanism, sim­ cate is $10. ilar to the rate bracket adjustment found in nearly every one of its regulated areas. Thus, periodically the agency reviews and (h) Each applicant for a new or relocated license will [shall] adjusts the fees and the allocation to account for changes in the pay $1.00 to the commissioner for each notice of application that is economy, the industries, and other pertinent factors, and to en­ required to be mailed. sure that each group covers its fair share. Clearly, the agency (i) Costs of hearings [hearing]. The commissioner or admin­ hopes to avoid the situation where one industry is substantially istrative law judge may assess the costs of an administrative appeal subsidizing the costs of regulation for another industry. The last pursuant to Texas Finance Code, §14.207 for a hearing afforded under time the fees were adjusted was 2002. For comparison, the rate [7 TAC] §85.206(g) of this title (relating to Processing of Application), adjustment bracket, as mentioned above, increased 20% from including the cost of the administrative law judge, the court reporter, 2002 to 2009 for the pawn industry and 140% for the regulated and agency staff representing the OCCC [agency] at a hearing. If it is loan industry. The increase in regulated loan industry is partly determined that a protest is frivolous or without basis, then the cost as­ due to a statutory change. The OCCC is fiscally conservative sociated with the hearing may be assessed solely to the protesting party. and strives to carefully manage its funds to deliver an efficient and effective system of regulation at the lowest cost. (j) Excess payment of fees. Any excess payment of fees re­ ceived by the commissioner may be held to offset anticipated fees that From 2002 to 2009, the agency has experienced increased may be owed by the licensee or applicant. costs of regulation. Examples of these increased regulatory costs include: additional state legislative burdens (authority This agency hereby certifies that the proposal has been reviewed over new licensees, transactions, products, and additional by legal counsel and found to be within the agency’s legal author­ regulatory responsibilities), review of federal requirements ity to adopt. (e.g., Gramm-Leach-Bliley Act; Talent Amendment), increased expenses in conducting field examinations (fuel, hotel ac­ Filed with the Office of the Secretary of State on December 18, commodations, meals), increased costs related to examiner 2009. retention and providing greater continuity in the examination TRD-200905970 process, increased complexity and time-intensive complaints arising from recession-related issues, and increased costs Leslie L. Pettijohn related to inflation. Commissioner Office of Consumer Credit Commissioner In reference to motor vehicle sales finance (MVSF) licensees, Earliest possible date of adoption: February 7, 2010 the agency began regulation of this industry after the 2001 leg­ For further information, please call: (512) 936-7621 islative session. The MVSF industry is in a unique position with respect to OCCC licensees as it is the largest licensee base ♦ ♦ ♦ (over 7,500 licenses). It is also a mature industry unaccustomed to financial regulation until recent years. Additionally, this indus­ CHAPTER 89. PROPERTY TAX LENDERS try has a larger turnover than the other financial industries that SUBCHAPTER C. APPLICATION the OCCC regulates (i.e., more applications and license expira­ tions). The agency’s examination experience over the past five PROCEDURES years has shown that regulation of the MVSF area constitutes 7 TAC §89.310 over 50% of the agency’s time and resources. The MVSF as­ sessments, however, do not cover half of the agency’s regulatory The Office of Consumer Credit Commissioner (OCCC) pro­ costs. The proposed fee adjustments serve to better proportion poses amendments to §89.310, concerning Fees for property the amount of MVSF fees to correspond with the agency time tax lenders. In general, the purpose of these amendments to and costs spent regulating this industry. current assessment fees is to update and revise fees in order Also with regard to MVSF licensees, the agency has been re­ to proportionately cover the costs of regulation. For related quested by stakeholders to consider a variable or volume-based amendments, please refer to the proposals regarding §83.310, fee. While §84.611 currently allows the agency to charge a vari­ concerning Fees for regulated lenders, §84.611, concerning able fee, the agency has not exercised that option to date. The Fees for motor vehicle sales finance licensees, and §85.211, agency specifically invites comments on the implementation of concerning Fees for pawnshops, published separately in this a variable fee structure for the motor vehicle industry, including issue of the Texas Register. how the agency would receive the necessary financial informa­ The OCCC supports its operations exclusively from the fees col­ tion to accurately and fairly assess the industry, how the industry lected by its regulated industries. No tax dollars are used in the would provide the information, and how the variable fee should operations of the agency. Within the agency’s budget structure, be allocated. costs are allocated within each type of regulated industry. Gen­ One key factor affecting the regulated loan industry is a dramatic erally, these allocations are computed by evaluating the num­ decrease in the number of licensees generating fees over the

35 TexReg 172 January 8, 2010 Texas Register past three years. Numerous regulated lenders have decided to difficult economic environment that the agency’s regulated in­ not renew their OCCC licensees. The estimated total decline dustries must operate in at the present time. from the end of fiscalyear2006tothe endof fiscal year 2009 is The anticipated cost to persons who are required to comply with approximately 36%. The agency can no longer support the cost the amendments as proposed will vary from licensee to licensee, of regulation of the remaining industry at the existing assessment depending on regulated area, number of licenses held, types of level, and further must adjust the aggregate resource allocation licenses held (active or inactive), and number of new applica­ to align properly with the license population levels. tions submitted. The most common increase experienced will The OCCC takes a very serious and cautious approach regard­ be the annual assessments for active licenses. The agency ing the expenditure of its funds, as the agency’s funds are indus­ has considered the impact to each individual licensed location in try funds. In fact, the agency was able to discount assessments proposing the increase in assessment fees and has attempted during multiple years for three of the four groups of licensees to structure the changes so that it does not have a significant (regulated lenders in 2005 and 2007; pawnshops in 2002, 2005, negative effect on each licensed location. The proposed in­ and 2007; and MVSF licensees in 2003, 2004, 2005, and 2007). crease in assessments for active regulated lenders and prop­ TheOCCC strivestobeproperstewardsofthe fees entrusted erty tax lenders is $170 per licensed location. For pawnshops, to the agency but can no longer maintain the current level of as­ the proposed increase in the annual assessments for active li­ sessments given the increased costs of regulation and changed censees is $195 per licensed location. Hence, the increases as circumstances. proposed for regulated lenders, property tax lenders, and pawn­ shops would be less than $200 per location per year. Therefore, as a result of all the factors outlined in the preceding paragraphs, the agency has determined that the following ad­ Due to factors discussed in this rule proposal, the MVSF area justments to the assessment fees for regulated lenders, MVSF li­ constitutes over 50% of the agency’s resources; thus, the an­ censees, pawnshops, and property tax lenders are necessary to ticipated cost to MVSF licensees is greater in order to provide proportionately cover the costs of regulation. With regard to the the proper fair share fee allocation. The increase in active as­ proposed amendments for all four sections, adjustments have sessments for MVSF licensees is $385 per licensed location and been made to assessment fees for active and inactive licenses $420 per registered office. and to license transfer fees. It has been the agency’s policy to The increased regulatory cost may be viewed from the stand­ stagger the due dates for the annual assessments, as autho­ point of the volume of transactions conducted by licensees over rized by Texas Finance Code, §341.501. The proposed amend­ a year. The agency performedananalysisin orderto quantify ments do not affect the renewal due dates for these fees, which the increased costs on a per transaction basis. These figures will remain as currently scheduled for all licensees. Additionally, are based on annual report data submitted to the agency for cal­ technical corrections have been made throughout each rule to endar year 2008. improve grammar, formatting, and clarity. For example, for lenders primarily engaged in the business of The fingerprinting fees for each rule have also been amended making loans under Chapter 342, Subchapter F, the median to accommodate the increased fees that will be charged to the number of transactions reported in 2008 was 1,686 per year. agency for electronic fingerprinting and other federal require­ Spreading the $170 assessment increase across that loan ments. The language revised in each section ("fee as prescribed volume results in a cost of $0.10 per transaction. The agency by the commissioner will be charged to recover to costs of in­ conducted a similar analysis for pawnshops, utilizing the 2008 vestigating each principal party’s fingerprint record") is intended annual report information. For pawnshops, the median number to allow the agency to pass through the appropriate costs to li­ of transactions reported was 2,842 per year. Dividing that censees, as the exact costs are unknown and will vary as ad­ median number by the $195 assessment increase results in a vances are made in the fingerprinting process. cost of $0.07 per transaction. Leslie L. Pettijohn, Consumer Credit Commissioner, has deter­ The agency explored other possible fee structures, but those mined that for the first five-year period the amendments are in alternatives would not accomplish the purpose of the amend­ effect there willbeno fiscal implications for state or local govern­ ments, whichistogeneratesufficient revenue to cover the costs ment as a result of administering the amendments. of regulation and apportion that cost fairly to each licensee base. Commissioner Pettijohn also has determined that for each year The agency reviewed the possibility of installment payments. of the first five years the amendments are in effect, the public Using MVSF licensees as an example, it is estimated that it costs benefitanticipated as a result of the changes will be continued the agency over $25,000 to conduct an annual renewal mailing regulation of the respective industries in Texas and the licensees’ and processing of licensee responses. This figure includes print­ proportionate financial burden of the agency’s costs of regula­ ing and mailing renewal letters, receiving the responses from tion. licensees, processing the payments, and the cost of supplies. Each step of this process is labor intensive. There are additional It is estimated that the following numbers of small businesses costs for second notices as well. To segment this process into a may be subject to these proposed new rules: for regulated system with two installment payments would be cost prohibitive. lenders, between 500 and 1,000 businesses; for MVSF li­ censees, between 3,500 and 4,500 businesses; for pawnshops, The agency has also attempted to lessen the potential costs between 500 and 1,000 businesses; and for property tax of these amendments on small businesses through several lenders, more than half of the 67 licensees. previous actions. Concerning variable or volume-based fees, the agency currently charges volume-based fees for regulated It is anticipated that there will be adverse economic effects on lenders and pawnshop licensees, which serves to correlate a small or micro businesses, but the agency has taken steps to re­ portion of the fee with the size of the business. Consequently, duce those effects. The agency has reduced its staff and over­ smaller businesses pay smaller fees. As noted earlier, the head below that approved by the legislature in the agency’s ap­ agency has been requested to consider a variable fee for MVSF propriations bill from last session. This reduction recognizes the

PROPOSED RULES January 8, 2010 35 TexReg 173 licensees. A variable fee had not been utilized for the motor The statutory provisions affected by the proposal are contained vehicle industry in the past in part because MVSF licensees are in Texas Finance Code, Chapter 351. not required by statute to file an annual report containing yearly §89.310. Fees. volume information. If comments support the interest in such a fee, one option for the agency to obtain the necessary volume (a) New licenses. information would be to require an annual report for MVSF licensees by rule. The agency specifically invites comments (1) Investigation fees. A $200 non-refundable investiga­ on the implementation of a variable fee structure for the motor tion fee is assessed each time an application for a new license is filed. vehicle industry. (2) Assessment fees. An assessment fee of $600 [$430] Regarding recordkeeping for regulated lenders and MVSF li­ per active license and $250 [$125] per inactive license is assessed each censees, the agency has reduced costs by providing flexibility in time an application for a new license is filed. This assessment fee will the recordkeeping rules, allowing paper, electronic, or optically be refunded if the application is not approved. imaged systems. The agency has also allowed some licensees (b) License transfers. An applicant must pay a $200 non-re­ to utilize centralized recordkeeping, where the records for mul­ fundable investigation fee for each [the first] license transfer [and a tiple locations are examined at a centralized collections facility. $50 non-refundable investigation fee on each additional license trans­ In addition, as examination for property tax lenders have only fer filed simultaneously]. recently begun, the same recordkeeping flexibility has been ap­ plied in the absence of specificrules. (c) Fingerprint processing. A [The] non-refundable fee as pre­ scribed by the commissioner will be charged to recover to costs of in­ In reference to all licensees, the agency has promulgated numer­ vestigating [to investigate]each principal party’s fingerprint record [is ous sample forms, including plain language contracts and disclo­ $40 per individual]. sures. Standardized forms increase the economies of scale and allow businesses of all sizes the ability to reduce costs and op­ (d) License amendments. A fee of $25 must be paid each time erate more efficiently. A licensee’s documentation cost is lower a licensee amends a license by inactivating [rendering] a license [inac­ and a licensee’s litigation cost is also lower through the develop­ tive], activating an inactive license, changing the assumed name of the ment of the forms by the agency and the use of those forms by a licensee, or relocating an office. licensee. In previous rulemaking actions regarding these forms, (e) License duplicates. The fee for a license duplicate is $10. the agency has continually worked with licensees in drafting, re­ vising, and refining the forms to provide the best language pos­ (f) Costs of hearings. The commissioner may assess the costs sible. The consumer forms written in plain language produced of an administrative appeal pursuant to Texas Finance Code, §14.207 by the agency have served to lessen consumer confusion, and for a hearing afforded under §89.307(d) of this title (relating to Pro­ thus, lower potential costs of disputes. In addition, the agency cessing of Application), including the cost of the administrative law hasfrequentlyprovided delayed compliance dates, often a year judge, the court reporter, and agency staff representing the OCCC at a or longer, to licensees to exhaust the supply of their current forms hearing. inventory in order to minimize the costs of discarding obsolete (g) Annual renewal and assessment fees [assessments]. forms. Furthermore, the agency has reviewed a number of soft­ ware programs for statutory compliance and has listed those pro­ (1) An annual assessment fee is required for each active grams on its website for the industry’s convenience. license consisting of: The agency is not aware of a more economic way to support (A) a fixed fee of $600 [$430]; and the agency’s regulatory mandates as provided by the legislature. (B) a volume fee based upon the lending activity con­ But in order to obtain more complete information, the agency in­ ducted and the volume of business that consists of an amount that is vites comments from interested stakeholders and the public on $0.03 per each $1,000 advanced for license holders whose regulated any adverse economic impacts on small businesses and on any operations occur within Texas Finance Code, Chapter 351 (Acts 2007, more efficient or alternative methods of achieving the purpose 80th Leg., ch. 1220), in accordance with the most recent annual re­ of the proposal while minimizing adverse impacts on small busi­ port filing required by Texas Finance Code, §351.164 (Acts 2007, 80th nesses. Leg., ch. 1220). Comments on the proposed amendments may be submitted (2) An annual assessment fee of $250 [$125] is required for in writing to Laurie Hobbs, Assistant General Counsel, Of­ each inactive license. fice of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to lau­ (3) The maximum annual assessment fee for each licensed [email protected]. To be considered, a written entity shall not averagemorethan$1,200 [$1,000] per active licensed comment must be received on or before the 30th day after the location. date the proposed amendments are published in the Texas This agency hereby certifies that the proposal has been reviewed Register. At the conclusion of the 30th day after the proposed by legal counsel and found to be within the agency’s legal author­ amendments are published in the Texas Register, no further ity to adopt. written comments will be considered or accepted by the com­ mission. Filedwiththe Office of the Secretary of State on December 18, These amendments are proposed under Texas Finance Code 2009. §11.304, which authorizes the Finance Commission to adopt TRD-200905971 rules to enforce Title 4 of the Texas Finance Code. Texas Fi­ nance Code, §351.007 authorizes the commission to adopt rules to ensure compliance with the Property Tax Lender License Act (Chapter 351).

35 TexReg 174 January 8, 2010 Texas Register Leslie L. Pettijohn The amended section is proposed pursuant to the authority of Commissioner the Texas Government Code, Chapter 2306 which provides the Office of Consumer Credit Commissioner Department with the authority to adopt rules governing the ad­ Earliest possible date of adoption: February 7, 2010 ministration of the Department and its programs. For further information, please call: (512) 936-7621 No other statutes, articles, or codes are affected by the proposed ♦ ♦ ♦ amended section. §1.23. State of Texas Low Income Housing Plan and Annual Report TITLE 10. COMMUNITY DEVELOPMENT (SLIHP). PART 1. TEXAS DEPARTMENT OF The Texas Department of Housing and Community Affairs (the Depart­ ment) adopts by reference the 2010 [2009] State of Texas Low Income HOUSING AND COMMUNITY AFFAIRS Housing Plan and Annual Report (SLIHP). Thefulltextof the 2010 [2009] SLIHP may be viewed at the Department’s website: www.td­ CHAPTER 1. ADMINISTRATION hca.state.tx.us. The public may also receive a copy of the 2010 [2009] SUBCHAPTER A. GENERAL POLICIES AND SLIHP by contacting the Department’s Housing Resource Center at PROCEDURES (512) 475-3976. This agency hereby certifies that the proposal has been reviewed 10 TAC §1.23 by legal counsel and found to be within the agency’s legal author­ The Texas Department of Housing and Community Affairs (the ity to adopt. Department) proposes an amendment to §1.23, concerning the State of Texas Low Income Housing Plan and Annual Report Filed with the Office of the Secretary of State on December 18, (SLIHP). The section adopts by reference the annual 2010 State 2009. of Texas Low Income Housing Plan and Annual Report (SLIHP). The purpose of the SLIHP is to serve as a comprehensive ref­ TRD-200905984 erence on statewide housing needs, housing resources, and Michael Gerber strategies for funding allocations. The document reviews the Executive Director Department’s programs, current and future policies, resource al­ Texas Department of Housing and Community Affairs location plan to meet state housing needs, and reports on 2009 Earliest possible date of adoption: February 7, 2010 performance. The Department is required to submit the SLIHP For further information, please call: (512) 475-3916 annually to its Board of Directors in accordance with §2306.072 of the Texas Government Code. ♦ ♦ ♦ Mr. Michael Gerber, Executive Director, has determined that for TITLE 19. EDUCATION the first five-year period the amended section is in effect there will be no fiscal implications for state or local governments as PART 1. TEXAS HIGHER EDUCATION a result of enforcing or administering the amended section as proposed. COORDINATING BOARD Mr. Gerber has also determined that for each year of the first five CHAPTER 4. RULES APPLYING TO years the amended section is in effect the public benefitantici­ pated will be improved communication with the public regarding ALL PUBLIC INSTITUTIONS OF HIGHER the Department’s programs and activities. There will be no ef­ EDUCATION IN TEXAS fect on small businesses or persons. There is no anticipated economic cost to persons who are required to comply with the SUBCHAPTER R. REVIEW OF LOW­ amended section as proposed. PRODUCING DEGREE PROGRAMS The full text of the 2010 SLIHP may be viewed at the Depart­ 19 TAC §§4.285 - 4.293 ment’s website: www.tdhca.state.tx.us. The public may also re­ ceive a copy of the 2010 SLIHP by contacting the Department’s The Texas Higher Education Coordinating Board proposes new Housing Resource Center at (512) 475-3976. §§4.285 - 4.293, relating to Rules Applying to All Public Insti­ tutions of Higher Education in Texas. These new sections will The public comment period will be held January 4, 2010 to Feb­ establish procedures for annual review of the number of gradu­ ruary 2, 2010. A public hearing will be held at the Stephen F. ates produced by degree programs at institutions of higher edu­ Austin Building, Room 220S, 1700 N. Congress Ave. Austin, cation to determine which are low-producing degree programs, Texas on January 13, 2010 at 11:00 a.m. Written comments may and provides remedies for those programs that meet the defini­ be submitted to Texas Department of Housing and Community tion of low-producing. Affairs, Elizabeth Yevich, P.O. Box 13941, Austin, Texas 78711­ 3941, by e-mail to the following address: elizabeth.yevich@td­ Dr. MacGregor M. Stephenson, Assistant Commissioner for hca.state.tx.us, or by fax to (512) 463-7961. Academic Affairs and Research, has determined that for each year of the first five years the new sections are in effect, there The TDHCA Board of Directors will consider the final 2010 will be no fiscal implications to state or local government as a SLIHP at the March 2010 board meeting. The 2010 SLIHP will result of enforcing or administering the rules. become effective 20 days after being filed with the Office of the Secretary of State. Dr. Stephenson has also determined that for each year of the first five years the new sections are in effect, the public bene­ fit anticipated as a result of administering the sections will be to

PROPOSED RULES January 8, 2010 35 TexReg 175 promote efficiency in higher education by reducing the number (6) Temporary Exemption--Exemption for degree pro­ of programs that produce low numbers of graduates annually. grams which removes them from the consequences of low-producing There is no effect on small businesses. There are no anticipated degree programs for a defined period of time. economic costs to persons who are required to comply with the (7) Related Degree Program--A degree program for which sections as proposed. There may be impact to the local employ­ an institution may use common faculty and other resources. ment if degree programs are closed. §4.288. Notification of Low-Producing Degree Programs. Comments on the proposal may be submittedto Dr. MacGregor M. Stephenson, Assistant Commissioner, Texas Higher Educa­ (a) Coordinating Board staff will send each institution an an­ tion Coordinating Board, P.O. Box 12788, Austin, Texas 78711 nual list of low-producing degree programs. or [email protected]. Comments will be (b) The Board will alert an institution when a degree program accepted for 30 days following publication of the proposal in the has not met the minimum standards for three consecutive years. A sec­ Texas Register. ond alert will follow if that degree program has not met the minimum The new sections are proposed under the Texas Education standards for four consecutive years. Code, Chapter 61 which gives the Coordinating Board the §4.289. Exemptions. authority to regulate the awarding or offering of degrees, credit towards degrees, and the use of certain terms. New programs or programs that are granted exemption will be noted on the annual list of low-producing programs, according to the following The new sections affect implementation of Texas Education criteria: Code, Chapter 61, Subchapter C, §61.051(e). (1) A new degree program is temporarily exempted for the §4.285. Purpose. first five years of program implementation. Annual review begins in This subchapter establishes rules regarding the periodic review of the sixth year of implementation. low-producing degree and certificate programs at public institutions (2) A Master’s degree program requiring only courses of higher education. taught in the corresponding doctoral program is permanently exempted §4.286. Authority. from low-producing status. These degrees are, in effect, terminal master’s degrees available to students who are unable to meet doctoral Unless otherwise noted in a section, the authority for these provisions requirements. No additional cost is associated with these degrees. is provided by Texas Education Code, §61.051 which describes the Board’s role in the Texas system of higher education. §4.290. Consequences for Non-Exempt Low-Producing Degree Pro- grams. §4.287. Definitions. Low-producing degree programs must be: The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates oth­ (1) Phased out or consolidated with another program or erwise: other programs; or mption. (1) Board--The Texas Higher Education Coordinating (2) Granted a temporary exe Board. §4.291. Process for Requesting a Temporary Exemption. (2) Degree or certificate program--Any grouping of subject (a) A low-producing degree program is eligible for a tempo­ matter courses which, when satisfactorily completed by a student, will rary exemption if: entitle the student to receive a degree or certificate from an institution (1) The Coordinating Board staff determines the necessity of higher education. for a temporary exemption because the institution demonstrates evi­ (3) Institution of higher education or institution--Any pub­ dence that the low-producing degree program contributes to meeting lic technical institute, public junior college, public senior college or Closing the Gaps initiatives or other Coordinating Board policies and university, medical or dental unit, or other agency of higher education institutional efforts are being made to increase enrollments, limit cost as defined in Texas Education Code, §61.003. inefficiencies, and improve program success. The period of time for the exemption will be established by Coordinating Board staff after discus­ (4) Low-Producing Degree Programs--Degree programs sions with the institution; or that do not meet the following minimum standards for degrees awarded in the program: (2) The degree is composed exclusively of courses required for other existing degrees at the institution and there is very limited or (A) For associate and bachelor’s programs, an average no additional cost associated with the degree. of five degrees awarded per academic year, to total not fewer than twenty-five degrees awarded for any five-year period; (b) To request a temporary exemption provide the following information: (B) For master’s programs, an average of three degrees awarded per academic year, to total not fewer than fifteen degrees (1) A narrative that explains the causes of low production; awarded for any five-year period; and (2) Justification for continuing the degree program. Justifi­ (C) For doctoral and special professional degrees, an cation should incorporate issues of need, quality, cost, and Closing the average of two degrees awarded per academic year, to total not fewer Gaps initiatives; than ten degrees awarded for any five-year period. (3) An action plan for the low-producing degree program. (5) Permanent Exemption--Exemption for degree pro­ The action plan should include a detailed strategy for increasing enroll­ grams which removes them from the list of low-producing degree ment, graduation output, and graduation rates. In accordance with the programs indefinitely. institution’s Uniform Recruitment and Retention Strategy, the action

35 TexReg 176 January 8, 2010 Texas Register plan should include specific strategies to recruit, retain, and graduate indicate that the age restriction of an eligible child or dependent students from underrepresented groups for the program; and has been changed from 18 to 25. The amendments bring consistency with §21.2108(c). (4) The following data on the degree program for the last two years: Lois Hollis, Special Assistant to the Deputy Commissioner for Business and Finance/Chief Operating Officer, has estimated (A) Number of declared majors; and that for each year of the first five years the amendments are in (B) Number of students per class section. effect, there will be no fiscal implications to state or local govern­ ment as a result of enforcing or administering the rule. (c) Coordinating Board staff will evaluate the application for a temporary exemption and approve or deny it. If approved, the exemp­ Ms. Hollis has also determined that for each year of the first five tion will be for a limited period of time determined by the staff after years the amendments are in effect, the public benefits antici­ discussion with the institution. pated as a result of administering the section will be increased participation by the children of veterans who are deceased and §4.292. Appeals Process. disabled for the benefits offered through the Hazlewood Act. Institutions may appeal the staff’s decision to phase out or consolidate Thereisnoeffectonsmallbusines ses. There are no anticipated a program. In order to do so, an institution must request an exemption economic costs to persons who are required to comply with the from the Coordinating Board at a quarterly board meeting. section as proposed. There is no impact on local employment. §4.293. Reinstatement of Closed Programs. Comments on the proposal may be submitted to Lois Hollis, P.O. (a) A program that has been closed due to low productivity Box 12788, Austin, Texas 78711, (512) 427-6465, or lois.hol­ may not be considered for reinstatement until a minimum of ten years [email protected]. Comments will be accepted for 30 days has passed. following publication of the proposal in the Texas Register. (b) Programs eligible for reinstatement must complete the re­ The amendments are proposed under the Texas Education quirements for new academic program approval. Code, §54.203, which provides the Coordinating Board with (c) Institutions may not start a new degree program that is a the authority to adopt any rules necessary to administer Texas related degree program to one that has been closed due to low pro­ Education Code, §54.203. ductivity without completing the New Bachelor’s or Master’s Degree The amendments affect Texas Education Code, §54.203. Program Form or Doctoral Program Request Form. §21.2100. Definitions. This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency’s legal author­ The following words and terms, when used in this subchapter, shall ity to adopt. have the following meanings, unless the context clearly indicates oth­ erwise: Filed with the Office of the Secretary of State on December 28, (1) - (3) (No change.) 2009. (4) Children-­ TRD-200906035 (A) Persons who are the veteran’s biological or adopted Bill Franz children and who are youngerthan25 [18] years of age on the date of General Counsel the death or disabling injury of the veteran; or Texas Higher Education Coordinating Board (B) Persons who are not the biological or adopted chil­ Proposed date of adoption: April 29, 2010 dren of the veteran, but who were claimed as dependents on the federal For further information, please call: (512) 427-6114 income tax return of the veteran for the year preceding the year of the ♦ ♦ ♦ veteran’s death or disabling injury and who are younger than 25 [18] years of age on the date of the death or disabling injury of the veteran. CHAPTER 21. STUDENT SERVICES (5) - (18) (No change.) SUBCHAPTER NN. EXEMPTION PROGRAM This agency hereby certifies that the proposal has been reviewed FOR VETERANS AND THEIR DEPENDENTS by legal counsel and found to be within the agency’s legal author­ (THE HAZLEWOOD ACT) ity to adopt. 19 TAC §21.2100 Filed with the Office of the Secretary of State on December 28, The Texas Higher Education Coordinating Board proposes 2009. amendments to §21.2100, concerning the Exemption Program TRD-200906036 for Veterans and their Dependents (The Hazlewood Act). Bill Franz Specifically, the amendments to §21.2100(4) are proposed to General Counsel align the age requirement in the definition of "Children" with Texas Higher Education Coordinating Board the age requirement in the new Hazlewood Legacy Program, through which veterans may assign unused Hazlewood hours Proposed date of adoption: April 29, 2010 to one of their children. Previously, a child or dependent of a For further information, please call: (512) 427-6114 veteran who was killed or disabled was eligible only if the child ♦ ♦ ♦ or dependent was 18 years of age or younger at the time of his or her parent’s death or disabling injury. The amendments TITLE 22. EXAMINING BOARDS

PROPOSED RULES January 8, 2010 35 TexReg 177 PART 10. TEXAS FUNERAL SERVICE (A) (No change.) COMMISSION (B) Law Updates--2 credit hours--this course must at least cover the most current versions of Texas Occupations Code Chap­ CHAPTER 203. LICENSING AND ter 651, and [22 Texas Administrative Code] Chapters 201 and 203 of ENFORCEMENT--SPECIFIC SUBSTANTIVE this title. (C) Vital Statistics Requirements and Regulations--2 RULES credit hours--this course must at least cover Health and Safety Code 22 TAC §203.30 Chapters 193, 711 - 715 and 25 TAC [Texas Administrative Code] Chapter 181. The Texas Funeral Service Commission (commission) proposes an amendment to §203.30, concerning Continuing Education. (g) (No change.) O. C. “Chet” Robbins, Executive Director, has determined that (h) Exemptions, waivers, reactivation, and conversion for the first five-year period the amendment is in effect, there will (1) An individual newly licensed by examination whose be no fiscal implication for state or local governments as a result initial renewal date is 12 months or less following original licensure of enforcing or administering the proposed amendment. is not required to obtain continuing education hours prior to renewal of Mr. Robbins further has determined that for each year of the first the license. An individual newly licensed by examination whose initial five year period the amendment is in effect, a public benefitan­ renewal date is more than twelve months following original licensure ticipated as a result of enforcing the amendment will be the elimi­ is required to complete the hours of the three mandatory courses de­ nation of time-consuming paperwork and increased efficiency on scribed in subsection [§203.30](f)(2) of this section. the part of persons who supervise continuing education. (2) - (7) (No change.) Mr. Robbins also has determined that there will be no effect on (i) Failure to comply. large, small or micro-businesses; there is no anticipated eco­ nomic costs to persons who are required to comply with the (1) (No change.) amendment as proposed; and there is no impact on local em­ (2) A $300 noncompliance fee must be paid before a li­ ployment or economies. cense is subject to renewal if the individual has not obtained the re­ Comments on the proposal may be submitted to Mr. Rob­ quired continuing education. bins at P.O. Box 12217, Capitol Station, Austin, Texas (A) (No change.) 78711-1440, Fax: (512) 479-5064, or electronically to chet.rob­ [email protected]. (B) The noncompliance penalty fee and allowance for every other renewal period does not eliminate the necessity of obtaining The amendment is proposed under Texas Occupations Code, continuing education hours in the mandatory courses listed in subsec­ §651.152. The commission interprets §651.152 as authorizing it tion (f)[(g)](2) of this section. to adopt rules as necessary to administer Chapter 651. (C) (No change.) No other statutes, articles, or codes are affected by the proposal. This agency hereby certifies that the proposal has been reviewed §203.30. Continuing Education. by legal counsel and found to be within the agency’s legal author­ (a) - (d) (No change.) ity to adopt.

(e) Responsibilities of Approved Providers Filedwiththe Office of the Secretary of State on December 21, (1) The provider shall verify attendance at each program 2009. and provide a certificate of attendance to each attendee. The certificate of attendance shall contain: TRD-200906001 O. C. "Chet" Robbins (A) - (E) (No change.) Executive Director (F) the signature of the provider or provider’s represen­ Texas Funeral Service Commission tative;[.] Earliest possible date of adoption: February 7, 2010 (G) (No change.) For further information, please call: (512) 936-2469 (2) (No change.) ♦ ♦ ♦ (3) The provider shall provide a mechanism for evaluation TITLE 28. INSURANCE of the program by the participants, to be completed on-site or at the time the program concludes. [A copy of the evaluations will be provided PART 1. TEXAS DEPARTMENT OF to the commission within 30 days following the presentation of each course, along with the course attendance roster.] INSURANCE (4) - (6) (No change.) CHAPTER 5. PROPERTY AND CASUALTY (f) Credit Hours Required INSURANCE (1) (No change.) SUBCHAPTER E. TEXAS WINDSTORM (2) The following are mandatory continuing education INSURANCE ASSOCIATION hours and subjects for each renewal period:

35 TexReg 178 January 8, 2010 Texas Register The Texas Department of Insurance proposes the repeal of makes no provision for public notice or comment on the submis­ §§5.4101, 5.4201, 5.4401, and 5.4501, concerning insurance sion and the 30-day timeline would be impractical for a public policy forms, endorsements, and manual rules used by the hearing. Texas Windstorm Insurance Association (Association). The Second, prior adoptions of §§5.4101, 5.4201, 5.4401, and repeal is necessary to revise the procedure for the consideration 5.4501 reference the Insurance Code §2210.351; however, and approval of these items. The revised procedure is proposed §2210.351 is a rate filing statute. While the Insurance Code in new §5.4911. In conjunction with this proposal, the Depart­ §2210.351 states the proposed form must accompany the rate ment is proposing the adoption of new §§5.4902 - 5.4908 and filing, this appears to be only for the purpose of evaluating the §5.4911 of this chapter (relating to Additional Requirements, adequacy of the rate as compared to the coverage offered. The Declination of Coverage, Flood Insurance, Minimum Retained Insurance Code §2210.351 does not set forth a procedure or Premium, Certificate of Compliance Approval Program, Certifi­ requirement to adopt these forms. For example, a rate filing cate of Compliance Transition Program, Alter and Alteration, under §2210.351 amending commercial rates would not require Insurance Policy Forms, Endorsements, Manual Rules, Appli­ re-approval of the commercial policy form if coverage under that cation Forms, and Underwriting Guidelines, respectively) also form did not change. Third, the prior version of the Insurance published in this issue of the Texas Register. Code §2210.008(a) specifically referenced a requirement for The Legislature has determined that the provision of windstorm notice and a public hearing for the adoption of Association "pol­ and hail insurance is necessary for the economic welfare of the icy forms." That requirement was removed by an amendment state and its inhabitants, and that the lack of such insurance to §2210.008 in HB 4409. Fourth, the formal rule adoption would severely impede the orderly growth and development of practice is often not an efficient method of considering forms the state. The Association was created by the Legislature and for approval. While it provides a means for notice and public serves as a residual insurer of last resort for windstorm and comment, the formal structured process requires an elongated hail insurance coverage (insurance coverage) in the catastro­ period of time and a significant investment of Department and phe area designated by the Commissioner of Insurance under Association resources for what are often non-controversial the Insurance Code §2210.005. The catastrophe area is un­ matters. derserved for insurance coverage and consists of the 14 Texas Therefore, the Department considers it necessary to propose re­ coastal counties and parts of Harris County. placing the current rule adoption by reference procedure with a The current practice is to adopt the Association’s insurance pol­ process that is more efficient. The proposed process will pro­ icy forms, endorsements, and manual rules by reference in the vide for approval of the Association’s insurance policy forms, Administrative Code in §§5.4101, 5.4201, 5.4401, and 5.4501. endorsements, manual rules, and application forms by Commis­ This practice provides for notice of the submission and an op­ sioner’s Order after notice and an opportunity for public com­ portunity for public hearing and comment. ment. The proposed repeal is necessary to change the current prac­ To effect this change it is necessary to repeal §§5.4101, 5.4201, tice. The reasons for thechangearethefollowing. First, the 5.4401, and 5.4501. The proposed new procedure is set forth in Insurance Code §2210.151 provides that the Commissioner proposed §5.9411, which is published elsewhere in this issue of shall adopt by rule the Association’s plan of operation to provide the Texas Register. Texas windstorm and hail insurance in the catastrophe area. Marilyn Hamilton, Associate Commissioner of the Property and The current practice is to adopt the Association’s insurance Casualty Program, has determined that for each year of the first policy forms, endorsements, and manual rules through a rule five years the proposed repeal will be in effect, there will be no making procedure by reference in the Administrative Code in fiscal impact to state and local governments as a result of the §§5.4101, 5.4201, 5.4401, and 5.4501. The Insurance Code enforcement or administration of the proposal. There will be no §2210.152(a)(1) sets out the requirements of the plan of op­ measurable effect on local employment or the local economy as eration and specifies that the plan of operation must provide a result of the proposal. for the efficient, economical, fair, and nondiscriminatory ad­ ministration of the Association. Further, the Insurance Code Ms. Hamilton also has determined that for each year of the first §2210.152(a)(2)(G) provides that the plan of operation may in­ five years the proposed repeal is in effect, the anticipated public clude other provisions considered necessary by the Department benefit will be the more efficient operation of the Association, to implement the purposes of Chapter 2210. However, neither because the repeal of these sections will allow for the imple­ the Insurance Code §2210.152 nor any other provision in the mentation of anefficient procedure to propose and approve, or Insurance Code Chapter 2210 requires that the Association’s disapprove, Association insurance policy forms, endorsements, insurance policy forms, endorsements, and manual rules be and manual rules. There are no anticipated economic costs to adopted by a rule in the Administrative Code or become part persons who are required to comply with the proposed repeal. of the plan of operation. To the contrary, the Insurance Code There will be no effect on small or micro businesses. §2210.003(13) defines Texas windstorm and hail insurance Section 2006.002(c) of the Government Code requires that if policies and forms as being approved by the Department and a proposed rule may have an economic impact on small busi­ not as policies and forms adopted by rule or as part of the plan nesses, state agencies must prepare as part of the rulemaking of operation. Thus, there is no statutory requirement to continue process an economic impact statement that assesses the po­ the current practice. Further, the current practice is not the tential impact of the proposed rule on small businesses and a only method of form approval that has been considered for the regulatory flexibility analysis that considers alternative methods Association as evidenced by a prior practice set forth in the As­ of achieving the purpose of the rule. The Government Code sociation’s plan of operation, §5.4001(d)(1)(A), which provides §2006.001(a)(2) defines a small business as a legal entity, in­ that forms must be approved or rejected by the Commissioner cluding a corporation, partnership, or sole proprietorship, that within 30 days of submission and that forms not acted upon is formed for the purpose of making a profit; is independently within 30 days are deemed approved. Further, §5.4001(d)(1)(A)

PROPOSED RULES January 8, 2010 35 TexReg 179 owned and operated, and has fewer than 100 employees or less §5.4101. TWIA Dwelling and Commercial Policy Forms. than $6 million in annual gross receipts. The Government Code §2006.001(a)(1) defines micro business similarly to small busi­ This agency hereby certifies that the proposal has been reviewed ness but specifies that such a business may not have more than by legal counsel and found to be within the agency’s legal author­ 20 employees. The Government Code §2006.001(a)(1) does not ity to adopt. specify a maximum level of gross receipts for a micro business. Filedwiththe Office of the Secretary of State on December 18, There will be no new costs to any person to comply with the re­ peal. There is no anticipated adverse economic effect on small 2009. or micro businesses regarding the regulatory cost of compliance TRD-200905978 with the repeal; therefore, preparationofaneconomicimpact Gene C. Jarmon statement and regulatory flexibility analysis is not statutorily re­ General Counsel and Chief Clerk quired. Texas Department of Insurance The Department has determined that no private real property in­ Earliest possible date of adoption: February 7, 2010 terests are affected by this proposal and that this proposal does For further information, please call: (512) 463-6327 not restrict or limit an owner’s right to property that would other­ wise exist in the absence of government action and, therefore, ♦ ♦ ♦ does not constitute a taking or require a takings impact assess­ ment under the Government Code §2007.043. DIVISION 4. ENDORSEMENTS To be considered, written comments on the proposal must be 28 TAC §5.4201 submitted no later than 5:00 p.m. on February 8, 2010, to Gene (Editor’s note: The text of the following section proposed for repeal C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, will not be published. The section may be examined in the offices of the Texas Department of Insurance, P.O. Box 149104, Austin, Texas Texas Department of Insurance or in the Texas Register office, Room 78714-9104. An additional copy of the comment must be si­ 245, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) multaneously submitted to Marilyn Hamilton, Associate Com­ missioner, Property and Casualty Program, Mail Code 104-PC, The repeal is proposed pursuant to the Insurance Code Chapter Texas Department of Insurance, P.O. Box 149104, Austin, Texas 2210 and §36.001. The Insurance Code §2210.008 authorizes 78714-9104. the Commissioner to adopt rules necessary to carry out the pur­ poses of Insurance Code Chapter 2210. Section 2210.151 re­ The Commissioner will consider the adoption of the proposed quires the Commissioner to adopt the Association’s plan of op­ repeal in a public hearing under Docket No. 2711, scheduled for eration as a rule. Section §2210.152(a)(1) requires the Asso­ January 19, 2010, at 10:00 a.m., in Room 100 of the William P. ciation’s plan of operation to provide for the efficient, economi­ Hobby, Jr., State Office Building, 333 Guadalupe Street, Austin, cal, fair and nondiscriminatory administration of the Association. Texas. Written and oral comments presented at the hearing will Section §2210.152(a)(2)(G) provides that the plan of operation be considered. may include other provisions considered necessary by the De­ DIVISION 3. POLICY FORMS partment to implement the purposes of Chapter 2210. Section 36.001 authorizes the Commissioner of Insurance to adopt any 28 TAC §5.4101 rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insur­ (Editor’s note: The text of the following section proposed for repeal ance Code and other laws of this state. will not be published. The section may be examined in the offices of the Texas Department of Insurance or in the Texas Register office, Room The following statutes are affected by this proposal: 245, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) Rule - Statute The repeal is proposed pursuant to the Insurance Code Chapter §§5.4101, 5.4201, 5.4401, and 5.4501 - Insurance Code 2210 and §36.001. The Insurance Code §2210.008 authorizes §2210.151 and §2210.152 the Commissioner to adopt rules necessary to carry out the pur­ poses of Insurance Code Chapter 2210. Section 2210.151 re­ §5.4201. Endorsements for Use with TWIA Policy Forms. quires the Commissioner to adopt the Association’s plan of op­ eration as a rule. Section §2210.152(a)(1) requires the Asso­ This agency hereby certifies that the proposal has been reviewed ciation’s plan of operation to provide for the efficient, economi­ by legal counsel and found to be within the agency’s legal author­ cal, fair and nondiscriminatory administration of the Association. ity to adopt. Section §2210.152(a)(2)(G) provides that the plan of operation may include other provisions considered necessary by the De­ Filedwiththe Office of the Secretary of State on December 18, partment to implement the purposes of Chapter 2210. Section 2009. 36.001 authorizes the Commissioner of Insurance to adopt any TRD-200905979 rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insur­ Gene C. Jarmon ance Code and other laws of this state. General Counsel and Chief Clerk Texas Department of Insurance The following statutes are affected by this proposal: Earliest possible date of adoption: February 7, 2010 Rule - Statute For further information, please call: (512) 463-6327 §§5.4101, 5.4201, 5.4401, and 5.4501 - Insurance Code ♦ ♦ ♦ §2210.151 and §2210.152

35 TexReg 180 January 8, 2010 Texas Register DIVISION 5. TEXAS SPECIAL MOBILE cal, fair and nondiscriminatory administration of the Association. Section §2210.152(a)(2)(G) provides that the plan of operation HOME WINDSTORM AND HAIL INSURANCE may include other provisions considered necessary by the De­ POLICY partment to implement the purposes of Chapter 2210. Section 36.001 authorizes the Commissioner of Insurance to adopt any 28 TAC §5.4401 rules necessary and appropriate to implement the powers and (Editor’s note: The text of the following section proposed for repeal duties of the Texas Department of Insurance under the Insur­ will not be published. The section may be examined in the offices of the ance Code and other laws of this state. Texas Department of Insurance or in the Texas Register office, Room The following statutes are affected by this proposal: 245, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) Rule - Statute The repeal is proposed pursuant to the Insurance Code Chapter 2210 and §36.001. The Insurance Code §2210.008 authorizes §§5.4101, 5.4201, 5.4401, and 5.4501 - Insurance Code the Commissioner to adopt rules necessary to carry out the pur­ §2210.151 and §2210.152 poses of Insurance Code Chapter 2210. Section 2210.151 re­ §5.4501. Rules for the Texas Windstorm Insurance Association. quires the Commissioner to adopt the Association’s plan of op­ eration as a rule. Section §2210.152(a)(1) requires the Asso­ This agency hereby certifies that the proposal has been reviewed ciation’s plan of operation to provide for the efficient, economi­ by legal counsel and found to be within the agency’s legal author­ cal, fair and nondiscriminatory administration of the Association. ity to adopt. Section §2210.152(a)(2)(G) provides that the plan of operation may include other provisions considered necessary by the De­ Filed with the Office of the Secretary of State on December 18, partment to implement the purposes of Chapter 2210. Section 2009. 36.001 authorizes the Commissioner of Insurance to adopt any rules necessary and appropriate to implement the powers and TRD-200905981 duties of the Texas Department of Insurance under the Insur­ Gene C. Jarmon ance Code and other laws of this state. General Counsel and Chief Clerk The following statutes are affected by this proposal: Texas Department of Insurance Earliest possible date of adoption: February 7, 2010 Rule - Statute For further information, please call: (512) 463-6327 §§5.4101, 5.4201, 5.4401, and 5.4501 - Insurance Code §2210.151 and §2210.152 ♦ ♦ ♦ §5.4401. Texas Special Mobile Home Windstorm and Hail Insurance DIVISION 10. IMPLEMENTATION OF HOUSE Policy--Deductible Coverage. BILL 4409 This agency hereby certifies that the proposal has been reviewed 28 TAC §§5.4902 - 5.4908, 5.4911 by legal counsel and found to be within the agency’s legal author­ ity to adopt. The Texas Department of Insurance proposes new Division 10, §§5.4902 - 5.4908 and §5.4911, to implement legislative Filed with the Office of the Secretary of State on December 18, changes to the Insurance Code Chapter 2210 and amend the plan of operation of the Texas Windstorm Insurance Association 2009. (Association). These sections concern (i) declinations of cover­ TRD-200905980 age; (ii) flood insurance; (iii) minimum retained premium; (iv) a Gene C. Jarmon certificate of compliance approval program; (v) a certificate of General Counsel and Chief Clerk compliance transition program; (vi) the definitions of the terms Texas DepartmentofInsurance alter and alteration; and (vii) the procedure for filing proposed Earliest possible date of adoption: February 7, 2010 Association policy forms, endorsements, manual rules, appli­ For further information, please call: (512) 463-6327 cation forms (Association forms and rules) and underwriting guidelines. This proposal will replace the emergency rule sec­ ♦ ♦ ♦ tions adopted effective August 31, 2009, which were published in the September 11, 2009, issue of the Texas Register (34 DIVISION 6. MANUAL TexReg 6202) (emergency rules). In conjunction with this pro­ 28 TAC §5.4501 posal, the Department is also proposing the repeal of existing §§5.4101, 5.4201, 5.4401, and 5.4501 of this chapter (relating (Editor’s note: The text of the following section proposed for repeal to TWIA Dwelling and Commercial Policy Forms; Endorsements will not be published. The section may be examined in the offices of the for Use with TWIA Policy Forms; Texas Special Mobile Home Texas Department of Insurance or in the Texas Register office, Room Windstorm and Hail Insurance Policy--Deductible Coverage; 245, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.) and Rules for the Texas Windstorm Insurance Association, respectively) in a separate proposal also published in this issue The repeal is proposed pursuant to the Insurance Code Chapter of the Texas Register. 2210 and §36.001. The Insurance Code §2210.008 authorizes the Commissioner to adopt rules necessary to carry out the pur­ Under §2210.001 of the Insurance Code, the Legislature has de­ poses of Insurance Code Chapter 2210. Section 2210.151 re­ termined that the provision of windstorm and hail insurance is quires the Commissioner to adopt the Association’s plan of op­ necessary for the economic welfare of the state and its inhabi­ eration as a rule. Section §2210.152(a)(1) requires the Asso­ tants; and that the lack of such insurance in the state’s seacoast ciation’s plan of operation to provide for the efficient, economi­ territories would severely impede the orderly growth and devel-

PROPOSED RULES January 8, 2010 35 TexReg 181 opment of the state. The Association was created by the Legisla­ §5.4905, which establishes the minimum retained premium ture and serves as a residual insurer of last resort for windstorm requirement set forth in the Insurance Code §2210.204; (v) and hail insurance coverage (insurance coverage) in the catas­ §5.4906, which addresses the applicationoftheInsurance trophe area designated by the Commissioner under the Insur­ Code §2210.251(f) to structures that participated in the certifi­ ance Code §2210.005. The catastrophe area is underserved for cate of compliance approval process regulations; (vi) §5.4907, insurance coverage and consists of the 14 Texas coastal coun­ which creates and makes available a certificate of compli­ ties and parts of Harris County. Persons seeking insurance cov­ ance transition program as authorized in the Insurance Code erage from the Association are unable to obtain comparable in­ §2210.251(a); and (vii) §5.4908, which definesthe termsalter surance coverage in the voluntary insurance market. The ability and alteration, as required in the Insurance Code §2210.008. to obtain insurance coverage is crucial to the financial welfare of The Legislature in HB 4409 directs the Association’s board of persons living and working in the designated catastrophe area, directors to propose an amended plan of operation by March 1, and its absence results in the lack of an important element for 2010. This proposal explains in subsequent discussions each economic stability in the region. Thus, adoption of these pro­ of the proposed §§5.4902 - 5.4908 in greater detail. posed rules will affect the economic welfare of the state and its Additionally, the Department is proposing §5.4911, which is inhabitants, and positively impact the orderly growth and devel­ necessary to establish a more efficient procedure for the pro­ opment of the state. posal and adoption of the Association’s insurance policy forms, The Association operates under a plan of operation which is endorsements, and manual rules. Currently, the Association’s adopted by rule. The Insurance Code §2210.151 provides that insurance policy forms, endorsements, and manual rules are the Commissioner shall adopt by rule the Association’s plan of adopted through a rule making procedure by reference in the operation to provide Texas windstorm and hail insurance in the Administrative Code in §§5.4101, 5.4201, 5.4401, and 5.4501 of catastrophe area. The Insurance Code §2210.152(a)(1) sets out this chapter. Because these four sections conflict with proposed the requirements of the plan of operation and specifies that the new §5.4911, they have been proposed for repeal in a separate plan of operation must provide for the efficient, economical, fair proposal also published in this issue of the Texas Register. and nondiscriminatory administration of the Association. Fur­ As previously discussed, the Association operates under a plan ther, the Insurance Code §2210.152(a)(2)(G) provides that the of operation. Proposed §5.4902(a) and (b) were adopted as part plan of operation may include other provisions considered nec­ of the emergency rules. Proposed §5.4902(a) provides that pro­ essary by the Department to implement the purposes of Chap­ posed §§5.4902 - 5.4908 and §5.4911 control over conflicting ter 2210. The Association’s current plan of operation is speci­ provisions in the Association’s current plan of operation set forth fied in §5.4001 of this chapter (relating to Plan of Operation) and in §5.4001 of this title. Proposed §5.4902(b) is necessary to es­ adopted §§5.4902 - 5.4908 of the emergency rules as specified tablish that §5.4903 and §5.4904, concerning the new declina­ in adopted §5.4902. References in the proposal to the plan of tion and flood insurance requirements, respectively, are in addi­ operation incorporate both §5.4001 and the emergency rule sec­ tion to other eligibility requirements set forth in the plan of oper­ tions, unless specified otherwise. Neither the Insurance Code ation and not in conflict with those provisions. §2210.151 nor §2210.152 require the Association’s plan of op­ eration to be in a single section of the Administrative Code. Proposed §5.4902(c) - (e) were not adopted with the emergency rules. Proposed §5.4902(c) defines common terms that are used House Bill (HB) 4409 substantially amended insurance cover­ in the new division. The definitions are the same as those de­ age eligibility requirements, and it is necessary that these new fined in §5.4001 of this chapter, except the term Association has requirements, which amend or augment the Association’s exist­ been updated to refer to the Texas Windstorm Insurance Asso­ ing plan of operation, be integrated into the plan of operation. ciation by its current name. In accordance with Chapter 2210 of the Insurance Code, com­ pliance with these requirements is essential to assure the avail­ Proposed §5.4902(d) requires the Association to audit agent ability of Association insurance coverage for all eligible persons compliance with proposed §5.4903 and §5.4904. This proce­ and properties. dure is anticipated to be similar to the procedure used to verify agent compliance with the declination requirement of the Fair Thus, it is necessary to amend the plan of operation to address Access to Insurance Requirements Plan (FAIR Plan). Such the following: (i) the declination requirement set forth in the a procedure would comply with proposed §5.4902(d). This Insurance Code §2210.202; (ii) the flood insurance requirement proposal does not change the existing submission requirements set forth in the Insurance Code §2210.203; (iii) the minimum because the emergency §5.4903(c) and §5.4904(h) require retained premium requirement set forth in the Insurance Code agents to submit such proof at the request of the Association. §2210.204; (iv) the authorization for continuation of coverage under the approval program set forth in the Insurance Code Proposed §5.4902(e) directs the Association to develop a pro­ §2210.251(f); (v) the availability of a transition program as posal for ensuring compliance with proposed §5.4903, relating authorized in the Insurance Code §2210.251(a); and (vi) the to declination of coverage requirements and §5.4904, relating to definition of the terms alter and alteration as required in the flood insurance requirements. The Association proposal would Insurance Code §2210.008. be subject to Commissioner approval. To effect these necessary amendments the Department pro­ Proposed §5.4902(f) directs the Association to develop a poses for adoption of the following: (i) §5.4902, which provides proposal for suspending the acceptance of new and renewal that §§5.4902 - 5.4908 and §5.4911 control over conflicting applications for Association insurance coverage from an agent, provisions in the Association’s current plan of operation; (ii) if the Association has determined that the agent has failed to §5.4903, whichamends theplanofoperationtoaddress comply with the requirements of proposed §5.4903 and §5.4904, the declination requirement set forth in the Insurance Code concerning the declination and flood insurance requirements, §2210.202; (iii) §5.4904, which addresses the flood insurance respectively. The proposal also requires the Association to requirement set forth in the Insurance Code §2210.203; (iv) propose a review process should the agent desire to contest

35 TexReg 182 January 8, 2010 Texas Register the suspension. The proposal, which must be submitted to the could be considered in determining whether coverage is sub­ Commissioner, would be considered as a possible amendment stantially equivalent are provided; however, these examples are to the plan of operation and thus would be required to be not exhaustive. The emergency rule adoption order indicated adopted as a rule, subject to the opportunity for public hearing that consideration of other potential factors such as affordability and comment, before the proposal could be implemented. were being deferred to a formal rule proceeding. The Depart­ Proposed §5.4902(f) is necessary because of the Insurance ment received comments concerning the emergency rules that Code §2210.202(b) that provides that any property and casualty affordability of coverage should be considered a type of declina­ insurance agent licensed in this state is eligible to submit an ap­ tion. Neither the rule nor the statute establishes a requirement plication for Association insurance coverage. The Association that the applicant must accept an offer of coverage based on has no power of appointment or other means generally available price from an authorized insurer if the applicant has a declina­ to other insurers to ensure that the business of the Association’s tion from an authorized insurer writing windstorm and hail insur­ customers is handled by agents knowledgeable of transacting ance in a first tier coastal county. Therefore, the Department has business with the Association. Agents who do not comply with determined that further consideration of affordability is not nec­ the applicable statutes or rules may create situations in which essary at this time. a person does not obtain the coverage they desire or a person Proposed §5.4903(b)(3) defines the term "writing" to mean "of­ who is ineligible for Association insurance coverage becomes fering new or renewal coverage." The proposed definition is con­ insured. The latter situation could lead to losses being paid sistent with other usages and interpretations of the term "writing" for a policy that should not have been issued. Currently, the in the Insurance Code and is unchanged from the emergency only remedy for such non-compliance is an enforcement action rules. by the Department to revoke the agent’s license. Although the Department takes necessary and appropriate action, other Proposed §5.4903(c) addresses the requirement in the Insur­ alternatives may also be effective. Therefore, the proposed ance Code §2210.202(b) that the agent possess proof of the section directs the Association to create a proposal for the declination when submitting the application for new and renewal Commissioner’s review setting forth the Association’s position Association insurance coverage. To be a meaningful require­ of how best to protect the Association’s customers from agents ment, the proof must be subject to verification. Therefore, pro­ that do not comply with the relevant statutes and rules governing posed §5.4903(c) requires that the proof must be maintained and the provision of coverage through the Association, and provides that the agent must provide such proof to the Association if re­ a procedure for agent to obtain a review. quested or audited. Proposed §5.4903(c) differs from the emer­ gency rule because it establishes a more flexible requirement for Proposed §5.4903 sets forth and defines the declination require­ maintaining the proof and sets forth the minimum amount of in­ ment required pursuant to the Insurance Code §2210.202(a). formation necessary to document the declination. The proposal Proposed §5.4903(a) specifies the statutory requirement that to provides that the proof may be stored in a written form or a form be eligible for Association insurance coverage an applicant for that can be printed if stored electronically. These provisions set new or renewal coverage must have at least one declination of the minimum requirement for compliance with the proof require­ coverage from an authorized insurer writing property insurance ment. The proposed section also would allow the Association to providing windstorm and hail insurance coverage in the first tier develop alternative methods of compliance that would allow the coastal counties. Proposed §5.4903(a) also provides that an requested proof documentation to be submitted electronically. agent may obtain a declination on behalf of the applicant. This Finally, the proposal also includes a requirement that the proof is necessary to clarify the statutory procedure under the Insur­ be maintained for a period of not less than five years following ance Code §2210.202(a), which states that the applicant must the submission of the application. The Department considers obtain a declination, and §2210.202(b), which states that the that the five-year maintenance period is reasonable because it agent must possess proof of the declination. Such an activity is consistent with the five-year limitation period in the Insurance is consistent with the acts constituting the acts of an agent un­ Code §81.001, relating to the limitations period for certain disci­ der the Insurance Code §4001.051. It is also consistent with plinary actions. the purpose of the declination requirement, which is to require the applicant to seek coverage in the voluntary insurance mar­ Proposed §5.4903(d) addresses cancellation of coverage based ket prior to applying for coverage through the Association. on failure to comply with the declination requirement. Cancel­ lation was not specifically addressed in the emergency rules. Proposed §5.4903(b) defines terms used in this section. Pro­ The Legislature in HB 4409 does not provide a specific penalty posed §5.4903(b)(1) defines the statutory term "insurer autho­ for policyholders that receive coverage without the required rized" to be the same as the more commonly used term "autho­ declination. This rule also does not create a penalty; however, rized insurer," meaning an insurer operating under a Department the declination requirement specified in the Insurance Code issued certificate of authority. This definition was not in the emer­ §2210.202(a) is considered an eligibility requirement. Section gency rules, but has been added for clarification. The term does 2210.202(a) provides that Association insurance coverage not include a surplus lines carrier. should not be made available unless the applicant is unable Proposed §5.4903(b)(2) defines the term "declination," and is to obtain windstorm insurance through the voluntary market unchanged from the definition adopted in the emergency rules. as evidenced by one declination from an authorized insurer. The definition of the term "declination" is necessary because of Under Chapter 2210, the Association’s plan of operation, the Insurance Code §2210.202, which requires that "declination" §5.4001(d)(2)(E)(i)(III)(-a-) of this chapter, and this proposal, if have the meaning assigned to it in the plan of operation. The the structure is ineligible for coverage a policy should not be proposal defines "declination" in accordance with the statute and issued. If a policy is issued to an applicant who is not eligible provides that a "declination" includes the following: (i) a refusal for Association insurance coverage, the Association may cancel to offer or renew windstorm coverage; or (ii) a refusal to offer sub­ the policy as provided in proposed §5.4903(d), the Association’s stantially equivalent similar insurance coverage to the insurance plan of operation, §5.4001(d)(3)(A) of this chapter, and the coverage provided by the Association. Examples of factors that Association’s currently adopted insurance policy forms. The

PROPOSED RULES January 8, 2010 35 TexReg 183 Association’s policy currently specifies a minimum 14-day notice enlarged, or altered on or after September 1, 2009. Therefore, period prior to cancellation. However, proposed §5.4903(d) because Zones VE and V1 - V30 have an additional hazard establishes a 30-day notice prior to cancellation of the policy associated with storm-induced waves, proposed §5.4904(b) under the declination requirement, because the 30-day notice includes these zones as well as Zone V in the eligibility period will provide the policyholder adequate time to establish requirements for Association insurance coverage. eligibility or to obtain insurance in the voluntary market. In Proposed §5.4904(c) lists the two exceptions to the flood insur­ accordance with the plan of operation in §5.4001(d)(3)(A)(ii), the ance requirement: (i) the repair of a structure; and (ii) insur­ notice of cancellation must state the reason for cancellation and able corporeal movable property located on or above the third provide the policyholders with notice of their right to appeal the floor of a structure. The Insurance Code §2210.203(a-1) does Association’s action. Further, the proposed subsection provides not include the term "repair" with regard to the statutory require­ for a rescission of the cancellation subject to certain conditions. ment to purchase flood insurance. Section 2210.203(a-1) ap­ Proposed §5.4904 sets forth the flood insurance requirement as plies only to those structures that are "constructed," "altered," required by the Insurance Code §2210.202(b) and §2210.203(a­ "remodeled," or "enlarged" on or after September 1, 2009. Sec­ 1). The proposed section has been rearranged and consoli­ tion 2210.203(a-1) thus differs from §2210.251 and §2210.258, dated, but is substantially similar to the same section adopted which include the term "repair" in listing building activities related in the emergency rules. to the inspection of structures for compliance with the applicable building code standards of the Association as set forth in the Proposed §5.4904(a) defines terms used in the section. Pro­ plan of operation. Because §2210.203(a-1) does not include the posed §5.4904(a)(1) defines the term "actual cash value." This term "repair," along with the terms "constructed," "altered," "re­ definition is the same as the definition adopted in the emergency modeled," or "enlarged" the flood insurance requirement in pro­ rules, but has been placed in this separate definitions subsec­ posed §5.4904 does not apply to structures "repaired" on or af­ tion. ter September 1, 2009. Therefore, for purposes of clarity and to Proposed §5.4904(a)(2) defines the terms "constructed," "al­ avoid ambiguity, it is necessary to define the term "repair" in pro­ tered," "remodeled," and "enlarged." The Department received posed §5.4904(a)(3). The proposed definition of "repair" means informal comments during the preparation of the emergency the reconstruction or restoration of a structure that is damaged or rules concerning the term "remodel" and whether this term deteriorated. The Department received inquiries concerning the would be extended to include such activities as installing new emergency rules on whether a structure could be "repaired" if no carpet and interior appliances. The Department considers that useable part of the structure remained. In analyzing this ques­ the use of the term "remodel" in the context of the Insurance tion, the Department considered that in enacting §2210.203(a-1) Code §2210.203(a-1) applies to modifications of a structure that the Legislature limited the requirement to obtain flood insurance require compliance with the windstorm building codes. This only to those persons who choose to create new exposure or determination is based on the term being consistently used for increase exposure in Zone V or a similar zone. A repair, in­ this purpose in conjunction with the terms "construct," "alter," cluding the reconstruction or restoration of a structure, would "enlarge," and "repair" in §2210.251 and §2210.258. Addi­ not necessarily create such new exposure, because the struc­ tionally, since 2001, the term "remodel" has been used in the ture existed and the repair of a damaged or deteriorated struc­ Insurance Code §2210.251(c), and its predecessor Article 21.49 ture is often a requirement rather than a discretionary decision. §6A. During this period, the Department has never considered The Department believes this to be a reasonable interpretation the term "remodel" to apply to any activity that would not require of the requirement in §2210.203(a-1). Therefore, §5.4904(c)(1) issuance of a certificate of compliance to maintain eligibility for is proposed to implement the statutory provision that the flood Association insurance coverage. Thus, proposed §5.4904(a)(2) insurance requirement does not apply to the repair, including re­ defines the terms "constructed," "altered," "remodeled," and construction or restoration, of a structure, regardless of whether "enlarged," as referring to any building activity or action on a or not any useable portion of that structure remains. The Depart­ structure that would require the insured or applicant to obtain a ment does not consider the concept of "repair" to require an ex­ certificate of compliance prior to the structure being considered act reconstruction or restoration of the prior structure. Proposed to be an insurable property eligible for insurance coverage from §5.4904 is not intended to change any Department rules related the Association. to building code requirements. Structures being repaired still must comply with the Insurance Code §2210.251 and §2210.258 Proposed §5.4904(a)(3) defines the term "repair." This term was to be eligible for coverage through the Association. defined in the preamble to the emergency rules and this defi­ nition is similar. The term "repair" is definedtomeanthere­ Proposed §5.4904(c)(2) specifies the second proposed excep­ construction or restoration of a structure that is deteriorated or tion to the flood insurance requirement, providing that the re­ damaged. The definition differs from that used in the emergency quirement does not apply to movable property on or above the rules because it does not include the term "existing" to describe third floor of the structure. This exception is made because the a "structure." The definition in proposed §5.4904(a)(3) applies structure will be insured as required under the Insurance Code regardless of the extent of damage or deterioration to the struc­ §2210.203(a-1) and barring a catastrophic structural failure due ture. to the storm-induced waves, it is unlikely that moveable property at this level would be subject to the effect of the storm-induced Proposed §5.4904(b) contains the Insurance Code waves. This exemption does not imply that a reasonably prudent §2210.203(a-1) requirement that to be eligible for Association person with property on or above the third floorinaZoneVor a insurance coverage the property must be covered by a flood similar zone should not purchase flood insurance. insurance policy, if such coverage is available from the National Flood Insurance Program (NFIP), and: (i) any part of the Proposed §5.4904(d) sets forth the coverage requirements for property is located in Zone V or another similar zone with the flood insurance under this section, including the amount of additional hazard associated with storm waves as defined by flood insurance that is required for structures subject to this the NFIP and (ii) the structure was constructed, remodeled, section. Unless the flood insurance coverage is already at the

35 TexReg 184 January 8, 2010 Texas Register maximum amount offered by the NFIP, the proposal provides requirement that the proof be maintained for a period of not less that required coverage under the flood insurance policy must be than five years following the submission of the application. The at least 90 percent of the amount of insurancefortheproperty Department considers that the five-year maintenance period is insured through the Association. This coverage must also be reasonable because it is consistent with the five-year limitation ofthesametypeasthe Associationcoverage, whichisusually period in the Insurance Code §81.001, relating to limitations pe­ replacement cost coverage. However, if replacement cost cov­ riod for certain disciplinary actions. erage is not available from the NFIP, flood coverage must be at Proposed §5.4904(h) has the statutory requirement that agents least 90 percent of the actual cash value (ACV) of the amount of offering or selling Association coverage in Zone V, Zone VE, insurance for the property insured through the Association. The or Zones V1 - V30, must offer flood insurance coverage to the level of coverage under the proposed §5.4904(d) requirement is prospective insured, if that coverage is available. based on the Insurance Code §2210.203(a-1) requirement that the property must have flood insurance if the flood insurance Proposed §5.4904(i) addresses cancellation of coverage based coverage is available. Flood insurance coverage is available on failure to comply with the flood insurance coverage require­ to the lesser of the insurable value of the structure or the NFIP ments. Cancellation was not specifically addressed in the emer­ maximum limits. Additionally, the requirement is limited to Zone gency rules. The Legislature in HB 4409 does not provide a V and similar areas with an additional hazard associated with specific penalty for policyholders that receive coverage without storm waves. Losses related to storm waves may result in the the required flood insurance. This rule also does not create total elimination of the structure. The Association’s windstorm a penalty; however, the flood insurance coverage requirement and hail insurance policy specifically excludes losses resulting specified in the Insurance Code §2210.203(a-1) is considered an from storm waves and other flood events. Therefore, the eligibility requirement. Section 2210.203(a-1) provides that the purchase of flood insurance coverage would provide affected Association may not issue a policy covering property in Zone V persons with a means of recovery in the event of a loss caused or similar zone with an additional hazard associated with storm by storm waves. waves unless the property is covered by a flood insurance policy, or such coverage is not available. Under Chapter 2210, the As­ Thus, while §2210.203(a-1) of the Insurance Code arguably re­ sociation’s plan of operation in §5.4001(d)(2)(E)(i)(III)(-a-), and quires flood insurance coverage that is at least equal to the appli­ this proposal, if the structure is ineligible for coverage a policy cant’s Association policy limits or the maximum limits offered by should not be issued. If a policy is issued to an applicant who is the NFIP, attempting to match insurance coverage exactly over not eligible for Association insurance coverage, the Association time may be difficult depending on valuations, timing and inflation may cancel the policy as provided in proposed §5.4904(i), the adjustments. The Department considers the 90 percent require­ Association’s plan of operation, §5.4001(d)(3)(A) of this chapter, ment to be necessary to allow for potential timing and inflation and the Association’s currently adopted insurance policy forms. adjustment differences that may arise between the Association The Association’s policy currently specifies a minimum 14-day policy and the NFIP policy and sufficient to meet the purposes of notice period prior to cancellation. However, the Department has the Insurance Code §2210.203(a-1) requirement. determined that a 30-day notice prior to cancellation of the pol­ Proposed §5.4904(e) provides that the required flood insurance icy is necessary, because the 30-day notice period will provide policy must be maintained throughout the entire period the As­ the policyholder adequate time to establish that the requirement sociation policy is in effect. This is necessary to ensure that the does not apply to the insured property or to obtain a flood insur­ policyholder who has property in an area that is exposed to cata­ ance policy. In accordance with the Association’s plan of opera­ strophic losses from storm waves continues to have a means to tion in §5.4001(d)(3)(A)(ii), the notice of cancellation must state recover damages from storm waves. Proposed §5.4904(f) clari­ the reason for cancellation and provide the policyholder with no­ fies that the Association policy may be issued if application and tice of their right to appeal the Association’s action. Further, the presentment of payment of the premium for the flood insurance proposed subsection provides for a rescission of the cancella­ policy to the NFIP or a participating "write your own company" tion subject to certain conditions. has been made. Proposed §5.4905 establishes the minimum retained premium Proposed §5.4904(g) addresses the requirement in the Insur­ for Association policyholders required by the Insurance Code ance Code §2210.202(b) that the agent have proof of flood insur­ §2210.204. The required minimum premium provisions have ance coverage or unavailability of that coverage when submitting not been changed from those adopted in the emergency rules. the application for new and renewal Association insurance cov­ The Insurance Code §2210.204(c) provides that the Association erage, if flood insurance coverage is required by the Insurance shall have a minimum retained premium set forth in the plan Code §2210.203(a-1). The statute requires the agent to pos­ of operation. The Insurance Code §2210.204(e) provides that sess proof of the flood insurance coverage. To be a meaningful the minimum retained premium in the plan of operation must be requirement, the proof must be subject to verification. Therefore, for a period of not less than 180 days except for certain events proposed §5.4904(g) requires that the proof must be maintained specified in the plan of operation. The events set forth in pro­ so that the agent will be able to provide such proof to the Associ­ posed §5.4905(b) are consistent with those specified in the In­ ation if requested. The proposed §5.4904(g) requirement differs surance Code §2210.204(e). The Insurance Code §2210.204(d) from the emergency rule because it establishes a more flexible and (e) do not prohibit a minimum premium being charged for requirement for maintaining the proof. The proposal provides those specified events; rather the statute just provides that these that the proof may be maintained in a written form or a form that events are an exception to the 180-day minimum premium. can be printed if stored electronically. Proposed §5.4904(g) also The Association’s current minimum retained premium is $100 as sets the minimum standards for compliance with the proof re­ adopted in the Association’s manual rules. The $100 minimum quirement. The proposed section also would allow the Associa­ retained premium was first adopted under §5.4501, effective tion to develop alternative documentation and methods of com­ June 15, 1999, and was incorporated into §5.4910, which was pliance that would allow the requested proof documentation to adopted on an emergency basis effective November 1, 2009. be submitted electronically. Finally, the proposal also includes a

PROPOSED RULES January 8, 2010 35 TexReg 185 The $100 minimum premium is proposed in §5.4905 in order to fund of the unearned premium in excess of the $100 minimum include it in the Association’s plan of operation, as required by retained premium is no longer available to the premium finance the Insurance Code §2210.204(d). company. On future policies issued to the customer, the pre­ mium finance company will receive a pro rata refund of the un­ Under proposed §5.4905(a), once the policy becomes effective, earned premium in excess of the premium amount equal to 180 the minimum retained premium is fully earned for cancellations days. Under proposed §5.4905(c)(3) subsection (a) applies to by the insured. This proposed section does not affect the re­ an Association policy that the premium is financed for a person fund of premium should the Association cancel the policy, which who was insured under a prior Association policy that was is­ is pro rata as required in the Association’s plan of operation, sued or renewed on or after November 1, 2009 and the policy §5.4001(d)(3)(A)(ii), and the Association’s insurance policies. was canceled within 180 days of the effective date of the policy. Under the Insurance Code §2210.202(a), and the Association’s The November 1, 2009, date is the date the minimum retained plan of operation §5.4001(d)(2)(E)(i), the Association requires premium provisions became effective in the emergency rules. payment in full for insurance coverage issued on an annual Proposed §5.4905(d) provides that the Association will maintain basis. Thus, under proposed §5.4905(c), but for an exception a list of all persons who have canceled their premium financed which might occur, the 180-day minimum retained premium policies within the 180-day period. Further, this list would be is fully earned and non-refundable upon issuance of the pol­ made available to premium finance companiesasameansof icy. This proposal addresses concerns that even the 180-day determining a proper down payment. It is a concern that if this minimum premium requirement could potentially have a dis­ information is not available, then premium finance companies proportionate adverse effect on persons relying on premium might simply choose not to fund premium finance loans on Asso­ financing to obtain Association insurance coverage (premium ciation policies for those in need of such options. This proposed finance customers). RequiringtheAssociationtowithholdafull subsection also differs from the emergency rules because it al­ minimum premium would require premium finance customers lows agents to have access to a customer’s information to de­ to make a deposit in excess of 50 percent of the policyholder’s termine if the customer is on the list. This information is neces­ annual premium, which is considerably more than current sary for the agent to determine the customer’s current eligibility financing practices require and could effectively eliminate this for Association insurance coverage and any amounts due to the option for those persons most in need of financing the premium. Association under this section. The Insurance Code §2210.204 was amended in HB 4409 to add subsection (e), which requires a minimum retained premium Proposed §5.4905(e) prohibits a person owing funds to the As­ in the plan of operation must be for a period of not less than sociation under a prior Association policy to be eligible for As­ 180 days, except for certain specified events that reflect a sociation coverage. This subsection is necessary to ensure that significant change in the policyholder’s exposure concerning the persons that have failed to pay the minimum premium fulfill their insured property. The Department believes that the intent of this obligation. Proposed §5.4905(f) provides that coverage will not amendment is to limit the actions of persons who buy Associa­ be extended beyond the effective date of cancellation. Proposed tion insurance coverage when a storm appears to be entering §5.4905(g) provides that §5.4905 does not address or affect any the Gulf of Mexico, only to cancel the policy when the danger requirement under statute or rule concerning the qualifications passed. Such purchases are adverse to the Association’s rate or licensure of persons engaging in the business of premium fi­ structure and premium collections which attempt to spread the nance. cost of insurance coverage over the entire year even though the Proposed §5.4906 establishes a certificate of compliance ap­ risk is concentrated primarily during hurricane season. Because proval program to address the application of the grandfather the intent of the amendment to §2210.204 is to discourage such provisioninthe Insurance Code §2210.251(f) to structures in­ activities, rather than penalize premium finance customers, sured by the Association without an inspection under the ap­ proposed §5.4905(c) provides that an Association policy that proval process regulations. The Insurance Code §2210.251(f) is canceled and premium for such policy is financed through provides that notwithstanding any other provision of the Insur­ a person authorized to finance premiums under the Insurance ance Code §2210.251, a residential structure insured by the Code Chapter 651 is subject to several specific conditions. Association as of September 1, 2009, may continue coverage Proposed §5.4905(a) establishes that, if a policyholder cancels through the Association subject to the inspection requirements an Association policy within 180 days of its inception, the pol­ imposed under the Insurance Code §2210.258. The certificate icyholder will be liable for the greater of the premium amount of compliance approval program applies to structures that were equal to 180 days of the annual policy term or $100. Proposed insured by the Association pursuant to the approval process reg­ §5.4905(b) specifies the exceptions to the 180-day minimum re­ ulations approved on April 12, 2006, and were eligible for contin­ tained premium requirement. The exceptions are consistent with uation of coverage through the Association under the approval those described in the Insurance Code §2210.204(e) and apply process regulations on September 1, 2009. This standard dif­ to insurance coverage issued for both paid and financed premi­ fers from that used in the adopted emergency rule section which ums. Cancellations based on any of these exceptions are sub­ established a 30-day lapse provision. The reason for this differ­ jecttoa$ 100 minimum retained premium. Proposed §5.4905(c) ence is to distinguish that the eligibility requirement follows the provides that in the event that an Association policy is canceled structure and a lapse in coverage is not necessarily related to within 180 days of its effective date (early cancellation) the pre­ a condition of the structure, either under the approval process mium finance company will receive a pro rata refund above the regulations or proposed §5.4906. $100 minimum if a premium finance customer did not have an To have maintained eligibility for coverage under the approval earlycancellationonaprior Association insurance policy. The process regulations, any subsequent repair, alteration, remodel­ customer will still owe the Association the unpaid balance of the ing and enlargement of the structure must have been inspected premium amount equal to 180 days, and must pay that amount for compliance with the applicable Association windstorm to be eligible for future Association coverage. Further, after the building code requirements as required under the Insurance customer’s first early cancellation within 180 days, a pro rata re­

35 TexReg 186 January 8, 2010 Texas Register Code §2210.251 and §2210.258. Proposed §5.4906 further ad­ A windstorm building code inspection requires inspection of in­ dresses the ability of persons to continue eligibility for coverage ternal structural components of the building as well as those on the structure through the Association under the certificate that can be seen. Thus, post-construction inspection of a com­ of compliance approval program. Proposed §5.4906(b)(1) pleted structure cannot be done without invasive physical exami­ provides that the insured must be in compliance with the build­ nation of components including the removal of internal and exter­ ing code inspection requirements under the Insurance Code nal coverings to verify the building materials and methods used. §2210.258, which became effective June 19, 2009. This date This type of inspection includes (i) access to the attic area; (ii) is used because the Insurance Code §2210.258, pursuant to removal of soffit areas to view connections at the top of the wall SECTION 51 of HB 4409, became immediately effective on the framing; (iii) removal of exterior coverings (such as brick veneer date the Governor signed HB 4409, which was June 19, 2009. or siding) to view items such as strapping; (iv) wall sheathing and nailing patterns; and (v) removal of sheetrock in various locations Proposed §5.4906(b)(2) and (3), provide notice that the decli­ of the structure like primary building corners to view anchor bolts, nation and flood insurance requirements in the Insurance Code clips, straps, framing members, and hold down connectors. Also §2210.202 and §2210.203, and §5.4903 and §5.4904 also apply of concern is that even if the consumer decides to incur the ex­ to structures in the certificate of compliance approval program. pense of an inspection, there is no guarantee that the structure Proposed §5.4906(b)(4) is proposed as a reminder to persons will be in compliance or that the structure can be brought into in the certificate of compliance approval program that the ex­ compliance. emption stated in the Insurance Code §2210.251(f) applies only to the Association’s windstorm building code inspection require­ The Insurance Code §2210.251(a), however, also provides that ments under the Insurance Code §2210.251 and not all of the in addition to inspection, a structure may be considered to be el­ Association’s underwriting requirements. igible for Association coverage if the structure is approved by the Department for compliance with the Association’s plan of As previously discussed, under §2210.001 of the Insurance operation. The approval process regulations approved by the Code, the Legislature has determined that the provision of wind­ Commissioner in 2006 were submitted in accordance with the storm and hail insurance is necessary for the economic welfare plan of operation and the Insurance Code §2210.251(a). The of the state and its inhabitants and that the lack of such insur­ requirements in the proposed §5.4907 certificate of compliance ance in the state’s sea coast territories would severely impede transition program will become part of the Association’s plan the orderly growth and development of the state. Proposed of operation and are in accordance with the Insurance Code §5.4907 is necessary to implement the express legislative intent §2210.251(a). The proposed certificate of compliance transition of Chapter 2210 of the Insurance Code as amended by HB 4409 program requirements do not alter or affect the Association’s un­ and the continued inclusion of the authority for "approval" of derwriting standards that are not based on the certificate of com­ structures under the Insurance Code §2210.251(a). Proposed pliance requirement. §5.4907 also sets forth the process of developing an alternative certification that will provide a mechanism for policyholders The proposed certificate of compliance transition program re­ to continue coverage of the structure through the Association quirements are similar to the requirements used in the approval after the transition program expires. The Department plans to process regulations and are intended to provide some level of propose the alternative certification as a separate rule. certainty that the residential structure was considered insurable in the private market. If each of the proposed requirements is Proposed §5.4907 is necessary for the same reasons the satisfied, residential structures otherwise required to have a cer­ Department approved the approval process regulations in tificate of compliance shall be subject to the approval process April 2006. At that time, the approval process was necessary in lieu of the inspection process for Association insurance eligi­ because, as a consequence of the destruction caused by Hurri­ bility. Once a residential structure is eligible for the certificate cane Rita and other catastrophes, many insurance companies of compliance transition program, the structure will retain its el­ began to significantly reduce or eliminate their exposure to igibility throughout the duration of the certificate of compliance windstorm losses in the first tier coastal counties by no longer transition program. writing residential property policies or by no longer providing windstorm and hail coverage under a residential property policy Therefore, proposed §5.4907(a) specifies the requirements for in these counties. This situation has not changed following a structure to be eligible for an Association residential insur­ Hurricanes Dolly and Ike. As in 2006, the continued with­ ance policy. Proposed §5.4907(a)(1) requires that "within the 12 drawal or refusal of insurance companies to write in the first month period prior to the date of application for Association cov­ tier coastal counties means that these policyholders may be erage the structure has been insured on an annual basis under unable to obtain windstorm coverage other than through the a property policy that included windstorm and hail coverage." Association. Many of these consumers may also be ineligible Proposed §5.4907(a)(2) requires that the "insurer that under­ for coverage through the Association because the structure wrote the policy on the structure" either "discontinues providing was not inspected during construction for compliance with the windstorm and hail insurance under the policy; or the insurer that applicable Association windstorm building code requirements underwrote the policy on the structure discontinues providing and, as such, do not have a certificate of compliance (WPI-8). residential property insurance in the portion of the catastrophe The certificate of compliance demonstrates that the structure is area where the structure is located." Proposed §5.4907(a)(3) eligible for insurance through the Association under the Insur­ provides the same requirements for eligibility and continuation ance Code §2210.251. However, many insurance companies in the certificate of compliance transition program that are re­ in the private market did not require a certificate of compliance quired for continuation of coverage under the certificate of com­ before providing windstorm coverage. The result is that it is pliance approval program in proposed §5.4906. Specifically, the unknown whether a particular structure was built in accordance structure and applicant must comply with the Insurance Code with the windstorm building code requirements. An inspection §2210.258 inspection requirements for building code compliance is required to determine compliance.

PROPOSED RULES January 8, 2010 35 TexReg 187 and the requirements related to declinations and flood insurance a rule in the Administrative Code or become part of the plan of coverage. operation. To the contrary, the Insurance Code §2210.003(13) defines Texas windstorm and hail insurance policies and forms Proposed §5.4907(b) limits persons participating in the certifi­ as being approved by the Department and not as policies cate of compliance transition program to one renewal of cover­ and forms adopted by rule or as part of the plan of operation. age during the duration of the certificate of compliance transi­ Thus, there is no statutory requirement to continue the current tion program. Proposed §5.4907(c) provides that the certificate practice. Further, the current practice is not the only method of of compliance transition program expires on August 31, 2011. form approval that has been considered for the Association as Association policies that are issued on structures under certifi­ evidenced by a prior practice set forth in the Association’s plan cate of compliance transition program and expire after August of operation, §5.4001(d)(1)(A), which provides that forms must 31, 2011, will continue until the expiration date of the policy. be approved or rejected by the Commissioner within 30 days Such policies will not be renewed after August 31, 2011. As indi­ of submission and that forms not acted upon within 30 days cated in proposed §5.4907(d), the Department is developing an are deemed approved. Further, §5.4001(d)(1)(A) makes no alternative certification under which policyholders may be able to provision for public notice or comment on the submission and continue coverage on the structure through the Association after the 30-day timeline would be impractical for a public hearing. the transition program expires. When developed, the alternative certificationwouldbeproposeda s a separate rule. Second, prior adoptions of §§5.4101, 5.4201, 5.4401, and 5.4501 reference the Insurance Code §2210.351; however, Proposed §5.4908 defines the terms alter and alteration, for the §2210.351 is a rate filing statute. While the Insurance Code purposes of Chapter 2210 of the Insurance Code. The Insurance §2210.351 states the proposed form must accompany the rate Code §2210.008(c) requires the Commissioner in rules adopted filing, this appears to be only for the purpose of evaluating the under Chapter 2210 to define the meaning of "alter" and "alter­ adequacy of the rate as compared to the coverage offered. The ation" for purposes of this chapter, specifically as used in Sub- Insurance Code §2210.351 does not set forth a procedure or chapters E and F. The definition differs from that adopted in the requirement to adopt these forms. For example, a rate filing emergency rules §5.4908 because the terms are no longer lim­ under §2210.351 amending commercial rates would not require ited to exterior changes in the structure. The proposed definition re-approval of the commercial policy form if coverage under that provides that the terms "alter" and "alteration" shall mean any form did not change. Third, the prior version of the Insurance modification to a structure that physically changes portions of the Code §2210.008(a) specifically referenced a requirement for structure subject to wind forces without increasing the square notice and a public hearing for the adoption of Association "pol­ footage of area of the structure. Therefore, the definition now icy forms." That requirement was removed by an amendment includes interior modifications to a structure and as such, in­ to §2210.008 in HB 4409. Fourth, the formal rule adoption cludes a "remodel." As previously explained in the discussion practice is often not an efficient method of considering forms of proposed §5.4904, the term "remodel" is used in conjunction for approval. While it provides a means for notice and public with the term "alter" when establishing the requirements under comment, the formal structured process requires an elongated the Insurance Code §§2210.203(a-1), 2210.251, and 2210.258. period of time and a significant investment of Department and Therefore, the proposed definition will not change any current Association resources for what are often non-controversial Department procedures. matters. Proposed §5.4911 establishes a procedure and requirement for Therefore, the Department considers it necessary to propose re­ Commissioner approval of the Association’s insurance policy placing the current rule adoption by reference procedure with a forms, endorsements, manual rules, and application forms. process that is more efficient. The proposed process will pro­ Theproposedsection also requires the Association to file its vide for approval of the Association’s insurance policy forms, underwriting guidelines with the Department. In conjunction with endorsements, manual rules, and application forms by Commis­ this proposal, the Department has also submitted a proposal to sioner’s Order after notice and an opportunity for public com­ repeal §§5.4101, 5.4201, 5.4401, and 5.4501 of this title. This ment. proposal is also published in this issue of the Texas Register. Finally, the proposed new process is not entirely unique. Approv­ The reasons for this proposed change in form and manual ing insurance policy forms, endorsements, and manual rules by rule procedures are the following. First, the Insurance Code order is consistent with the procedures used with other insurers §2210.151 provides that the Commissioner shall adopt by rule of last resort statutorily created by the Texas Legislature, includ­ the Association’s plan of operation to provide Texas windstorm ing the Fair Access to Insurance Requirements Plan Associa­ and hail insurance in the catastrophe area. The current practice tion, the Texas Automobile Insurance Plan Association, and the is to adopt the Association’s insurance policy forms, endorse­ Texas Medical Liability Insurance Association. ments, and manual rules through a rule making procedure by reference in the Administrative Code in §§5.4101, 5.4201, Proposed §5.4911(a) sets forth the approval requirement and the 5.4401, and 5.4501. The Insurance Code §2210.152(a)(1) submission process, including a requirement for posting of notice sets out the requirements of the plan of operation and spec­ of the submission on the Department’s website and publication in ifies that the plan of operation must provide for the efficient, the Texas Register and that an opportunity for comment is avail­ economical, fair, and nondiscriminatory administration of the able to interested persons. Proposed §5.4911(a)(1) requires Association. Further, the Insurance Code §2210.152(a)(2)(G) the Association in filing submissions under proposed §5.4911 to provides that the plan of operation may include other provisions comply with the filing requirements in §5.9310, relating to Prop­ considered necessary by the Department to implement the erty and Casualty Filing Transmittal Form, and §5.9320, relating purposes of Chapter 2210. However, neither the Insurance to Required Information for the Preparation and Submission of Code §2210.152 nor any other provision in the Insurance Policy Form, Endorsement, or Manual Rule (other than rating Code Chapter 2210 requires that the Association’s insurance manual) Filings. Proposed §5.4911(a)(3) specifies that a person policy forms, endorsements, and manual rules be adopted by may request a public hearing on the submission and outlines the

35 TexReg 188 January 8, 2010 Texas Register procedure for the filing the request. Proposed §5.4911(b) pro­ sult of this proposal through a verification procedure that relies vides that the Association may not submit any filing required to on proof the agent is required to possess at the time of applica­ be made under Chapter 2210, Subchapter H, of the Insurance tion under the Insurance Code §2210.202(b) and flexible means Code, including a filing required to be made under the Insur­ of maintaining this proof. The verification process will assist in ance Code §§2210.351, 2210.352, or 2210.362. This includes reducing the number of policyholders that are ineligible for cov­ rate filings and recommendations for reduction of coverages or erage under the declination and flood insurance coverage re­ an increase in an applicable deductible. Proposed §5.4911(c) quirements, thus ensuring that the Association is operating in provides that the Commissioner may consider each submitted accordance with its intended purposes and as an insurer of last item separately but must approve or disapprove each form in resort. Required Association proposals to enhance verification its entirety without modification. Proposed §5.4911(d) allows of compliance with the declination and flood insurance cover­ the Association to amend or withdraw pending submissions and age requirements and provide for the suspension of agents who provides that previously approved forms may only be amended do not comply with these requirements may assist in achiev­ or withdrawn through the submission process specified in pro­ ing these purposes. Additionally, the proposed new procedures posed §5.4911. Proposed §5.4911(e) establishes a time line for for filing of Association insurance policy forms, endorsements, when pending submissions shall be considered as being sub­ and manual rules for approval will be more efficient because it mitted. Proposed §5.4911(f) provides that forms and rules that maintains the opportunity for public hearing and comment and have been previously adopted by reference and those forms and provides for a less resource intensive process when consider­ rules adopted under §5.4909 and §5.4911 may be approved by ing non-controversial submissions. The proposed requirement the Commissioner without further notice and hearing. Proposed that the Association submit its underwriting guidelines to the De­ §5.4911(g) defines the term underwriting guidelines and requires partment will provide the opportunity for the Department to ver­ the submission of the Association’s residential and commercial ify that the Association’s underwriting guidelines are consistent underwriting guidelines. The requirement further directs the As­ with the Insurance Code Chapter 2210 and Department rules. sociation to deliver this information in a manner that is consis­ Additionally, coastal residents will benefit from the proposal. For tent with the Department’s applicable Filings Made Easy rules, example, the proposed provision concerning the minimum re­ §5.9342. While §5.9342 does not apply to commercial underwrit­ tained premium will result in the reduction of the potential initial ing guidelines for other insurers, under proposed §5.4911(g), the down payment requirements for persons who must utilize the procedure set forth in §5.9342 will be applicable to both the As­ premium finance market to maintain continuous Association in­ sociation’s residential and commercial underwriting guidelines. surance coverage. Also, the proposal provides an opportunity These underwriting guidelines may then be amended or with­ for persons with residential structures that are eligible for As­ drawn as further provided in proposed §5.4911(g). sociation residential insurance policy coverage and that are not currently covered through the certificate of compliance approval Proposed §5.4911(h) requires the Association to submit for program to obtain Association insurance coverage in the certifi­ approval its current application forms to the Department and cate of compliance transition program through August 31, 2011. specifies the time frame for such submissions. Under proposed Without this transition program, coastal residents may not be §5.4911(h), the Association may continue to use the submitted able to obtain windstorm insurance coverage on their property. application forms unless the forms are disapproved by the Commissioner. Proposed §5.4911(h) is necessary to ensure Estimated Costs for Persons Required to Comply with the Pro­ that the Association continues to be able to operate and provide posal. The persons that will incur costs for compliance with the new and renewal insurance coverage during the application proposal are the Association and agents that choose to place form review period. business with the Association. Additionally, the proposal contin­ ues the Association’s current requirement of a $100 minimum FISCAL NOTE retained premium that may reduce refunds to some Association Marilyn Hamilton, Associate Commissioner of the Property and policyholders who cancel Association insurance policies. Casualty Program, has determined that for each year of the first As provided in the Insurance Code Chapter 2210, the Associa­ five years the proposed sections will be in effect, there will be no tion is created for the purpose of providing windstorm and hail in­ fiscal impact to state and local governments as a result of the surance in the designated catastrophe area, and, as such, is re­ enforcement or administration of the proposal. There will be no quired to comply with this proposal. It is not a business decision measurable effect on local employment or the local economy as of the Association to choose to subject itself to these regulations a result of the proposal. by electing to write this type of coverage. Conversely, while the PUBLIC BENEFITS/COST NOTE Association will only accept an application for Association insur­ ance coverage from a licensed agent, insurance agents are not Ms. Hamilton also has determined that for each year of the first required to submit applications to the Association for insurance five years the proposed sections are in effect, there will be public coverage and thus compliance with the requirements in this pro­ benefits resulting from the proposal and there will be costs to posal is contingent on the agent’s business decision to submit persons required to comply with the proposal. applications for insurance coverage to the Association on be­ Anticipated Public Benefits. The Department anticipates that the half of applicants. With regard to policyholders, while no person more efficient operation of the Association will be a primary pub­ is required to purchase windstorm and hail insurance coverage lic benefit resulting from the proposal. This will result in part from from the Association, current residential insurance market con­ the proposed procedures and requirements relating to the decli­ ditions on the Texas coast limit the ability of many coastal resi­ nation and flood insurance requirements and the proposed new dents to purchase windstorm and hail insurance coverage from procedures for the filing of and the approval, or disapproval, of any source other than the Association. Association insurance policy forms, endorsements, and manual The Association. The anticipated costs to the Association result rules. There will be increased certainty of compliance with the from proposed §§5.4902, 5.4905, and 5.4911. The following cost statutory declination and flood insurance requirements as a re­ estimates were provided to the Department by the Association.

PROPOSED RULES January 8, 2010 35 TexReg 189 However, the Association indicated that the actual costs may the amount due would be sent with the cancellation notice that differ from these estimates due to unanticipated situations and is already required in the Association’s plan of operation. expenses. Proposed §5.4905(d) requires the Association to develop and Proposed §5.4902(d) requires the Association to implement a maintain a list of persons who cancelled a premium financed procedure to audit agents concerning compliance with the dec­ Association insurance policy within the first 180 days and subse­ lination requirement under the Insurance Code §2210.202 and, quently owe the Association a balance due for the remainder of if applicable, the flood insurance requirement under the Insur­ the 180-day minimum retained premium. The Association esti­ ance Code §2210.203(a-1). The audit program may be similar mated this cost at $7,500 per year for each of the first five years. to the audit program established by the Texas Fair Access to In­ The estimated cost includes labor costs associated with check­ surance Requirements Plan to audit agents for compliance with ing applications by input staff and underwriting staff; the cost of the declination requirement in the Insurance Code §2211.151. staff to add someone to the list and to calculate the balance due The Association estimated that the cost of compliance with this and information technology costs necessary to make the infor­ provision would require additional staff with knowledge equiva­ mation available to agents and premium finance companies. lent to a senior underwriter. The estimate projected overall costs Proposed §5.4911 sets forth a procedure for the Association to of performing this function is $70,000 per year for each year of submit its proposed insurance policy forms, endorsements, man­ the first five years the proposal is in effect. The cost estimate ual rules, and application forms to the Department for Commis­ includes the estimated costs of salary, benefits, space rental, of­ sioner approval. The submissions must use the filings made fice equipment, phone, and costs related to corresponding with easy format in §5.9310 relating to Property and Casualty Filing agents, such as postage, envelopes, paper, and copying. Transmittal Form and §5.9320 relating to Required Information Proposed §5.4902(e) requires the Association to, on or before, for the Preparation and Submission of Policy Form, Endorse­ June 1, 2010, present to the Commissioner for approval a pro­ ment, or Manual Rule (other than rating manual) Filings. Be­ posal to ensure compliance with the requirements in proposed cause this proposal does not require the Association to create §5.4903 and §5.4904. Proposed §5.4903 requires that, to be or develop any particular insurance policy form, endorsement, eligible to obtain new or renewal windstorm and hail insurance manual rule, or application form, the proposal does not result coverage from the Association for a property, an applicant or the in any additional costs for such creation or development. The applicant’s agent must have received at least one declination of costs resulting from this proposal are those costs necessary to coverage for the property from an insurer authorized to engage in prepare and submit the submission in compliance with §5.9310 the business of, and writing, property insurance providing wind­ and §5.9320. This proposed process is similar to the current storm and hail insurancecoverageinthe first tier coastal coun­ process used by the Association in preparing a submission. The ties. Proposed §5.4904 prohibits the Association from issuing Association estimated the costs associated with complying with or renewing a policy unless evidence is shown that a flood in­ proposed §5.4911, including Association management and staff surancepolicyisin effect for the insurable property if the struc­ time necessary to draft the submission and complete the re­ ture meets certain specified conditions. Preparing such a pro­ quired forms to be approximately $750 for each submission. This posal could include analyses and work products from underwrit­ estimated cost is based on the Association’s internal staff prepar­ ers, computer systems analysts, legal counsel, and senior man­ ing the submission. The Association further estimated that if it agement. The Association estimated the cost of preparing this was necessary to involve outside legal counsel in the drafting proposal to be $5,000, including estimated staff time to develop process, the cost of complying with this requirement could ex­ program criteria and determine how the program will affect the ceed several thousand dollars. Association’s systems. The cost would be a one-time expense Proposed §5.4911(g) requires the Association to file with the in the first year that the proposal is in effect. Department the Association’s residential and commercial un­ Proposed §5.4902(f) requires the Association to, on or before, derwriting guidelines in the manner required by §5.9342. The June 1, 2010, present to the Commissioner a proposal to amend Association estimated the cost of compliance with proposed the plan of operation to establish a procedure for suspending §5.4911(g), including preparing the submission, reviewing the acceptance of new or renewal insurance applications from the submission, and submitting the written guidelines to be an agent if the Association determines that the agent failed to approximately $100. Changes to the guidelines would require comply with §5.4902 and proposed §5.4903 and §5.4904. The theAssociationtosubmitthechange in writing. The cost of proposal must also include a procedure for an agent to obtain a compliance with this requirement will vary based on whether review of the suspension. Preparing such a proposal could in­ the Association submits just the change or re-submits its entire clude analyses and work products from underwriters, computer set of underwriting guidelines with the change. The Depart­ systems analysts, legal counsel, and senior management. The ment estimates the overall cost of submitting changes to the Association estimated the cost of preparing this proposal to be underwriting guidelines to be less than $10 per submission. $5,000, including time spent to develop suspension criteria; re­ Theestimateisbasedon theDepartment’s anticipation that view and approval by legal resources; internal systems analysis the notice would be prepared in 15 minutes or less by an office to make sure the suspended agent could not submit applications; worker at the mean hourly wage of $15.96. This estimated wage and preparation of the proposal for submission to the Commis­ is based on the classification "Office and Administrative Support sioner. The cost would be a one-time expense in the first year Workers, All Other" in the Department of Labor’s May 2008 that the proposal is in effect. Texas State Occupational Employment and Wage Estimates. The estimate also includes the Department’s latest determina­ Proposed §5.4905 requires the Association to notify a person of tion of the estimated costs for printing one page 8 cents for one a balance due when a premium financed policy is canceled. The printed page (7 cents for paper and 1 cent for ink), and includes Association estimated that no additional cost to the Association 44 cents for first class mail postage, and an estimated 5 cents would result from this notice requirement because the notice of for a single standard envelope.

35 TexReg 190 January 8, 2010 Texas Register All other costs to the Association under this proposal result from mitting the proof would be handled by an insurance agent, and the legislative enactment of the Insurance Code Chapter 2210 therefore, uses the mean hourly wage of $26.57 to calculate the and the amendments to Chapter 2210 in HB 4409 and are not estimated costs. This hourly wage is based on the classification a result of the adoption, enforcement, or administration of this "insurance sales agents" in the Department of Labor’s May 2008 proposal. Texas State Occupational Employment and Wage Estimates. It is possible that other clerical staff would handle the information Agents. The anticipated costs to agents required to comply with in some agents’ offices. However, in those instances, the wage this proposal result from proposed §5.4903 and §5.4904. Under costs would be less than those for the agent. The requirement to proposed §5.4903, an agent is required to maintain and sub­ obtain the proof under both proposed §5.4903 and §5.4904 re­ mit to the Association at its request documentation that indicates sults from the enactment of HB 4409 and not from the administra­ proof of the declination required under §5.4903(a) and that was tion or enforcement of this proposal. Proposed §5.4903 does not relied upon by the agent in completing the Association’s applica­ require any particular method for maintenance of the document tion for insurance coverage. Under proposed §5.4904, an agent beyond the requirement that it must be available for submission is required to maintain and submit to the Association at its re­ to the Association and a requirement that an electronic document quest, documentation demonstrating proof of the required flood must be in a printable format. Maintenance costs for each of the insurance coverage, or proof of the unavailability of the required proof documents under proposed §5.4903 and §5.4904 will thus flood insurance coverage, that was relied upon by the agent in vary widely and will be reflective of volume. To some agents completing the Association’s application for insurance coverage. with only a few Association customers, this amount may be neg­ Under both proposed §5.4903 and §5.4904, the total probable ligible. To other agents with many Association customers, this economic costs to each agent to comply will vary based on the requirement over a five-year period could result in the storage of number of Association insurance policies the agent writes. The hundreds and possibly thousands of pages of proof. However, more policies written will increase both the cost of generating in terms of storage requirements, the Department has consid­ and maintaining the proof, as well as, the likelihood of incurring ered the following factors. One thousand pieces of paper will a cost should the Association audit one or more of the policies not even begin to fill a standard size file cabinetdrawerora for compliance. file box. Electronically, at approximately 26 kilobytes per sin­ The Department considered the following cost components in gle page PDF file, 1,000 single-page proof files would amount estimating the costs for agents to comply with proposed §5.4903 to approximately 26 megabytes of storage, which is less than and §5.4904: (i) the agent’s creation of a proof document; (ii) one-tenth of one percent of a 40-gigabyte hard drive. Thus, the agent’s maintenance of the proof document for five years; while storing a large number of records may increase an agent’s and (iii) the agent’s submission of the proof document to the As­ current storage cost, it is unlikely that even the potential max­ sociation, if requested. The Insurance Code §2210.202(b) re­ imum volume that could result from compliance with proposed quires the agent to possess proof of the declination and, if re­ §5.4903 and §5.4904 will result in significant additional costs quired, flood insurance coverage or the unavailability of flood or in an alteration of an agent’s current record storage system. insurance coverage. Thus, obtaining the proof under proposed Each agent, however, who is required to comply with proposed §5.4903 and §5.4904 is required by statute and is not a cost re­ §5.4903 and §5.4904 has the cost and other available informa­ sulting from the enforcement or administration of this proposal. tion necessary to determine the agent’s individual storage costs The agent’s creation of a proof document involves the cost of to comply. Therefore, each agent has the flexibility to determine printing or copying a paper proof document, i.e., the act of com­ the most economical means of complying with the §5.4903 and mitting the required proof to paper. This method of compliance §5.4904 requirements. is generally available to all agents required to comply with this Basedonthe Department’s analysis of identified cost factors and proposal. The agent’s maintenance of the proof document for the fact that the proof of the declination required under proposed five years involves the cost of storing the item, either in a paper §5.4903 will consist of a single page, the Department estimates or electronically. The agent’s submission of the proof document thecostofcreating the proof and maintaining the proof for the to the Association, if requested, involves the cost of retrieving five-year period required under the proposal to be less than $3 the document, printing or copying the document and submitting per individual proof document. This cost estimate is based on the document to the Association. The submission of documents five minutes of the agent’s time to prepare the proof and 8 cents by first class mail is the method of compliance that is generally for printing or copying the original proof documentation. The es­ is available to all agents required to comply with this proposal. timated cumulative cost of compliance with proposed §5.4903 While there are other methods of generating, maintaining and for the first five years is estimated at approximately $15 per pol­ submitting proof that could comply with proposed §5.4903 and icyholder who renews each year of the five-year period. As pre­ §5.4904, the Department anticipates that each agent will choose viously discussed, an additional negligible cost for maintenance a method of compliance that is the most cost-efficient for the of the documents would also apply. agent. Choosing a method of compliance is a business decision of each agent. Under the flood insurance coverage requirement in proposed §5.4904, a complying proof document may consist of a single The Department’s cost estimates are based on the following fac­ page indicating that flood insurance is unavailable, a sin- tors. The printing cost is based on the Department’s latest de­ gle-page declarations sheet from the flood insurance policy, or termination of an estimated cost of 8 cents for one printed page the flood insurance policy, which is estimated to be 15 pages. (7 cents for paper and 1 cent for ink). The cost of submission While proof is not limited to these documents, these documents is based on postage rates for first class mail and range from 44 are the most common likely to be used for compliance and cents for one ounce in a standard envelope to $1.22 for three are therefore, used by the Department in estimating costs for ounces in a10x13 inch flat envelope. The Department esti­ compliance with proposed §5.4904. Based on the Department’s mates a cost of 5 cents for a standard envelope and 16 cents for analysis of identified cost factors and the range of documents a 13 x 10 inch envelope. The Department anticipates that the that may be used for compliance with the proof requirements actions of printing and storing the proof, or retrieving and sub­

PROPOSED RULES January 8, 2010 35 TexReg 191 under proposed §5.4904, the Department estimates the per ance Code §2210.202. All other costs to agents under this pro­ applicant cost of creating and maintaining this proof to be posal result from the legislative enactment of the Insurance Code between $3 and $4.20 per policyholder, per proof for each year Chapter 2210 and the amendments to Chapter2210inHB4409 of the first five years that the proposal is in effect. This cost and are not a result of the adoption, enforcement, or administra­ estimate includes an estimate of five minutes of the agent’s time tion of this proposal. to prepare the proof and between 8 cents and $1.20 for the Applicants and policyholders. Association applicants and policy­ original proof documentation. The estimated cumulative cost holders that are required to comply with this proposal are sub­ of compliance with proposed §5.4904 for the first five years is ject to the $100 minimum retained premium set forth in proposed between $15 and $21 per policyholder who renews each year §5.4905. However, as explained in more detail later in this cost of the five-year period. As previously discussed, an additional analysis, the proposed $100 minimum retained premium is not negligible cost for maintenance of the documents would also a newly proposed cost to Association applicants and policyhold­ apply. ers, and the Department has determined that there are no ad­ All agents submitting applications for Association coverage will ditional costs that would result to an applicant or policyholder be required to comply with the declination proof requirement. under proposed §5.4905 that are in addition to those costs that The flood insurance requirement will separately affect those are required under the §2210.204(e) of the Insurance Code and agents that submit applications for Association coverage on existing Department rule requirements. An additional cost to As­ structures located in Zone V, Zone VE, and Zones V1 - V30 sociation applicants and policyholders may arise based on the that have been remodeled, enlarged, altered, or constructed Insurance Code §2210.203(a-1) that prohibits the Association on or after September 1, 2009. Thus, the overall estimated from insuring a structure unless it has flood insurance coverage five-year cumulative costs of compliance for both sections will if the structure is constructed, altered, remodeled, or enlarged, be between $3 and $8.40 per applicant, and $15 and $42 per on or after September 1, 2009 and any part of the property is lo­ policyholder who renews each year of the five-year period. cated in Zone V or another similar zone with an additional hazard associated with storm waves as, defined by the National Flood With regard to the required submission costs to comply with pro­ Insurance Program (NFIP). An analysis of these costs is detailed posed §5.4903 and §5.4904, responding to each Association re­ in an explanation later this cost analysis. quest would be a separate, non-recurring expense. Based on this fact and the Department’s analysis of identified cost factors, Minimum retained premium. Proposed §5.4905 provides that the Department estimates that each submission to the Associ­ except as otherwise provided in §5.4905, the minimum retained ation upon request required by proposed §5.4903 and §5.4904 premium on an Association policy issued on an annual basis would cost between $14 and $16. This cost estimate includes must be the premium amount equal to the greater of 180 days an estimate of 30 minutes of the agent’s time to retrieve and print of the annual policy term or $100. It further provides that the or copy the proof document or documents, costs of between 8 minimum retained premium shall be fully earned on the effective cents and $1.20 for printing or copying the proof document or date of the policy, and any unearned premium in excess of the documents, costs of 44 cents to $1.22 for first class postage us­ minimum retained premium shall be refunded to the policyholder ing the United States Post Office, and costs of 5 cents to 16 pro-rata. The $100 minimum retained premium is not new with cents for an appropriately sized envelope. Total annual costs for this proposal. The Association has had the $100 minimum re­ compliance will vary based on the number of requested submis­ tained premium provision since 1999 when it was adopted by sions that the agent receives and on whether the requests are reference as an amendment to the Association’s manual rules for proof of declination as required under proposed §5.4903 or SectionI,RuleM, under §5.4501, effective June 15, 1999. At proof of required flood insurance coverage or proof of the un­ that time, the minimum retained premium increased from $50 availability of the required flood insurance coverage as required to $100. The current manual minimum retained premium rule under proposed §5.4904. was adopted under §5.4910 on an emergency basis effective November 1, 2009. As amended by HB 4409, the Insurance An additional cost for agents may result from the Insurance Code §2210.204(d) requires a minimum retained premium to be Code §2210.203(a-1) requirement that agents are required to specified in the Association’s plan of operation. As provided in offer flood insurance coverage to all applicants seeking cover­ proposed §5.4902, proposed §5.4905 is part of the Association’s ageinZoneV,Z one VE, and Zones V1 - V30. This statutory plan of operation. requirement is also included in proposed §5.4904(h); however, any associated cost with the requirement results from the statute The purpose of the minimum retained premium is to help the As­ and not as a result of the enforcement or administration of the sociation to recover the overhead costs incurred in initially writing proposal. A cost to an agent could result if the agent is required and servicing a policy as well as to recover the additional pro­ to take federally mandated flood insurance training before being cessing expenses that will be incurred whenever coverage un­ able to offer flood insurance to persons seeking coverage in der the policy is terminated. The current $100 minimum retained Zone V, Zone VE, and Zones V1 - V30. Section 207 of the premium, which was first adopted in 1999 was largely justified Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of based on compilations of average expenses per policy from the 2004, Pub. L. 108-264 requires such training. An online search mid- to late-1990s. A review of more recent expense informa­ by the Department identified that a self study continuing educa­ tion indicates that economies of scale have developed in recent tion course sufficient to meet the federal training requirement is years that have actually reduced the per-policy costs of writing available for $14.95. and servicing the average policy. However, these costs when coupled with reasonable estimates of the additional processing The Department does not consider the completion and submis­ costs that will be incurred when coverage under a policy is ter­ sion of an Association application to be a cost resulting from the minated suggest that the existing minimum retained premium of enforcement or administration of the proposal. Agents choos­ $100 represents a reasonable estimate of the costs that must be ingtowrite business through the Association are required to covered by the minimum retained premium. complete and submit Association applications under the Insur­

35 TexReg 192 January 8, 2010 Texas Register HB 4409 amends the Insurance Code §2210.204(d) to require Code §2210.203(a-1). Section 2210.203(a-1) prohibits the As­ that the Association’s plan of operation specify the minimum re­ sociation from insuring a structure unless it has flood insurance tained premium amount set forth in the plan of operation. Sec­ coverage if the structure is constructed, altered, remodeled, or tion 2210.204(d) further provides that if an insured requests can­ enlarged, on or after September 1, 2009 and any part of the cellation of the insurance coverage, the Association shall re­ property is located in Zone V or another similar zone with an ad­ fund the unearned premium, less any minimum retained pre­ ditional hazard associated with storm waves as, defined by the mium set forth in the plan of operation, payable to the insured National Flood Insurance Program (NFIP). Review of materials and the holder of an unpaid balance. It also requires the prop­ published by the NFIP indicates that Zones VE and V1 - V30 are erty and casualty agent who submitted the application to refund defined by the NFIP as zones with an additional hazard associ­ the agent’s commission on any unearned premium in the same ated with storm waves. The cost associated with the purchase manner. The Insurance Code §2210.204(e) requires that the of flood insurance results from the requirement specified in the Association’s plan of operation provide for a minimum retained insurance Code §2210.203(a-1) and not from the enforcement premium of a period of not less than 180 days, except for events or administration of this proposal. The NFIP determines the cost specified in the plan of operation that reflect significant change in of flood insurance. Cost of flood insurance for a particular struc­ the exposure of the policyholder concerning the insured property. ture may be obtained from the NFIP or an insurance agent. The statute includes four events that reflect a significant change The type of coverage required under proposed §5.4904(d) is in the exposure of the policyholder concerning the insured prop­ necessary for compliance with the Insurance Code §2210.203(a­ erty. The statutory 180-day minimum retained premium require­ 1) requirement that the property must have flood insurance if ment and the four statutory exceptions are included in proposed the flood insurance coverage is available. Unless the property §5.4905. The proposal does not extend the minimum retained is in an area where flood insurance cannot be obtained, flood period beyond the 180-day minimum period required by statute. insurance coverage is available to the lesser of the insurable The Insurance Code §2210.204(e) does not provide that the value of the structure or the NFIP maximum limits. Losses re­ 180-day minimum retained premium is the Association’s only lated to storm waves may result in the total elimination of the authorized minimum retained premium. The $100 minimum structure. The Association’s windstorm and hail insurance pol­ retained premium applies only when the 180-day minimum icy specifically excludes losses resulting from storm waves and retained premium required by the Insurance Code §2210.204(e) other flood events. Therefore, the purchase of flood insurance does not apply to a cancellation by the insured, which is a coverage would provide affected policyholders with a means of cancellation under the four statutory exceptions also included in recovery in the event of a loss caused by storm waves. A struc­ proposed §5.4905(b) or a situation in which the annual premium ture may be damaged or destroyed by wind or storm waves. To is less that $200. Cancellations by the Association are subject limit the possibility of an uninsured loss, the flood insurance cov­ to §5.4001(d)(4)(A) and are refunded on a pro rata basis. erage amount should be at least equal to the coverage amount provided under the Association insurance policy. However, at­ To any particular policyholder the actual cost, if any, of either tempting to match over time these amounts on a consistent basis the $100 minimum retained premium or the 180-day statutorily couldbedifficult due to inflation adjustments and other factors. required minimum retained premium will depend on the policy­ Thus, to avoid a situation in which minor differences in cover­ holder’s premium and the policy’s effective cancellation date. age result in a violation of the Insurance Code §2210.203(a-1), Premium is based on the Association’s approved rates, which proposed §5.4904 provides for a variance, and specifies that the are not part of this proposal. As a result of all of these pre­ flood insurance policy coverage amount must be no less than 90 ceding factors, including the fact that the proposed $100 mini­ percent of the Association policy coverage amount. This vari­ mum retained premium, as previously explained, is not a newly ance is not intended to reduce or increase the statutory flood proposed cost to Association applicants and policyholders, the insurance requirement nor does this variance result in a cost to Department has determined that there are no additional costs persons required to comply with the statute. For similar reasons, that would result to an applicant or policyholder under proposed proposed §5.4904 also addresses the situation that while As­ §5.4905 that are in addition to those that are required under sociation policies generally provide replacement cost coverage, §2210.204 of the Insurance Code and existing Department rule NFIP flood insurance policies may only provide actual cash value requirements. coverage on certain structures, particularly if the structure is not Because the 180-day minimum premium limits the pro-rata a primary dwelling. The requirement specified in the Insurance refund, the Department is required to consider the effect of Code §2210.203(a-1) is neither a requirement for the Associa­ this statutory requirement on persons who need to finance tion to issue only the type of coverage that can be obtained from their Association premium. To address this situation, proposed the NFIP nor a requirement limited to persons who reside in the §5.4903(c) allows the premium finance company to receive V Zones. Thus, proposed §5.4904(d) specifies that actual cash a pro rata refund subject only to the $100 minimum retained value coverage is in compliance with the statutory requirement premium with respect to policies financed by policyholders who if that coverage is provided under the Association policy or that have not had a prior cancellation of a premium financed policy is the only coverage offered by the NFIP. This proposed vari­ within the 180-day minimum retained premium period. This ance in §5.4904 does not reduce or increase the statutory flood proposed provision does not affect the cost associated with the insurance requirement, and therefore, does not result in an ad­ 180-day minimum retained premium because the policyholder ditional cost to persons required to comply with the Insurance would stillowetheAssociationfor thedifferenceandwouldbe Code 2210.203(a-1). ineligible for future Association coverage until the amount was Applicant and policyholder requirements that do not result in any paid. additional costs under this proposal. The Department has de­ Flood insurance coverage requirement. As previously indicated, termined that the following proposed provisions do not result in an additional cost to applicants and policyholders may result any costs to policyholders that are inadditiontothose costsal­ from the flood insurance coverage requirement in the Insurance ready resulting from the enactment of HB 4409: (i) the declina-

PROPOSED RULES January 8, 2010 35 TexReg 193 tion requirement in proposed §5.4903; (ii) the certificate of com­ may not have more than 20 employees. The Government Code pliance approval program in proposed §5.4906; (iii) the certifi­ §2006.001(a)(1) does not specify a maximum level of gross cate of compliance transition program in proposed §5.4907; and receipts for a "micro business." There are three categories of (iv) the definition of the terms "alter" and "alteration" in proposed individuals and entities that must be analyzed to determine in §5.4908. whether they are subject to the Government Code §2006.002 small and micro business analysis as a result of this proposal: The Department has determined that the declination require­ (i) the Texas Windstorm Insurance Association; (ii) agents; and ment in proposed §5.4903 does not result in any costs to ap­ (iii) commercial property owner applicants and policyholders. plicants that are in addition to those costs resulting from the en­ actment of HB 4409. The declination requirement is established The Association. The Association does not meet the definition under the Insurance Code §2210.202 as amended by HB 4409. of a small business under Government Code §2006.001(a)(2). Neither the statute nor the proposal requires the applicant to ac­ TheAssociation is an association...composed of all property cept an offer of coverage from an authorized insurer if the ap­ insurers authorized to engage in the business of property insur­ plicant has a declination from another authorized insurer writing ance in this state, formed under the authority of Insurance Code windstorm and hail insurance in a first tier coastal county. §2210.051. It is not a corporation, partnership nor sole propri­ etorship. It is not formed for the purpose of making a profit, but The Department has determined that the certificate of compli­ to provide a method by which adequate windstorm and hail in­ ance approval program in proposed §5.4906 and the certificate surance may be made available in certain designated portions of of compliance transition program in §5.4907 do not result in any this state, as mandated by Insurance Code §2210.001. Under costs to applicants and policyholders that are in addition to those Insurance Code §2210.056, the net earnings of the Association costs resulting from the enactment of HB 4409. The certificate may not inure to the benefit of private shareholders or individ­ of compliance approval program in proposed §5.4906 is for poli­ uals; and the assets of the Association may not be used, ex­ cyholders as of September 1, 2009 and is not available after that cept to satisfy claims on policies, make investments authorized date as specified in the Insurance Code §2210.251(f). A policy­ under applicable law, pay reasonable and necessary adminis­ holder’s decision to continue Association coverage as specified trative expenses, satisfy the obligations of the Association, in­ in the Insurance Code §2210.251(f) is a voluntary decision by cluding public securities, financial instruments and the purchase the policyholder. While the certificate of compliance transition reinsurance, or prepare for or mitigate the effects of catastrophic program in proposed §5.4907 does impose requirements for ad­ natural events. Under Insurance Code §2210.452, the net gain mission to the program, these requirements do not result in any from operations of the Association in excess of incurred losses additional cost to the policyholder. Further, proposed §5.4906(b) and operating expenses, is paid to a catastrophe reserve trust and §5.4907(a)(3) list the requirements for continuation in the fund or used to procure reinsurance. Further, under Insurance programs, but these requirements are not limited to participants Code §2210.056 and §2210.452, upon dissolution of the Asso­ in these programs. Rather, these requirements apply equally ciation, all assets revert to the state. The Association is not to every Association policyholder, and as such do not create independently owned and operated. In addition to not being an additional cost of compliance for persons under proposed owned by its members, under Insurance Code §2210.101 and §5.4906(b) and §5.4907(a)(3). Also, because any premiums and §2210.102, the Association operates with a board of directors, surcharges that are imposed are the result of the Insurance Code which is responsible and accountable to the Commissioner. The Chapter 2210 and the Association’s approved rates, such costs Association provides windstorm and hail insurance according to are not part of this proposal. a plan of operation as specified by Insurance Code §2210.152 The Department has determined that the proposed definitions of and adopted by the Commissioner by rule pursuant to Insurance the terms "alter" and "alteration" in §5.4908 do not result in any Code §2210.151. Further, the Association has approximately costs to applicants and policyholders that are in addition to those 150 employees (including employees who are providing services costs resulting from the enactment of HB 4409. These proposed by contract to the FAIR Plan) and net receipts well over $6 mil­ definitions do not change any existing requirement, practice, or lion. Therefore, based on these factors, the Association does not procedure imposed on policyholders. meet the definition of a small or micro business under the Gov­ ernment Code §2006.001(a)(1) and (2), and an analysis of the All other costs to applicants and policyholders under this pro­ economic impact of this proposal on the Association pursuant to posal result from the legislative enactment of the Insurance Code the Government Code §2006.002(c) is not required. Chapter 2210 and the amendments to Chapter 2210 in HB 4409 and are not a result of the adoption, enforcement, or administra­ Agents. Agents who write windstorm and hail insurance through tion of this proposal. the Association may meet the definition of small business or mi­ cro business in Government Code §2006.001(a)(1) and (2). Un­ The Government Code §2006.002(c) requires that if a proposed der the Insurance Code §2210.202, any general lines property rule may have an economic impact on small businesses or and casualty agent and any personal lines agent licensed by the micro businesses, state agencies must prepare as part of Department is authorized to submit applications to the Associ­ the rulemaking process an economic impact statement that ation for insurance coverage. As of August 31, 2009, 104,358 assesses the potential impact of the proposed rule on these individuals and 7,175 entities held these agent licenses. While businesses and a regulatory flexibility analysis that considers most of these agents, which are located throughout the state, alternative methods of achieving the purpose of the rule. The will not sell a policy for the Association, each is potentially sub­ Government Code §2006.001(a)(2) defines "small business" ject to certain of the requirements under this proposal. Almost as a legal entity, including a corporation, partnership, or sole all agents and agencies engaged in the business of insurance in proprietorship, that is formed for the purpose of making a profit; Texas operate as small or micro business as defined by the Gov­ is independently owned and operated, and has fewer than 100 ernment Code §2006.001(a)(2). The estimated costs for agents employees or less than $6 million in annual gross receipts. The required to comply with this proposal have been addressed in Government Code §2006.001(a)(1) defines "micro business" detail in the Public Benefit/Cost Note section of this proposal, similarly to "small business" but specifies that such a business

35 TexReg 194 January 8, 2010 Texas Register and these costs apply to any agent that qualifies as a small or nation and, if required, proof of flood insurance coverage if avail­ micro business. able, and to report possession of this proof to the Association on the application for insurance. To be meaningful requirements, Agent compliance with §5.4903 and §5.4904. The Department the proof must be subject to later verification. Both the statutory has determined that, based on the cost note analysis for agent requirements in the Insurance Code §2210.202 and §2210.203 compliance with proposed §5.4903 (declination of coverage re­ and the requirements in proposed §5.4903 and §5.4904 are inte­ quirements) and §5.4904 (flood insurance requirements), the gral to implementing the Legislature’s determination that the pro­ proposal may have an adverse economic impact on those agents vision of windstorm and hail insurance is necessary for the eco­ that elect to sell Association insurance coverage. In accordance nomic welfare of the state and its inhabitants; and that the lack with the Government Code §2006.002(c-1), the Department has of such insurance in the state’s seacoast territories would se­ determined that even though proposed §5.4903 and §5.4904 verely impede the orderly growth and development of the state. may have an adverse economic effect on agents operating as These requirements, therefore, are important to and protective small or micro businesses that elect to sell Association insur­ of the economic welfare of the inhabitants in all areas of this ance coverage and that are, therefore, required to comply with state and those in the V Zones. Therefore, the Department has the requirements in these two proposed sections, the Depart­ determined, in accordance with §2006.002(c-1) of the Govern­ ment is not required to prepare a regulatory flexibility analysis ment Code, that because the purpose of the Insurance Code as required in §2006.002(c)(2) of the Government Code for the §2210.202 and §2210.203 and proposed §5.4903 and §5.4904 following reasons. First, agents operating as small or micro busi­ is to protect the economic welfare of the state and its inhabi­ nesses are not required by statute or by this proposed rule to tants, there are no additional regulatory alternatives to proposed sell Association insurance coverage. Therefore, those small and §5.4903 and §5.4904 that will sufficiently protect the economic micro businesses that sell Association insurance coverage do welfare of the state and its inhabitants. so at their own choice, and as a result, agree to bear the addi­ tional costs required for compliancewiththisproposal. Thecosts As detailed in the Public Benefit/Cost Note part of this proposal, outlined in the Public Benefit/Cost Note section of this proposal there are no other costs to agents as a result of this proposal. provide sufficient cost information for agents operating as small Therefore, there is no further adverse impact on agent small or or micro businesses to make an informed business decision on micro businesses as a result of this proposal. whether to sell Association insurance coverage. Commercial Property Owner Applicants and Policyholders. The Secondly, §2006.002(c)(2) of the Government Code requires a Association provides windstorm and hail insurance on commer­ state agency, before adopting a rule that may have an adverse cial structures. The Association had 13,931 non-dwelling insur­ economic effect on small or micro businesses, to prepare a reg­ ance policies written as of September 30, 2009. The Associa­ ulatory flexibility analysis that includes the agency’s considera­ tion does not collect information concerning whether a business tion of alternative methods of achieving the purpose of the pro­ would qualify as a small or micro business under the Govern­ posed rule. Section 2006.002(c-1) of the Government Code re­ ment Code §2006.001(a)(1) and (2). The Department estimates quires that the regulatory analysis "consider, if consistent with the number of small and micro businesses in the designated the health, safety, and environmental and economic welfare of catastrophe area to be at least 50 percent of the almost 14,000 the state, using regulatory methods that will accomplish the ob­ non-dwelling structures insured through the Association, or ap­ jectives of applicable rules while minimizing adverse impacts proximately 7,000 businesses. The estimated costs of compli­ on small businesses." Therefore, an agency is not required to ance with this proposal for applicants and policyholders, includ­ consider alternatives that, while possibly minimizing adverse im­ ing commercial policyholders, purchasing Association insurance pacts on small and micro businesses would not be protective of coverage are addressed in detail in the Public Benefit/Cost Note the health, safety, and environmental and economic welfare of section of this proposal, and those costs are equally applicable to the state. any commercial applicant or policyholder that qualifies as a small or micro business under the Government Code §2006.001(a)(1) As specified in §2210.001 of the Insurance Code, the Legisla­ and (2). ture has determined that the provision of windstorm and hail in­ surance is necessary for the economic welfare of the state and Proposed §5.4905 minimum retained premium requirement. its inhabitants; and that the lack of such insurance in the state’s The Department has determined that proposed §5.4905 may seacoast territories would severely impede the orderly growth have an adverse economic impact on the small and micro busi­ and development of the state. The Association was created by nesses that elect to purchase Association insurance coverage. the Legislature and serves as a residual insurer of last resort Proposed §5.4905 provides that except as otherwise provided for windstorm and hail insurance coverage in the catastrophe in §5.4905, the minimum retained premium on an Association area designated by the Commissioner under the Insurance Code policy issued on an annual basis must be the premium amount §2210.005. The Insurance Code §2210.202 declination require­ equal to the greater of 180 days of the annual policy term or ment ensures that the Association operates as a market of last $100. It further provides that the minimum retained premium resort. The Insurance Code §2210.203 requirement, concerning shall be fully earned on the effective date of the policy, and flood insurance coverage if available, addresses the economic any unearned premium in excess of the minimum retained welfare of those persons in the V Zones, because the Associa­ premium shall be refunded to the policyholder pro-rata. The tion’s windstorm and hail insurance policy specifically excludes adverse economic impact on small or micro businesses results losses resulting from storm waves and other flood events. The from an reduced refund should the policyholder cancel a policy purchase of flood insurance coverage would provide affected under certain conditions as specified in §5.4905, because upon persons with a means of recovery in the event of a loss caused cancellation of the policy by the insured, the Association shall by storm waves. refund the unearned premium, less any minimum retained pre­ mium set forth in the plan of operation. The purpose of the $100 As a means of implementing these requirements, the Insurance minimum retained premium is to help the Association to recover Code §2210.202(b) requires the agent to possess proof of decli­ the overhead costs incurred in initially writing and servicing a

PROPOSED RULES January 8, 2010 35 TexReg 195 policy as well as to recover the additional processing expenses timates the number of small and micro businesses subject to this that will be incurred whenever coverage under the policy is requirement is estimated at less than 10 percent of the almost canceled. As proposed in §5.4905, the $100 minimum retained 14,000 non-dwelling structures insured through the Association, premium would apply when the 180-day statutory minimum or no more than 1,400 businesses. Section 2210.203(a-1) of the retained premium required by the Insurance Code §2210.204(e) Insurance Code prohibits the Association from insuring a struc­ does not apply to a cancellation by the insured, or the annual ture unless it has flood insurance coverage if the structure is con­ policy premium is less than $200. Therefore, the Department, structed, altered, remodeled, or enlarged, on or after Septem­ in accordance with the Government Code §2006.002(c-1), has ber 1, 2009 and any part of the property is located in Zone V or considered the following alternative methods of achieving the another similar zone with an additional hazard associated with purpose of the proposed rule: (i) reduce or eliminate the amount storm waves as, defined by the National Flood Insurance Pro­ of the minimum retained premium for small or micro businesses; gram (NFIP). The Insurance Code Section 2210.203(a-1) does or (ii) calculate the exact cost of the minimum retained premium not apply if flood insurance is not available for the structure. Pro­ related to the cancellation of the small or micro business policy. posed §5.4904(b) includes the statutory prohibition. As a re­ sult of this prohibition, small and micro businesses that meet the The Department has determined that the alternatives to reduce statutorily specified criteria must purchase flood insurance in or­ the amount of the minimum retained premium or eliminate the der to purchase windstorm and hail coverage through the Asso­ minimum retained premium for small or micro businesses are ciation. As stated in the Public Benefit/Cost Note part of this pro­ not economically practical for the Association. First, implemen­ posal, the cost associated with the requirement to purchase flood tation of either of these alternatives would require identification insurance results from the requirement specified in the insurance of a particular business as a small or micro business. The As­ Code §2210.203(a-1) and not from the enforcement or admin­ sociation would have to collect, maintain and verify information istration of proposed §5.4904. Also, as indicated in the Public related to the small or micro business. The Association would Benefit/Cost Note part of this proposal, the type of coverage re­ then have to confirm this information. This creates an additional quired under proposed §5.4904(d) is necessary for compliance cost. This cost would be in addition to the overhead costs in­ with the Insurance Code §2210.203(a-1) requirement that the curred in initially writing and servicing a policy as well as to re­ property must have flood insurance if the flood insurance cov­ cover the additional processing expenses that will be incurred erage is available. The Department’s proposal incorporates the whenever coverage under the policy is canceled that the mini­ statutory requirement to purchase flood insurance, if available, mum premium is intended to offset. Because of the need to re­ in order to obtain coverage from the Association in certain spec­ coup the cost of operational expenses, including the additional ified areas and other provisions that are necessary for compli­ cost of verifying the small or micro businesses, the Association ance with this statutory requirement. The Department has de­ would pass these costs on to other Association policyholders, termined that the requirement to purchase flood insurance under including other small and micro businesses, in the form higher the statutorily specified conditions is a legislative mandate as a premiums. result of the enactment of the Insurance Code §2210.203(a-1) The Department has determined that the alternative to calculate in HB 4409. Additionally, as specified in §2210.001 of the Insur­ the exact cost of the minimum retained premium related to the ance Code, the Legislature has determined that the provision of cancellation of a particular small or micro business policy would windstorm and hail insurance is necessary for the economic wel­ also be economically impractical. The second, alternative is sim­ fare of the state and its inhabitants and that the lack of such in­ ilar to the first. The Association would have to verify that the surance in the state’s seacoast territories would severely impede business was a small or micro business, but then the Associa­ the orderly growth and development of the state. Therefore, the tion would have to calculate the exact overhead cost associated Department has determined, in accordance with the "HB 3430 with that policy. The expense of calculating the actual cost of a Small Business Impact Guidelines" by the Texas Attorney Gen­ single cancellation, considering labor and disruption to the As­ eral, April 2008, that the requirements under proposed §5.4904, sociation’s work flow, would generate additional costs that would including the requirement to purchase flood insurance and the increase the unearned premium amount to be collected from the requirements that are necessary for compliance with the statu­ small or micro business. This could increase the minimum pre­ tory requirement to purchase flood insurance, are per se con­ mium amount to be over $100. If the minimum premium were sistent with protecting the economic welfare of the state. As a limited to $100, the Association would pass these costs on to result, it is not necessary that the Department consider alterna­ other Association policyholders, including other small and micro tive regulatory methods as required by the Government Code businesses, in the form higher premiums. §2006.002(c). Thus, while these alternatives could reduce the immediate ad­ The Department has determined that no private real property in­ verse economic impact to small and micro businesses result­ terests are affected by this proposal and that this proposal does ing from the $100 minimum retained premium, the alternatives not restrict or limit an owner’s right to property that would other­ are not viable because they would result in increased costs to wise exist in the absence of government action and, therefore, the Association that would be passed on to other policyholders, does not constitute a taking or require a takings impact assess­ including other small and micro business. These costs would ment under the Government Code §2007.043. be shifted to the Association’s other policyholders in the form of REQUEST FORPUBLICCOMMENTS higher premiums. Most of the Association’s policyholders are homeowners. The Department has determined that this type of To be considered, written comments on the proposal must be cost shifting is not practical or reasonable. submitted no later than 5:00 p.m. on February 8, 2010, to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Proposed §5.4904 flood insurance coverage. The Department Texas Department of Insurance, P.O. Box 149104, Austin, Texas has determined that proposed §5.4904 may have an adverse 78714-9104. An additional copy of the comment must be si­ economic impact on the small and micro businesses that elect to multaneously submitted to Marilyn Hamilton, Associate Com­ purchase Association insurance coverage. The Department es­ missioner, Property and Casualty Program, Mail Code 104-PC,

35 TexReg 196 January 8, 2010 Texas Register Texas Department of Insurance, P.O. Box 149104, Austin, Texas and duties of the Texas Department of Insurance under the 78714-9104. Insurance Code and other laws of the state. The Commissioner will consider the adoption of the proposed CROSS REFERENCE TO STATUTES amendments in a public hearing under Docket No 2711, sched­ The following statutes are affected by this proposal: uled for January 19, 2010, at 10:00 a.m., in Room 100 of the William P. Hobby, Jr., State Office Building, 333 Guadalupe Rule - Statute Street, Austin, Texas. Written and oral comments presented at §5.4902 - Insurance Code §§2210.151, 2210.202, and 2210.203 the hearing will be considered. §5.4903 - Insurance Code §2210.202 STATUTORY AUTHORITY §5.4904 - Insurance Code §2210.202 and §2210.203 Sections 5.4902 - 5.4908 and §5.4911 are proposed under the Insurance Code §§38.002, 38.003, 2210.003, 2210.008, §5.4905 - Insurance Code §2210.204 2210.151, 2210.152, 2210.202, 2210.203, 2210.204, 2210.251, §5.4906 and §5.4907 - Insurance Code §2210.251 and 2210.258, and 36.001; and Section 46, HB 4409, 81st Legisla­ §2210.258 ture, 2009, Regular Session. The Insurance Code §38.002(b) requires each insurer to file with the Department a copy of the §5.4908 - Insurance Code §2210.008 insurer’s residential property insurance underwriting guidelines §5.4911 - Insurance Code §§38.002, 38.003, 2210.003, and further to update its filed guidelines each time they are 2210.151 and 2210.152 changed. Section 38.003(c) authorizes the Department to obtain a copy of an insurer’s underwriting guidelines that are not §5.4902. Additional Requirements. subject to the requirement in §38.002. Section 2210.003(13) (a) This section, §§5.4903 - 5.4908, and §5.4911 of this di­ defines Texas windstorm and hailinsurancetomeandeductible vision (relating to Declination of Coverage; Flood Insurance; Min­ insurance against direct loss to insurable property incurred imum Retained Premium; Certificate of Compliance Approval Pro­ as a result of windstorm or hail, as those terms are defined gram; Certificate of Compliance Transition Program; Alter and Alter­ and limited in policies and forms approved by the Department. ation; and Insurance Policy Forms, Endorsements, Manual Rules, Ap­ Section 2210.008(b) authorizes the Commissioner to adopt plication Forms, and Underwriting Guidelines, respectively) shall be reasonable and necessary rules in the manner prescribed in considered to be a part of the Texas Windstorm Insurance Association’s Subchapter A, Chapter 36, Insurance Code. Section 2210.151 plan of operation. These sections shall control over any conflicting pro­ authorizes the Commissioner to adopt the Association’s plan vision in §5.4001 of this subchapter (relating to Plan of Operation). of operation to provide Texas windstorm and hail insurance coverage in the catastrophe area by rule. Section 2210.152 (b) In addition to the requirements set forth in §5.4001 of this provides that the Association’s plan of operation provide for the subchapter, including §5.4001(d)(2)(E) of this subchapter, prior to the efficient, economical, fair, and nondiscriminatory administration issuance of an Association policy on insurable property, the Associa­ of the Association and include both underwriting standards and tion must have received an application for a new or renewal Association other provisions considered necessary by the Department to policy that contains a statement that the agent possesses proof of: implement the purposes of this chapter. Section 2210.202(a) (1) a declination of coverage from an authorized insurer requires that a declination be defined in the Association’s plan writing windstorm and hail insurance as provided in §5.4903 of this of operation. Section 2210.202(b) requires the agent to possess division; and proof of the declination described by §2201.202(a) and proof of flood insurance coverage or unavailability of that coverage as (2) if applicable, flood insurance that was obtained for the described by §2210.203(a-1). Section 2210.203(a-1) requires property to be insured as provided for in §5.4904 of this division or the the purchase of flood insurance in Zone V or another similar unavailability of flood insurance for such property. zone with the additional hazard associated with storm waves (c) The following words and terms when used in this division as defined by the NFIP. Section 2210.204(d) and (e) require shall have the following meanings unless the context clearly indicates that the minimum retained premium be set forth in the plan of otherwise: operation; and that the plan of operation specify events that reflect a significant change in the exposure, or the policyholder, (1) Association--The Texas Windstorm Insurance Associ­ concerning the insured property that would be exempt from the ation. minimum retained premium requirement. Section 2210.251(a) (2) Commissioner--The Texas Commissioner of Insurance. authorizes the plan of operation to include an approval program for determining whether a structure is eligible for Association (3) Department--The Texas Department of Insurance. insurance coverage. Section 2210.251(f) establishes that struc­ (d) The Association shall implement an agent audit procedure tures insured by the Association as of September 1, 2009, may to verify that agents possess and maintain proof of the declination and continue to be considered insurable property notwithstanding flood insurance as required under §5.4903 of this division and, if ap­ the requirements of §2210.251. Section 2210.258 provides plicable, §5.4904 of this division. that notwithstanding any other provision in the Insurance Code Chapter 2210, to be eligible for insurance through the Associa­ (e) In addition to the requirement in subsection (d) of this sec­ tion, all construction, alteration, remodeling, enlargement, and tion, the Association shall on or before June 1, 2010, submit to the repair of, or addition to, any structure located in the catastrophe commissioner for approval a proposal to ensure compliance with the area that is begun on or after June 19, 2009, must be performed requirements set forth in §5.4903 and §5.4904 of this division. in compliance with the applicable building code standards, as (f) The Association on or before June 1, 2010, shall submit to set forth in the Association’s plan of operation. Section 36.001 the commissioner a proposal to amend the plan of operation to establish provides that the Commissioner of Insurance may adopt any a procedure for suspending the acceptance of new or renewal insurance rules necessary and appropriate to implement the powers applications from an agent if the Association determines that the agent

PROPOSED RULES January 8, 2010 35 TexReg 197 failed to comply with this section and §5.4903 and §5.4904 of this divi­ §5.4904. Flood Insurance. sion. The proposal must also include a procedure for an agent to obtain a review of the suspension. (a) The following words and terms when used in this section shall have the following meanings unless the context clearly indicates §5.4903. Declination of Coverage. otherwise: (a) To be eligible to obtain new or renewal windstorm and hail (1) Actual cash value--The replacement cost of an insured insurance coverage from the Association for a property, an applicant or property at the time of loss, less the value of physical depreciation for applicant’s agent must have received at least one declination of cover­ the property. age for the property from an insurer authorized to engage in the busi­ (2) The terms constructed, altered, remodeled, and en­ ness of, and writing, property insurance providing windstorm and hail larged--Refer to any building activity or action on a structure that insurance coverage in the first tier coastal counties. would require the insured or applicant to obtain a certificate of com­ (b) The following words and terms when used in this division pliance, prior to the structure being considered to be an insurable shall have the following meanings unless the context clearly indicates property eligible for insurance coverage from the Association. otherwise: (3) Repair--The reconstruction or restoration of a structure (1) Authorized insurer and insurer authorized--An insurer that is deteriorated or damaged. operating under a certificate of authority issued by the Texas Depart­ (b) The Association may not issue or renew a policy unless ment of Insurance. evidence is shown that a flood insurance policy is in effect for the in­ (2) Declination-­ surable property if: (A) A refusal to offer or a refusal to renew coverage for (1) the structure is constructed, altered, remodeled, or en­ the perils of windstorm and hail from an authorized insurer; or larged on or after September 1, 2009; (B) An offer of a policy that includes coverage for the (2) all or any part of the insurable property is located in perils of windstorm and hail that is not substantially equivalent to the any of the following zones designated by the National Flood Insurance coverage offered by the Association. A policy is not substantially Program (NFIP): equivalent to an Association policy if the policy that is being offered (A) Zone V; does not provide the basic coverage(s) that the applicant is seeking. For example, a policy is not substantially equivalent if the policy pays for (B) Zone VE; damage to covered property on an actual cash value basis compared to (C) Zones V1 - V30; and an Association policy that pays for damage to covered property on a replacement cost basis or a policy has a minimum windstorm and hail (3) flood insurance is available for the insurable property deductible that is in excess of the deductible the applicant is seeking from the NFIP. and that is available through the Association. (c) This section does not apply to: (3) Writing--Offering new or renewal coverage. (1) the repair of a structure; and (c) An agent shall maintain and submit to the Association at its (2) insurable corporeal movable property located on or request documentation that indicates proof of the declination required above the third floor of a structure. under subsection (a) of this section and that was relied upon by the agent in completing the Association’s application for insurance cover­ (d) The flood insurance policy required under subsection (b) age as set forth in §5.4902(b) of this division (relating to Additional of this section must provide the following coverage: Requirements). The proof must document the name of the authorized (1) if replacement cost coverage is available through the insurer that declined to offer coverage and the date of the declination. NFIP for the property to be insured by the Association, the flood in­ Documentation must be maintained either in writing or in an electronic surance policy must provide coverage for the property in an amount at format that may be printed by the agent. Documentation must be main­ least equal to the lesser of: tained for a period of not less than five years following the date of the submission of the application for Association coverage. The Associ­ (A) ninety percent of the amount of insurance for the ation may also allow an agent to submit the requested documentation property insured under the Association policy; or electronically in a manner that is acceptable to the Association. (B) the maximum coverage amount available under the (d) If the Association determines that a structure does not have NFIP for the property; or a declination as required by this section, the Insurance Code §2210.202, (2) if replacement cost coverage is not available through and §5.4902(b) of this division, the Association may cancel insurance the NFIP for the property to be insured by the Association, the flood coverage on the structure. The Association shall provide the policy­ insurance policy must provide coverage for the property in an amount holder and the policyholder’s agent with written notice of the cancel­ at least equal to the lesser of: lation not later than the 30th day before the effective date of the can­ cellation. In accordance with §5.4001(d)(3)(A)(ii) of this subchapter (A) ninety percent of the actual cash value for the prop­ (relating to Plan of Operation), the notice of cancellation must state erty; or the reason for cancellation and provide the policyholder with notice of (B) the maximum coverage amount available under the their right to appeal the Association’s action. If the policyholder, or NFIP for the property. the policyholder’s agent, provides the Association prior to the date of the cancellation of the policy with proof of a declination as required (e) A flood insurance policy required under subsection (b) of by this section, the Insurance Code §2210.202, and §5.4902(b) of this this section must be maintained throughout the entire period the Asso­ division, the Association shall rescind the cancellation notice and con­ ciation policy is in effect. tinue coverage under the policy.

35 TexReg 198 January 8, 2010 Texas Register (f) For purposes of this section, a flood insurance policy is con­ (2) the replacement of the Association policy with other sidered to be in effect upon application and presentment of payment of similar coverage in the voluntary market; the premium for the flood insurance policy to the NFIP or a participat­ (3) the removal of the item(s) insured under an Association ing "write your own insurance company" regardless of any applicable policy due to a total loss of the item(s), including demolition of the waiting period that may apply to the flood insurance policy. item(s); or (g) The agent shall maintain and submit to the Association at (4) the death of the policyholder. its request documentation demonstrating proof of the flood insurance coverage, or proof of the unavailability of flood insurance coverage re­ (c) An Association policy that is canceled and premium for quired under this section, that was relied upon by the agent in complet­ such policy is financed through a person authorized to finance premi­ ing the Association’s application for insurance coverage as set forth in ums under the Insurance Code Chapter 651 is subject to the following: §5.4902(b) of this division (relating to Additional Requirements). Ac­ (1) A $100 minimum retained premium applies, except as ceptable proof shall include a copy of the flood insurance policy dec­ provided for in paragraph (3) of this subsection. The $100 minimum larations page, or a copy of the flood insurance policy, or written or retained premium is fully earned on the effective date of the policy. The printable electronic evidence from the NFIP or the participating "write unearned premium in excess of the $100 minimum retained premium your own insurance company" that the flood insurance is unavailable shall be refunded to the premium finance company on a pro-rata basis. through the NFIP. The Association may specify additional types of doc­ umentation that may be used to demonstrate compliance with this sub­ (2) Except as provided for under subsection (b) of this sec­ section. Proof must be maintained either in writing or in an electronic tion, the named insured shall owe to the Association the unpaid balance format that may be printed by the agent. Documentation must be main­ of the minimum retained premium under subsection (a) of this section tained for a period of not less than five years following the date of the that is in excess of $100, and the named insured shall not be eligible submission of the application for Association coverage. The Associa­ for coverage until the balance is paid. tion may also allow the requested proof to be submitted electronically (3) Subsection (a) of this section applies to an Association in a manner that is acceptable to the Association. policy that the premium is financed for a person that was insured un­ (h) Each agent offering or selling a Texas windstorm and hail der a prior Association policy that was issued or renewed on or after insurance policy in an area subject to this section must offer NFIP flood November 1, 2009, and the premium for such policy was financed and insurance coverage to the prospective insured if that coverage is avail­ the policy was canceled within 180 days of the effective date of the able. policy. (i) If the Association determines that a structure does not (d) The Association shall maintain a list of all persons that are have flood insurance as required by this section, the Insurance Code subject to subsection (c)(2) of this section. The Association may pro­ §2210.203(a-1), and §5.4902(b) of this division, the Association vide information concerning a person who is on the list to an agent may cancel insurance coverage on the structure. The Association who is preparing an application for that person. The list may be shared shall provide notice of the cancellation not later than the 30th day with persons authorized by the department to engage in the business before the effective date of the cancellation. In accordance with of premium finance under the Insurance Code Chapter 651 and the de­ §5.4001(d)(3)(A)(ii) of this subchapter (relating to Plan of Opera­ partment. A person may be removed from the list if on petition by the tion), the notice of cancellation must state the reason for cancellation person to the Association, the Association determines that the cancel­ and provide the policyholder with notice of their right to appeal lation resulted due to one or more of the events set forth in subsection the Association’s action. If the policyholder, or the policyholder’s (b) of this section. agent, provides the Association prior to the date of the cancellation (e) The Association shall not issue a new or renewal policy to of the policy with proof of flood insurance coverage, or proof of the an applicant who is indebted to the Association on a prior Association unavailability of flood insurance coverage, as required by this section, policy. the Insurance Code §2210.203(a-1), and §5.4902(b) of this division, the Association shall rescind the cancellation notice and continue (f) The minimum retained premium shall not create or extend coverage under the policy. coverage beyond the policy’s effective cancellation date. A person making a payment on a balance due as provided under subsection (e) §5.4905. Minimum Retained Premium. of this section shall not be entitled to any additional coverage beyond (a) Except as provided in this section, the minimum retained the policy’s effective cancellation date. premium on an Association policy issued on an annual basis shall be the premium amount equal to the greater of 180 days of the annual (g) This section does not address or affect any requirement un­ policy term or $100. The minimum retained premium shall be fully der statute or rule concerning the qualifications or licensure of persons earned on the effective date of the policy. Unearned premium in excess engaging in the business of premium finance. of the minimum retained premium set forth in this subsection shall be §5.4906. Certificate of Compliance Approval Program. refunded pro-rata. (a) This section applies to each residential structure insured by (b) An Association policy canceled due to the reasons spec­ the Association under a policy that was issued in accordance with the ified in paragraphs (1) - (4) of this subsection is subject to the $100 approval process regulations initiated April 12, 2006 and continued to minimum retained premium. The minimum retained premium shall be be eligible for that coverage on September 1, 2009. fully earned on the effective date of the policy. Unearned premium in excess of the minimum retained premium set forth in this subsection (b) A person may continue to obtain insurance through the As­ shall be refunded pro-rata. sociation for a structure described in subsection (a) of this section sub­ ject to the following requirements. The insured must comply with: (1) A change in majority ownership of the insured property, including sale of the insured property to an unrelated party, or foreclo­ (1) the mandatory building code requirement specified in sure of the insured property; the Insurance Code §2210.258, effective June 19, 2009;

PROPOSED RULES January 8, 2010 35 TexReg 199 (2) the declination requirement specified in the Insurance §5.4911. Insurance Policy Forms, Endorsements, Manual Rules, Ap- Code §2210.202 and §5.4902 and §5.4903 of this division (relating to plication Forms, and Underwriting Guidelines. Additional Requirements and Declination of Coverage, respectively); (a) The Association shall submit insurance policy forms, en­ (3) If applicable, the flood insurance requirement specified dorsements, manual rules, and application forms to the department for in the Insurance Code §2210.203 and §5.4902 and §5.4904 of this di­ commissioner approval. vision (relating to Additional Requirements and Flood Insurance, re­ spectively); and (1) Each policy form, endorsement, manual rule, and ap­ plication form submission must include all information required by (4) all other Association underwriting requirements, in­ §5.9310 and §5.9320 of this chapter (relating to Property and Casualty cluding maintaining the structure in an insurable condition. Filing Transmittal Form and Required Information for the Preparation §5.4907. Certificate of Compliance Transition Program. and Submission of Policy Form, Endorsement, or Manual Rule (other than rating manual) Filings, respectively). (a) Except as provided in §5.4906 of this division (relating to Certificate of Compliance Approval Program) after 12:01 a.m. Septem­ (2) The department shall provide public notice of the sub­ ber 1, 2009, and until expiration of this section, an applicant may obtain mission not later than the 10th day after the filing is received by the de­ insurance through the Association for a residential structure without a partment. The notice, shall be posted on the department’s website and certificate of compliance if: in the Texas Register, and shall indicate that the submission is available for review at the Office of the Chief Clerk of the Texas Department of (1) within the 12-month period prior to the date of appli­ Insurance during the period the petition is pending. cation for Association coverage the structure has been insured on an annual basis under a property policy that included windstorm and hail (3) Not later than the 20th day after notice of the submis­ coverage; sion is posted as provided under paragraph (2) of this subsection, a person may request a public hearing on the submission. The request (2) the insurer that underwrote the policy on the structure: must be in writing and submitted to the commissioner through the Chief (A) discontinues providing windstorm and hail insur­ Clerk of the Texas Department of Insurance. ance under the policy; or (4) The department will provide not less than 10 days no­ (B) the insurer that underwrote the policy on the struc­ tice of a public hearing to consider a submission under this section. The ture discontinues providing residential property insurance in the por­ department may set a public hearing without a request under paragraph tion of the catastrophe area where the structure is located; and (3) of this subsection. Notice of the hearing shall be posted in the Texas Register. (3) the applicant complies with: (5) Written comments on the submission must be submitted (A) the mandatory building code requirement specified within 30 days after notice of the submission is posted as provided in the Insurance Code §2210.258, effective June 19, 2009; under paragraph (2) of this subsection, or on or before the date of a (B) the declination requirement specified in the Insur­ public hearing, if that date is later. ance Code §2210.202 and §5.4902 and §5.4903 of this division (relat­ (6) The commissioner shall approve or disapprove by or­ ing to Additional Requirements and Declination of Coverage, respec­ der any submission made under this section. The commissioner may tively); delegate this authority to department staff as the commissioner deems (C) if applicable, the flood insurance requirement spec­ necessary and appropriate. ified in the Insurance Code §2210.203 and §5.4902 and §5.4904 of this (b) The Association may not submit under this section any fil­ division (relating to Additional Requirements and Flood Insurance, re­ ing required to be made under Chapter 2210, Subchapter H, of the In­ spectively); and surance Code, including a filing required to be made under the Insur­ (D) all other Association underwriting requirements, ance Code §§2210.351, 2210.352, or 2210.361. including maintaining the structure in an insurable condition and (c) The commissioner shall not be required to approve or dis­ payment of premium. approve submitted items as a group. The commissioner may approve (b) Coverage issued under this section that expires prior to the some items and disapprove other items submitted; however, the com­ expiration of this section may be renewed one time during the duration missioner must approve or disapprove each form in its entirety without of the transition program provided the policyholder complies with all modification, and if the commissioner disapproves a form, the commis­ statutory requirements and Association underwriting requirements as sioner shall notify the Association of the reasons for such disapproval. provided in subsection (a)(3) of this section. Except as provided in this section, the Association may not use an in­ surance policy form, endorsement, manual rule, or application form (c) This section expires on August 31, 2011. No person may that has not been approved by the commissioner. obtain insurance through the Association under the certificate of com­ pliance transition program described in this section after August 31, (d) The Association may: 2011. (1) modify or withdraw a submission, in whole or in part, (d) Under an alternative certification being developed by the before it is approved or disapproved by providing written notice to the department, policyholders will be able to continue coverage on the department; structure through the Association after the transition program expires. (2) seek to amend an approved insurance policy form, en­ §5.4908. Alter and Alteration. dorsement, manual rule, or application form pursuant to the procedures set forth in subsection (a) of this section; and For purposes of the Insurance Code Chapter 2210 and this chapter, the term "alter" and "alteration" shall mean any modification to a structure (3) seek to withdraw an approved insurance policy form, that physically changes portions of the structure subject to wind forces endorsement, manual rule, or application form by requesting with­ without increasing the square footage of area of the structure.

35 TexReg 200 January 8, 2010 Texas Register drawal of the items pursuant to the procedures set forth in subsection The Office of Injured Employee Counsel (OIEC) proposes new (a) of this section. §276.6, concerning the Notice of Injured Employee Rights and Responsibilities in the Texas Workers’ Compensation System (e) Any submission pending on the date that this section takes (Notice of Rights and Responsibilities). This section is neces­ effect, shall be considered as being submitted on the date this section sary to implement Labor Code §404.109 as a result of House Bill takes effect. (HB) 673 that was passed by the 81st Texas Legislature, Regular (f) The commissioner may without further notice and hearing Session, 2009. Labor Code §404.109 requires the Public Coun­ approve without modification, in whole or in part, the Association’s in­ sel to adopt the Notice of Rights and Responsibilities in the form surance policy forms, endorsements, and manual rules that have been and manner prescribed by the Public Counsel, after consulta­ previously adopted by reference under this title, including the policy tion with the Commissioner of Workers’ Compensation, to be dis­ forms and manual rules that have been adopted on an emergency basis tributed by the Texas Department of Insurance, Division of Work­ under §5.4909 of this subchapter (relating to Policy Forms and Man­ ers’ Compensation (TDI-DWC). The Notice of Rights and Re­ ual Rules) and §5.4910 of this subchapter (relating to Cancellation and sponsibilities shall be consistent with the Texas Workers’ Com­ Minimum Retained Premiums). The commissioner may approve the pensation Act, Labor Code, Title 5 and not construed as estab­ previously adopted-by-reference forms to be effective as of the effec­ lishing an entitlement to benefits to which a claimant would oth­ tive date of this section. After the effective date of this section, the erwise not be entitled under the Labor Code. New §276.6 adopts Association may not use any previously adopted-by-reference insur­ by reference the current version of the Notice of Rights and Re­ ance policy forms, endorsements, or manual rules that have not been sponsibilities in the Workers’ Compensation System. approved by the commissioner pursuant to this section. Brian White, Deputy Public Counsel, has determined that for (g) The Association must submit its current residential and each year of the first five years the proposed section shall be commercial underwriting guidelines to the department within 10 days in effect there shall be no fiscal impact to state and local gov­ of the effective date of this section. The Association must submit any ernments as a result of the enforcement or administration of this amendments to its residential and commercial underwriting guidelines rule. There shall be no measurable effect on local employment not later than the 10th day after the date that the amended underwrit­ or the local economy as a result of the proposal. Any fiscal im­ ing guideline becomes effective. Underwriting guideline submissions pact, such as the cost to distribute the Notice of Rights and Re­ must include all information required by §5.9342 of this chapter (relat­ sponsibilities, is a result of HB 7 that was passed by the 79th ing to Filing Requirements). As used in this subsection, the term "un­ Texas Legislature, Regular Session, 2005 and HB 673 that was derwriting guidelines" means a rule, standard, guideline, or practice, passed by the 81st Texas Legislature, Regular Session, 2009. whether written, oral, or electronic, that is used by the Association or Mr. White has also determined that for each year of the first five its agent as required by the Association to determine whether to accept years the proposed new section is in effect the public benefit will or reject an application for coverage under a residential or commercial be that injured employees will continue to be educated on their Association insurance policy or to determine how to classify those risks rights and their responsibilities in the Texas Workers’ Compensa­ that are accepted for the purpose of determining a rate. tion System. OIEC’s rules will now reflect HB 673’s amendments (h) The Association must submit for approval its current ap­ to Labor Code §404.109. The Notice of Rights and Responsibil­ plication forms to the department within 10 days of the effective date ities will serve as a valuable reference that is of no cost to the of this section. The Association may continue to use the application injured employee. forms submitted under this subsection unless the forms are disapproved Mr. White has determined that there is no cost associated with by the Commissioner. the proposed section. The proposed section will not have an This agency hereby certifies that the proposal has been reviewed adverse economic effect on small and micro businesses, and by legal counsel and found to be within the agency’s legal author­ it is neither legal nor feasible to waive the requirements of the ity to adopt. proposed new section for small or micro-businesses. As required by the Government Code §2006.002(c), OIEC has Filed with the Office of the Secretary of State on December 18, determined that the proposal will not have an adverse economic 2009. affect on small or micro-business. Compliance with Labor Code TRD-200905982 §409.005 is required for Texas employers participating in the workers’ compensation system. Gene C. Jarmon General Counsel and Chief Clerk OIEC has determined that this proposal is not a "major envi­ Texas Department of Insurance ronmental rule" as defined by Government Code §2001.0225. Earliest possible date of adoption: February 7, 2010 Therefore a regulatory flexibility analysis is not required. For further information, please call: (512) 463-6327 OIEC has determined that no private real property interests are affected by this proposal, and this proposal does not restrict or ♦ ♦ ♦ limit an owner’s right to property that would otherwise exist in the absence of government action. Therefore, this proposal does PART 6. OFFICE OF INJURED not constitute a taking or require a takings impact assessment EMPLOYEE COUNSEL under the Government Code §2007.043. To be considered, written comments on the proposal must be CHAPTER 276. GENERAL ADMINISTRATION submitted no later than 5:00 p.m. on February 7, 2010, to SUBCHAPTER A. GENERAL PROVISIONS Brian White, Deputy Public Counsel, Office of Injured Employee Counsel, Mail Code 50, 7551 Metro Center Drive, Austin, Texas 28 TAC §276.6 78744. A request for a public hearing should be submitted separately to the Deputy Public Counsel.

PROPOSED RULES January 8, 2010 35 TexReg 201 Section 276.6 is proposed pursuant to Labor Code §§404.006, (2) Texas Department of Insurance, Division of Workers’ 404.109, and 409.005. Labor Code §404.006 provides the Compensation website at www.tdi.state.tx.us or at the physical location Public Counsel rulemaking authority to adopt rules; §404.109 located at 7551 Metro Center Drive, Austin, Texas 78744. provides for the Public Counsel to adopt and provide the (d) This section may not be construed as establishing an enti­ Commissioner of Workers’ Compensation a notice of injured tlement to benefits to which the claimant is not otherwise entitled under employee rights and responsibilities for distribution by the Texas Labor Code Title 5. Department of Insurance, Division of Workers’ Compensation; and §409.005 establishes the procedure for filing a report of This agency hereby certifies that the proposal has been reviewed injury, the format to be used, and authorizes the adoption of by legal counsel and found to be within the agency’s legal author­ rules that must be included in the report and implementation of ity to adopt. electronic filing of reports. Filedwiththe Office of the Secretary of State on December 28, The following sections are affected by this proposal: Labor Code §§404.006, 404.109, and 409.005. 2009. §276.6. Notice of Injured Employee Rights and Responsibilities. TRD-200906034 Brian M. White (a) The Public Counsel adopts by reference the Notice of Deputy Public Counsel Injured Employee Rights and Responsibilities in the Texas Workers’ Compensation System (Notice) in accordance with Labor Code Office of Injured Employee Counsel §404.109. Earliest possible date of adoption: February 7, 2010 For further information, please call: (512) 804-4182 (b) The Notice shall be distributed by the Texas Department of Insurance, Division of Workers’ Compensation (Division). ♦ ♦ ♦ (c) The Notice may be obtained from: (1) the Office of Injured Employee Counsel’s website at www.oiec.state.tx.us or at the physical location located at 7551 Metro Center Drive, Austin, Texas 78744; or

35 TexReg 202 January 8, 2010 Texas Register TITLE 1. ADMINISTRATION establishes limitations on discovery and establishes provisions for the admission of evidence. New §165.23 provides who may PART 7. STATE OFFICE OF represent the parties at the hearing. New §165.25 sets forth the guidelines that the judge will use to issue a determination after ADMINISTRATIVE HEARINGS the hearing. New §165.27 sets forth the guidelines for filing ob­ jections to the determination issued by the judge. New §165.29 CHAPTER 165. RULES OF PROCEDURE FOR sets forth the procedure that the judge must follow if the property APPRAISAL REVIEW BOARD APPEALS owner is delinquent on taxes. 1 TAC §§165.1, 165.3, 165.5, 165.7, 165.9, 165.11, 165.13, No comments regarding the new chapter were received during 165.15, 165.17, 165.19, 165.21, 165.23, 165.25, 165.27, the 30-day comment period or at the public hearings held on 165.29 December 8, 2009, in Austin, Texas or on December 9, 2009, in Houston, Texas. The State Office of Administrative Hearings (SOAH) adopts new Chapter 165, §§165.1, 165.3, 165.5, 165.7, 165.9, 165.11, The new chapter is adopted under Government Code, Chapter 165.13, 165.15, 165.17, 165.19, 165.21, 165.23, 165.25, 2003, §2003.050 and §2003.903, which authorize SOAH to 165.27, and 165.29, concerning Rules of Procedure for Ap­ establish procedural rules for its hearings, and Government praisal Review Board Appeals. Sections 165.1, 165.3, 165.5, Code, Chapter 2001, §2001.004, which requires agencies to 165.7, 165.9, 165.11, 165.15, 165.17, 165.19, 165.21, 165.23, adopt rules of practice setting forth the nature and requirements 165.27, and 165.29 are adopted without changes, and §165.13 of formal and informal procedures. and §165.25 are adopted with minor changes to the proposed The new chapter affects the Government Code, Chapters 2001 text as published in the November 13, 2009, issue of the and 2003, and Tax Code, Chapter 41. Texas Register (34 TexReg 7935). Specifically, §165.13(a) was modified to reflect that the three-year pilot project concludes on §165.13. Number of Appeals. December 31, 2012, rather than December 31, 2013. Section (a) In order to expeditiously determine the appeals using avail­ 165.25(b)(4) was modified to correct a typographical error. able resources, the chief judge may limit the number of appeals to The word "of" between the words district and property has SOAH under this chapter during the three-year period from January been changed to "or." The new chapter implements HB 3612 1, 2010, through December 31, 2012, to a total of 3,000 appeals. The of the 81st Legislature, which amended Chapter 2003 of the number of appeals for any calendar year during that period may be lim­ Government Code by adding Subchapter Z, creating a pilot ited to 1,000. program that allows taxpayer appeals from certain appraisal (b) If the chief judge determines that available resources re­ review board determinations in certain counties to be heard by quire that appeals be limited, the appeals that may be filed from Bexar, SOAH. Cameron, El Paso, Harris, Tarrant, and Travis Counties will be deter­ Specifically, the new chapter clarifies the types and number of mined based on the total number of lawsuits filed concerning appraisal appeals that may be filed and establishes procedures for the review board orders during 2008 in each respective county as a per­ hearings on such appeals. New §165.1 sets forth the statement centage of the total number of lawsuits filed in all of those counties of purpose and scope for the new chapter. New §165.3 sets during 2008. forth the definition of words and terms used in the new chapter. (c) If appeals are limited during any of the years designated New §165.5 sets forth the applicability of other SOAH rules that in subsection (a) of this section, the percentage of appeals from each apply to this new chapter. New §165.7 sets forth the board or­ county, as determined from the formula in subsection (b) of this section, ders that may be appealed under this new chapter. New §165.9 is as follows: Bexar, 12%; Cameron, 1.0%; El Paso, 2.0%; Harris, sets forth the procedures for the property owner to file an ap­ 63%; Tarrant, 14%; and Travis, 8.0%. peal of a board order. New §165.11 sets forth the procedures for the chief appraiser for the appraisal district to refer the appeal to (d) The appeals will be accepted by SOAH in the order that SOAH. New §165.13 sets forth procedures for the chief judge to they are received. determine if the number of appeals should be limited and estab­ (e) If appeals are to be limited for any year, the chief judge lishes the percentages of overall appeals to be accepted from will notify the chief appraiser of each appraisal district of the number each county if appeals are limited. New §165.15 provides for of allowable appeals from the respective counties. A chief appraiser designation of an administrative law judge. New §165.17 pro­ may not accept any additional appeals by property owners of board vides when a judge shall issue the prehearing order setting the orders after a county has received its allowable number of appeals for case for hearing and the required contents of that order. New the applicable year. §165.19 establishes the venue for the hearings. New §165.21 §165.25. Determination.

ADOPTED RULES January 8, 2010 35 TexReg 203 (a) As soon as practicable, but no later than the 30th day after PART 2. TEXAS DEPARTMENT OF the date the hearing is concluded, the judge shall issue a determination and send a copy to the property owner and the chief appraiser. BANKING (b) The judge’s determination: CHAPTER 25. PREPAID FUNERAL (1) must include a determination of the appraised or market CONTRACTS value, as applicable, of the property that is the subject of the appeal; SUBCHAPTER A. CONTRACT FORMS (2) must contain a brief analysis of the judge’s rationale for, and set out the key findings in support of, the determination, but is not 7 TAC §§25.1 - 25.5, 25.7 required to contain a detailed discussion of the evidence admitted or The Finance Commission of Texas (the commission), on behalf the contentions of the parties; of the Texas Department of Banking (the department), adopts (3) may include any remedy or relief a court may order un­ amendments to §25.1, concerning Definitions; §25.2, concern­ der Texas Tax Code, Chapter 42, in an appeal relating to the appraised ing Am I Required to Use the Model Contract and Model Waiver; or market value of property, other than an award of attorney’s fees un­ §25.3, concerning What Requirements Apply to a Non-Model der Texas Tax Code, §42.29; and Contract or Waiver; §25.4, concerning What Are the Plain Lan­ guage Requirements for a Non-Model Contract or Waiver; §25.5, (4) shall specify whether the appraisal district or property concerning How Do I Obtain Approval of a Non-Model Contract owner is required to pay the costs of appeal and the amount of those or Waiver; and §25.7, concerning Casket and Outer-Burial Con­ costs. tainers. Amendments to §§25.2, 25.3 and 25.5 are adopted with (c) If the judge determines that the appraised or market value, changes to the text as published in the October 30, 2009, is­ as applicable, of the property that is the subject of the appeal is nearer sue of the Texas Register (34 TexReg 7451). Amendments to to the property owner’s opinion of the appraised or market value, as §§25.1, 25.4 and 25.7 are adopted without changes and will not applicable, of the property as stated in the notice of appeal submitted be republished. by the property owner than the value determine by the board: Changes made to the proposed rules are in response to public (1) SOAH shall refund the property owner’s filing fee; comments received orally andinwriting andare describedin the summary of comments and responses section of the preamble. (2) the appraisal district, on receipt of a copy of the deci­ Other changes were made to correct typographical or grammat­ sion, shall pay the costs of the appeal as specified in the decision; and ical errors. (3) the chief appraiser shall correct the appraised or market The amended rules are adopted to update and conform the rules value, as applicable, of the property as shown in the appraisal roll to related to prepaid funeral contract forms to new statutory provi­ reflect the judge’s determination. sions. House Bill (HB) 3762, adopted by the 81st Texas Legis­ (d) If the judge determines that the appraised or market value, lature in 2009, amended Finance Code, Subchapters A through as applicable, of the property that is the subject of the appeal is not F of Chapter 154, and added a new Subchapter C-1. nearer to the property owner’s opinion of the appraised or market value, Pre-proposal consultation with stakeholders. as applicable, of the property as stated in the property owner’s notice of appeal, than the value determined by the board: The department provided a draft of proposed revisions to §§25.1 - 25.5 and §25.7, along with a new sample insurance-funded (1) SOAH shall retain the property owner’s filing fee; contract and a new sample trust-funded contract to potentially (2) The chief appraiser shall correct the appraised or mar­ affected permit holders, consumer representatives, industry as­ ket value, as applicable, of the property as shown in the appraisal roll sociations and attorneys known to practice before the depart­ to reflect the judge’s determination if the value as determined by the ment in this area. The department invited those parties to submit judge is less than the value as determined by the board; and comments in writing and/or orally at a meeting which was held on August 31, 2009. The department received written comments, (3) the property owner shall pay the difference between the and twenty-nine people attended the August meeting, in addi­ costs of the appeal as specified in the determination and the property tion to department staff. The department made extensive revi­ owner’s filing fee. sions to the sample contract forms and draft rules in response to the comments. The department submitted the revised contract Filed with the Office of the Secretary of State on December 28, forms and rules to all the original recipients. Once again the 2009. department solicited and received both written comments and oral comments at a second meeting held September 21, 2009. TRD-200906033 Twelve people attended the September meeting, in addition to Kerry D. Sullivan department staff. The department made further revisions based General Counsel on those comments. State Office of Administrative Hearings After the meetings and revisions, some industry representatives Effective date: January 17, 2010 who use insurance-funded prepaid contracts still had three un­ Proposal publication date: November 13, 2009 resolved concerns. First, they wanted to reduce printing costs For further information, please call: (512) 475-4931 by having the contract pages sequenced differently. Second, they objected to a new requirement that two disclosures be ini­ ♦ ♦ ♦ tialed by the purchaser. Third, they objected to the placement TITLE 7. BANKING AND SECURITIES of each disclosure in the pertinent section of the contract rather than putting them all on one page.

35 TexReg 204 January 8, 2010 Texas Register In response to these concerns, the department assembled a refund of all their premiums when they cancelled their contract. small focus group of persons who were representative of po­ Since March 2002, insurance-funded contracts have required a tential prepaid funeral contract purchasers and asked the group disclosure about the amount of premiums paid and about cancel­ to review two different versions of the sample insurance-funded lation refunds, but the purchasers have not been required to ini­ contract. One version was in the layout and page sequencing tial these disclosures. As of March 2002, the contracts also have preferred by the department. The other was in the layout and required initialing of a disclosure about what goods are and are page sequencing preferred by the insurance industry represen­ not purchased. After March 2002, calls regarding confusion over tatives. The focus group was not told why there were two differ­ what goods were included in the contract declined steeply. How­ ent versions. The focus group was asked to evaluate whether ever, calls regarding the amount of premiums paid and refunds the layout, page sequencing or content of each contract was un­ did not. This experience demonstrates the efficacy of purchaser derstandable. The focus group was also asked to consider the acknowledgement. effect of requiring initials on certain disclosures. After obtaining At the August meeting, provider representatives from both a responses from the focus group, which will be discussed in the large and a small funeral home stated that their customers focus following paragraphs, the department made further revisions to on and better understand particular contract provisions when the sample contracts. the customer is required to sign a disclosure. Representatives On September 29, 2009, the department sent the revised sam­ from the large funeral home stated that after it instituted its own ple contracts to the interested parties and asked for feedback. initial-required disclosure regarding the fact that premiums paid The department received several oral and written comments and might be greater than the contract price and setting out the total made further changes to the form contracts and proposed figures amount to be paid, the number of complaints they received in response. about this issue was dramatically reduced. Additionally, the focus group members recommended requiring initialing as a Focus group reaction and other considerations produce final means of focusing the purchaser on the information. form of proposed rules. 3. Requiring disclosures tobeplacednexttothepertinentsec - 1. Page sequencing. tion of the contract. Because of statutory changes, the Statement of Funeral Goods Some industry representatives expressed concern regarding the and Services now has a Part A and Part B and does not fit on one layout of the new insurance-funded contract form. They stated page. The department’s draft model contract has Part A on page that if disclosures requiring initials were placed in the part of the one of the contract and Part B on page two of the contract. The contract to which they apply, the contracts would need another Definitions and other sections of the contract follow beginning on page of carbonless copy paper at a cost of approximately 40 page three. cents per contract. They were also concerned that a salesperson To reduce printing costs, some insurance-funded permit holders might forget to have a customer initial a disclosure if it were in asked that the rule allow for placement of Part A of the Statement the middle of the contract, rather than having all disclosures on of Funeral Goods and Services on page one, the Definitions and one page. portions of the General Provisions on page two, Part B of the There will be minimal economic costs to persons required to Statement of Funeral Goods and Services on page 3, and the comply with the amended rules. The general practice of the in­ continuation of the General Provisions and other sections start­ dustry today is to use carbonless copy paper, sometimes called ingonpagefour. NCR paper, for each page that requires writing. The requirement The focus group found the contract form with Part A and B on of the amended rules that disclosures requiring initials be placed pages one and three very confusing and strongly urged the de­ in the part of the contract to which they apply will add an addi­ partment to use the contract form with Part A and B on pages tional page of carbonless copy paper to the proposed sample one and two. insurance-funded contract. Each additional page of carbonless copy paper increases the cost of a contract by approximately 40 2. Requiring certain disclosures to be initialed. cents. Therefore, the amended rules are estimated to increase Throughout this process, several industry representatives who the cost of each insurance-funded contract by 40 cents. Any sell or use insurance-funded prepaid contracts expressed con­ additional costs to revise the contract to comply with statutory cern regarding the new requirement that two disclosures be ini­ changes are a direct result of the statutory changes rather than tialed. The first disclosure that has a new requirement that it the rule. The cost is minimal and is outweighed by the benefitin be initialed informs the purchaser that the amount paid on the understanding to the purchaser. The amended rules do not re­ insurance policy may not equal the contract price. A similar dis­ sult in additional carbonless copy paper pages for trust-funded closure was already in the sample contract, but initialing was not contracts, and therefore no additional cost to these contracts. required. The focus group felt just saying the amounts could be HB 3762 includes a requirement regarding excess coverage that different was not enough. They wanted to see the total of all esti­ has been included in the amended rules. Some industry rep­ mated premium payments that could be required under the con­ resentatives and one commenter suggested that a disclosure tract. (See new Figure 7 TAC §25.3(i)(4)(D)). The second dis­ about excess coverage be placed on a separate page, which closurewithanew initialing requirement informs the purchaser would add another 40 cents to the cost of the contract. One of that the refund due, if the purchaser cancels the insurance policy those representatives suggested that the statute contemplates after the free look period, may be less than the premiums paid. providing the excess coverage disclosure outside the contract. (See new Figure 7 TAC §25.3(f)(2)(E)). A similar disclosure was Therefore, the department asked the focus group to evaluate already in the sample contract, but initialing was not required. whereinthe contract this disclosure is most effective. The department has received consumer calls and inquiries from The focus group suggested that all initialed disclosures should purchasers who did not understand why their premiums were be placed in the contract section to which they apply. The fo- greater than their contract price, or why they did not receive a

ADOPTED RULES January 8, 2010 35 TexReg 205 cus group opined that requiring initialed disclosures by the per­ Amended §25.3(b)(2) explains that items may be moved from tinent contract section makes the seller more likely to explain Figure 7 TAC §25.3(c)(1) to Figure 7 TAC §25.3(b) if the price the particular section in depth and the consumer more likely to is guaranteed and appropriate disclosures are made. The dele­ focus his or her attention on the disclosure. The focus group tion of current §25.3(b)(5) is due to the inclusion of this subject stated that it was important to place the excess coverage disclo­ matter in new §25.3(c). The amendment to newly numbered sure in the contract section to which it applies; the focus group §25.3(b)(5) is to conform the terms used to Federal Trade Com­ felt that if this disclosure were on a separate page, it would mission (FTC) regulations. New §25.3(b)(7) gives sellers flexi­ lose its meaning. The statute does not contemplate the place­ bility on where to place this required language. ment of this disclosure on a separate page. Compare Texas Fi­ New §25.3(c) arises from the Legislature’s enactment of new nance Code §154.2021(b), where this disclosure is set forth, with Finance Code §154.1551, which states that a purchaser of a §154.2021(a), which concerns a disclosure to be made in an in­ prepaid funeral benefits contract may agree to advance funds surance policy. The group also felt the excess coverage disclo­ for certain items and which states that the cash advance items sure did not tell the purchaser what their options were, if any. shall be segregated from prepaid funeral benefits. New §25.3(c) One of the conclusions of the House Committee on Financial In­ states that the second section of the contract must set forth stitution’s Interim Report 2008 regarding prepaid funeral benefits the non-guaranteed cash advance items that will be provided. contracts was that the forms lacked adequate consumer disclo­ New Figure 7 TAC §25.3(c)(1) is required to be used, except sure. Additional disclosures are one solution, but the require­ as stated in §25.3(c)(1)(A) - (F). If the contract does not include ments that a purchaser initial the disclosures and that disclo­ cash advance items, new Figure 7 TAC §25.3(c)(2) informs the suresbeplacedwiththe applicable contract provisions make it purchaser that cash advance items are not included and that the more likely that the disclosures are communicated and under­ provider will charge for the listed items at the time of the funeral. stood by the purchaser. Amended §25.3(d) reflects the change to the definition of Description of amendments. "provider" in Finance Code §154.002(6). Amended §25.1 changes the definition of "funeral provider" to Amended §25.3(e) reflects the change to the definition of reflect changes made to Finance Code §154.002(6). It also "provider" in Finance Code §154.002(6) and conforms the rule adds a definition of "non-guaranteed cash advance items" to new Finance Code §154.1551 provisions, which allow the because HB 3762 adds a new provision, codified as Finance inclusion of cash advance items. Code §154.1511, which states that purchasers may advance all The amendments to §25.3(f)(1)(A) and (2)(C) arise from the or part of the funds for items that are not price guaranteed. The Legislature’s deletion in Finance Code §154.156 of a fifteen-day definition of "non-guaranteed cash advance items" states that waiting period before a purchaser may irrevocably waive his the purchaser may advance funds for the "reasonable estimated or her right to cancel the contract. The language in former cost" of the items. The inclusion of "reasonable" in the definition §25.3(f)(2)(E) is moved to §25.3(i)(4)(A), where it is also clari­ ensures that sellers will not use the cash advance provision fied. New §25.3(f)(2)(E) and new Figure 7 TAC §25.3(f)(2)(E) to obtain more funds from purchasers than are reasonably add an acknowledgement requirement to the disclosure required necessary to pay for the non-guaranteed items. by §25.3(f)(2)(F) and are in response to complaints received Amended §25.2(a)(3) reflects the change to the definition of by the department from purchasers who did not understand "provider" in Finance Code §154.002(6). This subsection was why they did not receive all the premiums they had paid when also changed from the proposed rule to allow a proposed they cancelled their policy. Amended §25.3(g)(4) arises from form contract to exclude the disclosureshown in Figure7TAC the Legislature’s expansion of coverage of the Prepaid Funeral §25.3(i)(4)(E) if it is not applicable. Amended Figure 7 TAC Guaranty Fund to cover insurance-funded contracts in Finance §25.2(c) deletes a reference to a fifteen-day waiting period Code §154.351. before a purchaser could waive the purchaser’s right to cancel Amended §25.3(h) clarifies that, under certain circumstances, the contract, because the waiting period was removed by changes can be made to the contract at time of death in regard amendment of Finance Code §154.156; and to delete the state to the disposition of remains and/or funeral goods and services. seal. Amended Figure 7 TAC §25.3(h) contains non-substantive clar­ Amended §25.3 updates required contract provisions to conform ifications of modifications that may occur at time of death. to changes made by HB 3762. Amended §25.3(a)(4) adds the The amendments to §25.3(i)(4)(A) result from the movement to requirement of new Finance Code §154.151(c)(3) that a non- that subsection of former §25.3(f)(2)(E) and clarification that all seller provider agree in the contract to discharge responsibilities premiums will be returned if insurance coverage is denied. imposed on it by Finance Code §154.161. The amendments to §25.3(b) - (e)and (h)updatetheruleinaccordance with the Amended §25.3(i)(4)(C) deletes language which is addressed Legislature’s amendment to Finance Code §154.151(e) that re­ by §25.3(i)(4)(D). Amended §25.3(i)(4)(D) requires a disclosure, quires the commission to establish a standard disclosure in each which must be acknowledged in writing by the purchaser, that contract to inform purchasers of the goods and services that will premiums may be more or less than the contract price, and that be provided or excluded and the circumstances under which the an estimate of total premiums to be paid must be given. New Fig­ contract may be modified after the death of the beneficiary. ure 7 TAC §25.3(i)(4)(D) sets out the mandatory language of the disclosure. A somewhat similar disclosure is in previous sample The amendments to §25.3(b) differentiate §25.3(b), which reg­ contract forms, but initialing was not required. The department ulates the statement of guaranteed funeral goods and services, received questions from purchasers who did not understand why from new §25.3(c), which regulates the statement of non-guar­ the total premiums paid are greater than the contract price. As anteed cash advance items. Amended Figure 7 TAC §25.3(b) discussed previously, the commission is of the opinion that re­ and new Figure 7 TAC §25.3(c)(1) likewise illustrate how guaran­ quiring a signature will focus the purchaser’s attention on this teed and cash advance items, respectively, should be set forth. disclosure. Also, the focus group stated that it is very important

35 TexReg 206 January 8, 2010 Texas Register to them that they be shown the total estimated amount of pre­ islative changes and makes two non-substantive changes. After miums it would take to fully fund the contract. After the rule was the amended rule was proposed, the department received infor­ proposed, two commenters made the same suggestion about mal comments that industry would not be able to print and dis­ changing the language in the disclosure. The suggestions have tribute new contract forms to sellers between the time the rule been accepted and the rule as adopted has been changed ac­ was adopted and January 1, 2010. In response, the department cordingly. further amended the rule to allow use of an obsolete contract, plus the model supplement, plus, if applicable, new Figure 7 Amended §25.3(i)(4)(E) and new Figure 7 TAC §25.3(i)(4)(E) TAC §25.3(i)(4)(E) until February 1, 2010. The department also arise from the enactment of new Finance Code §154.2021(b), amended the rule to extend the deadlinefor filing a non-model which requires that a purchaser receive a conspicuous disclo­ contract and for requesting an extension to complete a pending sure, to which the purchaser consents in writing, if the insurance approval proceeding until February 1, 2010. policies used to fund a prepaid benefits contract exceed the total contract price by more than five percent (5%). Additionally, the Amended §25.7(b)(2)(A)(ii) replaces "protective, or non-pro­ new disclosure informs purchasers that they can ask for other tective" with "gasketed, or nongasketed" regarding the type of options because the focus group did not understand that they sealing features of a casket which must be listed on the casket had any other options when this disclosure did not explicitly in­ description in a prepaid funeral contract to conform to Federal form them that they did. Amended §25.3(i)(4)(E) was changed Trade Commission regulations. Amended §25.7(b)(2)(C)(ii) slightly from the proposed version to more accurately state the deletes "protective, or non-protective" as a sealing feature on point at which a disclosure is required. an outer-burial container for the same reason. Amended §25.3(j) arises from the Legislature’s enactment Public Comment. of new Finance Code §154.131, which requires a brochure The department received three comments. Comments support­ be given to each purchaser; §154.132, which requires the ing the proposed amendments were received from the Funeral department to establish a website that informs consumers Consumers Alliance of Texas. Comments opposing some of the about prepaid funeral benefits; and §154.133, which requires amendments and suggesting changes to the rules as proposed any sales literature to include a reference to the department’s were received from the Texas PreNeed Coalition. Comments website. The amendment requires notices to the purchaser that suggesting changes were also received from Homesteaders Life he or she will be given the brochure and of the department’s pre­ Company. paid funeral contract informational website address. Amended §25.3(j) reflects the change to the definition of "provider" in A commenter stated that the proposed amendments, especially Finance Code §154.002(6). the requirement that disclosures be initialed and be placed throughout the contract, would increase contracting errors. The Amended §25.3(k)(1) deletes the requirement that the state seal commenter suggested that all the disclosures be placed on one be used on the contract, in accordance with the prohibition by page and that the initialing requirement be deleted from one Texas Business and Commerce Code §17.08 of unlicensed use disclosure. The commission disagrees. Contracting errors can of the state seal for a commercial purpose. Amended §25.3(l)(5) be minimized with adequate training, and the benefittocon­ clarifies that the contract number is required to be stated on only sumers of increased disclosure outweighs the concern about one page of the contract. contracting errors. Requiring initialing and placing disclosures Amended §25.4(e)(1) changes the type size from 8 and 1/2 point with the pertinent contract provision increase consumer under­ to 9 point for the statement of goods and services selected and standing, based on the department’s experience, experience for the consumer inquiries and complaint disclosure for reading of industry representatives, and the focus group’s comments, ease. Amended §25.4(e)(1)(A) arises from the Legislature’s en­ as detailed previously in this preamble. Therefore, initialed actment of new Finance Code §154.1551, which provides for disclosures have been included in these amended rules and cash advance items, and new §25.3(c), which establishes the enhanced with the suggested additions from the focus group form of the cash advance section of the contract. The deletion of and two commenters. §25.4(e)(1)(B) allows the notices and signatures part of the con­ A commenter stated that the amendments will increase the num­ tract as described in amended 7 TAC §25.3(j) to be in at least 10 ber of pages in the contract, which will increase printing, copy­ point type because industry representatives requested a larger ing and administrative costs. The commenter stated that the area for signatures. Amended §25.4(f)(2) changes the minimum additional cost will be thousands of dollars per year per per­ recommended page size of a proposed non-model contract from mit holder. No basis for this amount was provided. The com­ 8-1/2 inches by 14 inches to 8-1/2 inches by 11 inches, because mission agrees that an added page will increase costs but dis­ of the change to contract format resulting from the Legislature’s agrees that all permit holders’ costs will increase dramatically. enactment of Finance Code §154.1511, which allows purchasers Theamendedrules are estimated to increase the cost of each in­ to advance funds for items that are not price guaranteed. Before surance-funded contract by 40 cents and to cause no additional the enactment of Finance Code §154.1511, the entire statement cost to trust-funded contracts. The increased cost is minimal. Of of goods and services could fit on one 14-inch long page. With the nineteen companies currently selling insurance-funded con­ the addition of the cash advance items section, that is no longer tracts, only the six largest sellers are estimated to incur additional possible. Therefore the commission now recommends a mini­ annual costs over $1,000.00. The minimal economic cost to per­ mum page size of the more standard 11 inches. sons required to comply with the amended rules is outweighed Amended §25.5(c)(1)(A) clarifies that a non-model contract filed by the increased awareness purchasers will gain from having the with the department for approval will be considered a new fil­ disclosures placed with the contract provision to which they ap­ ing. The amendments also change the dates recited in the rule ply. to refer to the legislative changes of 2009, and to delete out­ In adopting these rules, the alternatives proposed by certain dated year references. Amended §25.5(f)(2) changes the dates insurance industry representatives were considered, including recited in the rule to conform to the effective date of the leg­

ADOPTED RULES January 8, 2010 35 TexReg 207 the page sequencing alternative that would eliminate the extra A commenter suggested that sellers be allowed to place the page of carbonless copy paper and eliminating the requirement disclosure required by Finance Code §154.2021(b) in a sepa­ that certain disclosures be initialed. These alternatives do not rate page, stating that a separate disclosure is more effective meet the goal of increasing the purchaser’s understanding of the communication with the consumer. The commission disagrees. transaction. Based on the experience of the department and industry, and focus group comments, the commission concludes that disclo­ A commenter stated that the new disclosures are not required sures are more apt to be read and understood by the consumer in trust-funded contracts and therefore constitute bias towards if they are with the contract provision to which they apply. There­ insurance-funded contracts. The commission disagrees. Of the fore, no change has been made. three disclosures requiring initials, two relate to the discrepancy between the amount of premiums paid or insurance coverage Amendments to §§25.1 - 25.5 and 25.7 are adopted under Fi­ and the contract price. This is not an issue with trust-funded nance Code §11.307(a), which requires the commission to adopt contracts, where the amount paid is equal to the contract price. rules applicable to each entity regulated by the department, The third disclosure informs the purchaser that the amount re­ specifying the manner in which the entity provides consumers funded may be less than premiums paid. With trust-funded con­ with information on how to file complaints with the department; tracts, the amount refunded is easily determined and is at least Finance Code §154.051, which authorizes the commission to 90% of the amount paid. Because insurance-funded contracts adopt reasonable rules concerning the filing of prepaid funeral are funded by insurance policies, the refund due depends on benefits contracts and the enforcement and administration of the policy’s cash surrender value, which varies between policy Chapter 154; Finance Code §154.151(a), which requires the types and cannot be quantified in the prepaid funeral contract. department to approve a sales contract form for prepaid funeral The disclosure helps draw the consumer’s attention to this fact. benefits before the form is used; Finance Code §154.151(d) which requires the department to provide model contracts A commenter stated that the department has no quantifiable doc­ that are easily read and written in plain language; Finance umentation of complaints justifying its view that the current dis­ Code §154.151(e) which states that the commission by rule closures are inadequate. The commission agrees that it does shall establish a standard disclosure that must be included in not have statistics of such complaints because the department each contract to inform purchasers of the goods and services became aware of purchaser confusion through phone calls. It that will be provided or excluded under the contract and the keeps statistics only on written, not oral, complaints. However, circumstances under which the contract may be modified after as discussed previously in this preamble, department experi­ death of the beneficiary, Finance Code §154.156, which states ence was but one factor considered when adopting the amend­ that an irrevocable waiver of the right to cancel the contract ments. Focus group comments and industry experience were must comply with plain language requirements; and Finance also considered. Code §154.2021(b) which states that a purchaser must receive A commenter objected to the focus group the department and consent to a conspicuous written disclosure when policies assembled and the review procedure. The commenter stated issued to fund a contract exceed the contract amount by more that no attempt was made to seek participation by permit hold­ than five percent. ers. The commission disagrees. When department officials §25.2. Am I Required to Use the Model Contract and Model Waiver? held meetings with industry and consumer representatives, including the commenter, to obtain pre-proposal comments, the (a) Use of model contract and waiver. You may use the appro­ department stated that it intended to convene a focus group to priate model contract or the model waiver described in this subsection help evaluate different formats. The point of the focus group except as provided in paragraph (2) of this subsection, but you are not was to determine whether consumers could understand or required to do so if you obtain approval to use a non-model contract or had questions regarding the different contract versions. At the waiver. meeting, the department asked if anyone could suggest mem­ (1) The department has adopted two model contracts, one bers for the focus group but received no response. Thereafter, for sale of trust-funded prepaid funeral benefits and one for sale of in­ the department contacted the consumer representative on the surance-funded prepaid funeral benefits where the purchaser is also the Guaranty Fund Advisory Council and asked him to assemble policy owner, and a model waiver, in English and in Spanish, for your a small group of persons who were representative of potential use. Each model contract or waiver meets all statutory requirements prepaid funeral contract purchasers. Once again, the focus and the requirements of this subchapter with respect to the type of group’s comments were one of several factors considered when transaction it is designed to govern. You may acquire copies of model adopting the amendments. contracts and the model waiver by downloading them from the depart­ A commenter pointed out that the disclosures required in the ment’s web site or requesting them by mail. The department’s web site rules are not all mandated by HB 3762. Although not all spe­ address is http://www.banking.state.tx.us. cific disclosures are mandated, the Legislature, in Finance Code (2) If you sell insurance-funded contracts, the insurance- §154.051, has authorized the commission to adopt reasonable funded model contract is suitable only if the person named in the con­ rules concerning the filing of prepaid funeral contracts and any tract as the purchaser is also the insurance policy owner. If the contract other matter relating to the enforcement and administration of Fi­ purchaser and the insurance policy owner are not to be the same person, nance Code Chapter 154. Additionally, one of the conclusions you must use an approved non-model contract that correctly addresses of the House Committee on Financial Institution’s Interim Report this arrangement. 2008 regarding prepaid funeral benefits contracts was that the forms lacked adequate consumer disclosures. (3) You may use a current model contract or model waiver after the department verifies that your proposed form document is a Two commenters suggested changes to clarify the language in current model document that has been customized by inserting your Figure 7 TAC §25.3(i)(4)(D) regarding total premiums. The com­ name and permit number. Your submitted form document may also mission agrees and the figure has been changed to adopt the exclude the disclosure shown in Figure 7 TAC §25.3(i)(4)(E), if it is suggested language. not applicable; and contain other information about you or a provider as

35 TexReg 208 January 8, 2010 Texas Register long as you do not otherwise alter the model document. The department (4) if the provider is not the licensed seller, a statement that shall approve or disapprove a customized model document on or before the provider agrees to discharge the responsibilities imposed on a fu­ the 10th business day following the day the document is filed with the neral provider by Finance Code §154.161; department. (5) the impact of terms in the insurance policy on the con­ (b) Non-model contracts. Before you use a non-model con­ tract if the contract is insurance-funded, as described by subsection (e) tract, it must: of this section; (1) satisfy the substantive content requirements of §25.3 of (6) disclose and explain the purchaser’s cancellation rights this title (relating to What Requirements Apply to a Non-Model Con­ under the contract and, if the contract is insurance-funded, the effect tract or Waiver); of insurance policy cancellation or assignment on the contract, as de­ scribed by subsection (f) of this section; (2) qualify under the plain language principles stated in §25.4 of this title (relating to What Are the Plain Language Require­ (7) state events of default under the contract for all parties ments for a Non-Model Contract or Waiver); and and explain the consequences of default, as described by subsection (g) of this section; (3) be approved by the department as provided in §25.5 of this title (relating to How Do I Obtain Approval of a Non-Model Con­ (8) state and explain the circumstances under which the re­ tract or Waiver). sponsible person may modify or change the contract at the death of the contract beneficiary, as described by subsection (h) of this section; (c) Non-model waivers. You may use a non-model waiver if it addresses substantially the same matters in substantially the same (9) disclose and explain all payment terms under the con­ order as the model waiver, to promote comparability and consumer tract and related provisions as described by subsection (j) of this sec­ understanding. Your proposed non-model waiver form may contain tion; additional provisions that are fair to consumers in light of the purpose (10) contain a section for required signatures and related of Finance Code, Chapter 154. You must submit a non-model waiver notices as described by subsection (j) of this section; to the department for approval in the manner required by §25.5 of this title. The model waiver in English appears as: (11) contain a standard disclosure explaining how a pur­ Figure: 7 TAC §25.2(c) chaser can make inquiries or file complaints with specified regulatory agencies, as described by subsection (k) of this section; (d) Transactions conducted in Spanish. If you intend to con­ duct any prepaid funeral benefits transaction predominately in Spanish, (12) comply with subsections (l) and (m) of this section; you may use a current model contract or model waiver in Spanish as (13) comply with §25.4 of this title (relating to What provided by subsection (a) of this section. If the department has ap­ Are the Plain Language Requirements for a Non-Model Contract or proved your non-model document in English under §25.5 of this title, Waiver); and you may use a Spanish version of the document after you file a copy of your Spanish document and a certification from a translation ser­ (14) be approved by the department as provided by §25.5 vice acceptable to the department that the Spanish version is a true and of this title (relating to How Do I Obtain Approval of a Non-Model correct translation of the submitted English document. If the English Contract or Waiver). version of your Spanish non-model document has not previously been (b) Statement of guaranteed funeral goods and services approved, you may not use your Spanish non-model document until selected. The first section of a proposed prepaid funeral benefits you comply with subsection (b) of this section. contract must inform the purchaser of the guaranteed funeral goods (e) Interpretation of required content and form. The depart­ and services that you will provide under the contract, as required by ment considers the model contracts and model waiver to satisfy the Finance Code, §154.151(e). This section must appear entirely on page substantive content requirements of §25.3 of this title and qualify un­ one of the contract exactly as set out in the model contract and in der the plain language principles stated in §25.4 of this title. If you the following figure, including substantially the same formatting and have questions regarding the intent and meaning of a requirement in spacing, except: this subchapter, locate and review the related clause in the model con­ Figure: 7 TAC §25.3(b) tracts or model waiver. You are not required to include a broader or (1) you may move specific goods and services between more comprehensive provision than is contained in the relevant model general description categories; document unless additional explanation or disclosure is necessary to clarify or prevent misleading provisions in your non-model document. (2) you may move specific goods and services from figure 7 TAC §25.3(c)(1) to figure 7 TAC §25.3(b), if you guarantee the price §25.3. What Requirements Apply to a Non-Model Contract or of the good or service and include any required Federal Trade Com­ Waiver? mission disclosures regarding cash advance items; (a) Contract requirements. The department must approve a non-model contract before you can use it. Your proposed non-model (3) you may change the description of specific goods or contract must: services if the alteration does not change the intent of the description in the standard disclosure; (1) contain a disclosure informing the purchaser of the fu­ neral goods and services that will be provided under the contract, as (4) you may add other, specific funeral goods and services described by subsections (b) and (c) of this section; to the list of funeral goods and services to be provided; (2) define terms used in the contract as described by sub­ (5) you may delete check boxes and related text for sealing section (d) of this section; features in casket and outer burial container descriptions, for example, "gasketed", "non-gasketed", "seal", and "non-seal", if these features are (3) state and explain the purchaser’s obligations, your obli­ not included in the funeral home’s price list; and gations, and the name and obligations of the provider if you are not performing all funeral services under the contract;

ADOPTED RULES January 8, 2010 35 TexReg 209 (6) if the goods and services you sell are specifically lim­ performing all funeral services under the contract, and the impact of ited and constitute significantly less than those goods and services nor­ terms in the insurance policy on the contract if the contract is insur­ mally required for a funeral, you may substitute a simplified disclosure ance-funded, with respect to: that the contract is for your specific goods and services only and that (1) your obligation (and that of the provider) to furnish the you do not offer any other funeral goods and services. For example, guaranteed funeral goods and services selected in the contract for a you may substitute this limited disclosure if you sell only services re­ cost not to exceed the total contract price applicable to the guaranteed lating to opening and closing of the grave or unique memorials that charges at the death of the contract beneficiary, if the purchaser has utilize a token portion of cremains, or if you only sell limited funeral fully complied with the contract and with each insurance policy, if the goods such as outer burial containers or caskets without furnishing fu­ contract is insurance-funded; neral services. (2) your obligation (and that of the provider) to furnish the (7) The Explanation of Certain Charges language may be non-guaranteed cash advance items selected in the contract, if current moved from figure 7 TAC §25.3(c)(1) to figure 7 TAC §25.3(b). costs are paid at the time of death or how any unallocated and remaining (c) Statement of non-guaranteed cash advance items selected. non-guaranteed funds will be refunded; (1) The second section of a proposed prepaid funeral ben­ (3) the purchaser’s inability to change the selected funeral efits contract must inform the purchaser of the non-guaranteed cash goods and services during the life of the contract unless the contract is advance items that you will provide under the contract, as required by voided and replaced with a new contract; Finance Code §154.1511(b). The section must appear entirely on either (4) the extent to and conditions under which the purchaser page one or two of the contract exactly as set out in the model contract may change the provider specified in the contract or, with respect to a andinthefollowing fi gure, including substantially the same formatting trust-funded contract, the contract beneficiary; and spacing, except; Figure: 7 TAC §25.3(c)(1) (5) whether the purchaser may incur tax liability for earn­ ings under a trust-funded contract or for growth under an insurance (A) you may delete the non-guaranteed cash advance policy if the contract is insurance-funded; items section if you do not sell cash advance items; (6) the extent to which you offer any warranties or guaran­ (B) you may move the Explanation of Certain Charges tees or assert any specificdisclaimers of warranty; language to figure 7 TAC §25.3(b); (7) the prohibition on partial cancellation of or loans (C) you may change the subtotal pages references if fig­ against the contract; ures 7 TAC §25.3(b) and 7 TAC §25.3(c)(1) are to be placed on the same page of the contract; (8) if the transaction may result in available funds in excess of the contract price at the time the funeral is performed, identification (D) you may move specific goods and services from fig­ of who is entitled to such excess funds; ure 7 TAC §25.3(c)(1) to figure 7 TAC §25.3(b) if you guarantee the price of the good or service; (9) each party’s general contractual duties under the con­ tract and the extent to which the contract is binding on a person who (E) you may change the description of specific goods or assumes the rights or obligations of a party to the contract; services if the alteration does not change the intent of the description in the standard disclosure; and (10) the manner in which a party must notify other parties of a change of address; and (F) you may add other specific funeral goods and ser­ vices to the list of non-guaranteed funeral goods and services to be (11) if the contract is insurance-funded, the requirement provided only through a non-model filing. that terms of the insurance policy must be consulted for information concerning the obligations of the insurance company and those of the (2) If you delete the statement of non-guaranteed cash ad­ policy owner. vance items, you must include the following figure on the bottom of page one of the contract, including substantially the same formatting (f) Cancellation or assignment. Your proposed prepaid funeral and spacing: benefits contract must recognize and explain: Figure: 7 TAC §25.3(c)(2) (1) with respect to a trust-funded contract: (d) Definitions. Your proposed prepaid funeral benefits con­ (A) the manner in and conditions under which the pur­ tract must list, define, and use the terms "contract beneficiary", "re­ chaser may cancel the contract, including the procedural requirements sponsible person", "provider", "purchaser", and "seller", or terms com­ applicable to a cancellation, including the purchaser’s obligation to re­ monly understood by consumers to be equivalent, substantially as de­ quest cancellation in writing on department-approved forms and your fined in a model contract. For example, you may use a combined obligation to pay a refund not later than the 30th day after receipt of term such as "seller/provider" if you believe the alternate term is more the purchaser’s written cancellation notice; descriptive of your services. If your proposed contract is insurance- funded, you must also list, define, and use the terms "insurance com­ (B) the amount of the refund or other payment that you pany", "insurance policy", and "premiums" in the contract, or terms will owe the purchaser if the contract is canceled and the conditions or commonly understood by consumers to be equivalent, substantially as circumstances that may alter the refund amount; and defined in the department’s insurance-funded model contract. You may (C) the refund or other benefits you will owe the pur­ list, define and use additional terms if they are consistent with the re­ chaser if the contract is canceled at your request; or quirements of §25.4 of this title. (2) subject to modifications or clarifications required by (e) General provisions. Your proposed prepaid funeral bene­ §25.2(a)(2) of this title (Relating to Am I Required to Use the Model fits contract must recognize and explain the purchaser’s obligations, Contract and Model Waiver), with respect to an insurance-funded con­ your obligations, and the obligations of the provider if you are not tract:

35 TexReg 210 January 8, 2010 Texas Register (A) the purchaser’s right to assign the purchaser’s inter­ be modified by the responsible person at the death of the contract bene­ est in an insurance policy by signing a separate document; ficiary, as required by Finance Code, §154.151(e). The disclosure must appear exactly as set out in the model contract and in the following fig­ (B) the qualification that canceling the contract does not ure, without modification, except that the phrase "fully funded" may be automatically cancel the insurance policy but canceling the insurance substituted for the phrase "fully paid" wherever it appears in this dis­ policy does cancel the contract; closure when used in an insurance-funded contract. In addition, you (C) the procedural requirements applicable to a cancel­ may use a larger type size if feasible. lation of the contract, including the purchaser’s obligation to request Figure: 7 TAC §25.3(h) cancellation in writing on department-approved forms and the statu­ (i) Payment terms. Your proposed prepaid funeral benefits tory obligation, if applicable, to pay a refund not later than the 30th contract must clearly state and explain payment terms and related pro­ day after receipt of the purchaser’s written cancellation notice; visions, including: (D) the purchaser’s obligation to read the insurance pol­ (1) how and when you will deposit a payment received un­ icy to determine the conditions imposed upon cancellation and the po­ der a trust-funded contract, or forward any premiums received to the tential amount of refund that would be due if the policy is canceled insurance company for application to an insurance policy if the con­ during or after the "free look" period; tract is insurance-funded; (E) notice and acknowledgement by the purchaser that (2) with respect to a trust-funded contract, whether and the if the insurance policy is cancelled at the purchaser’s request, the sur­ extent to which you will retain a portion of the purchaser’s payments render value may be significantly less than the premiums the purchaser for reimbursement of your operating and selling expenses; paid. The disclosure must appear in the cancellation section exactly as set out in the model contract and in the following figure, without mod­ (3) with respect to a trust-funded contract, the finance ification, including substantially the same formatting and spacing: charges you will impose, if applicable, provided that the description Figure: 7 TAC §25.3(f)(2)(E) must also comply with Finance Code, Chapter 345, and other state and federal law governing such charges; (F) the consequences the purchaser may expect, whether refund of premium, receipt of cash surrender value, or other (4) subject to modifications orclarifications required by benefits from you or another person, if the contract is canceled at your §25.2(a)(2) of this title, with respect to an insurance-funded contract: request; and (A) the effect on the contract if insurance coverage is (G) the effect that loans against or withdrawal of pro­ denied and that all premiums will be returned to the policy owner; ceeds accrued under an insurance policy will have on the contract and (B) if payment terms under the insurance policy are not on price guaranties in the contract. disclosed in the contract, a space for the purchaser to initial or sign to (g) Default. Your proposed prepaid funeral benefits contract acknowledge that the purchaser has received written information re­ must explain events and consequences of default under the contract garding the terms governing premium payments in another document and under each insurance policy if the contract is insurance-funded, that the purchaser received at the time of sale, such as the application including: for insurance or the insurance policy; (1) the potential effect on the contract if the purchaser fails (C) if the information the purchaser receives regarding to make a payment or makes a late payment under the contract or under payment terms under an insurance policy is based on an estimate of an insurance policy if the contract is insurance-funded; premiums, that must be noted; (2) the effect on the contract and on payments due if the (D) notice and acknowledgement by the purchaser that contract beneficiary dies: insurance premiums paid on the insurance policy or policies may be more or less than the total contract price, and an estimate for total pre­ (A) before the purchaser’s payment obligations have miums to be paid. The disclosure must appear in the payment terms been fulfilled under a trust-funded contract; or section exactly as set out in the model contract and in the following (B) if the contract is insurance-funded: figure, without modification, including substantially the same format­ ting and spacing: (i) during a period when an insurance policy pays Figure: 7 TAC §25.3(i)(4)(D) reduced benefits, if applicable; or (E) notice and acknowledgement by the purchaser if (ii) before the premium obligations have been ful­ you initially issue insurance policy(s) with an aggregate initial face filled on an insurance policy, if applicable; and value that exceed(s) the total contract price by more than 5%. The (3) the conditions under which you may owe a full or par­ disclosure must include the total amount of the policy(s) in excess tial refund to the purchaser of funds received under a contract, or a full of 100% of the contract price. The disclosure must appear in the or partial abandonment of your rights to anticipated proceeds of an in­ payment terms section exactly as set out in the following figure, surance policy if the contract is insurance-funded and proceeds are not without modification, including substantially the same formatting and yet received, as a consequence of your inability (or the provider’s in­ spacing; and, ability, if you are relying on another to perform portions of the contract) Figure: 7 TAC §25.3(i)(4)(E) to furnish the selected funeral goods and services; (5) other contract provisions that materially relate to pay­ (4) a statement that the Prepaid Funeral Guaranty Fund ment terms under a contract or under an insurance policy. covers the contract and guarantees contract performance. (j) Required signatures and notices. Your proposed prepaid (h) Changes to disposition or funeral goods and services at the funeral benefits contract must contain a section for required signatures death of contract beneficiary. Your proposed prepaid funeral benefits and related notices that appears in its entirety on the last page of the contract must disclose the circumstances under which the contract may contract. This section must include:

ADOPTED RULES January 8, 2010 35 TexReg 211 (1) a list of all items that must be received or offered before (2) a document title that discloses the contract is for the the contract can be signed; purpose of prearranging a funeral, such as "Prepaid Funeral Benefits Contract"; (2) if required by state or federal law, cooling-off period language that includes spaces to note when and where the contract was (3) a distinguishing form number or name; signed; (4) your permit number; and (3) notice that the purchaser will receive a copy of the con­ (5) a space for the contract number on at least one of the tract; contract pages. (4) notice that the purchaser is required to be provided an (m) Your proposed non-model contract or waiver form may informational brochure for contracts sold after June 1, 2010; contain: (5) the Department’s prepaid funeral contract informa­ (1) additional contract clauses that are fair to consumers in tional website address; light of the purpose of Finance Code, Chapter 154; and (6) if the contract is insurance-funded: (2) additional consumer disclosures that you determine: (A) notice that the policy owner will receive a copy of (A) will assist the purchaser in understanding the trans­ the insurance policy from the insurance company; or action; or (B) if the insurance company is not legally required to (B) are required by other state or federal law for the type deliver a copy of the insurance policy to the policy owner, notice that of transaction the contract represents. the policy owner may request a copy of the insurance policy from the insurance company; §25.5. How Do I Obtain Approval of a Non-Model Contract or Waiver? (7) spaces for: (a) Authority. Finance Code, §154.151(a), requires the depart­ (A) the purchaser’s printed name, mailing address, tele­ ment to approve a prepaid funeral benefits contract form before you phone number, social security number (if required), and signature line; use the form. Finance Code, §154.156(a), requires the department to (B) if you are not directly providing the funeral goods approve a waiver of cancellation rights form in the same manner. You and services, the printed name, mailing address, and telephone number may use the department’s model contracts or model waiver as provided of the provider, and spaces for the printed name and signature of the in §25.2(a) of this title (relating to Am I Required to Use the Model authorized officer or agent signing on behalf of the provider; Contract and Model Waiver). This section describes: (C) your printed name, mailing address, and telephone (1) how to apply to the department for approval of your number, and spaces for the printed name and signature of the authorized proposed non-model contract, what information, documents, and fees officer or agent signing on your behalf; and you must file as part of your application before the department will accept it for filing, and what fees the department may impose, in sub­ (D) the printed name, mailing address, and date of birth section (b) of this section; of the sole individual designated as contract beneficiary; and (2) what procedures the department will follow to approve (8) other provisions, party identifications, or certifications or deny approval of your proposed non-model document and when you legally required for valid execution of the contract. may reasonably expect the department to decide, in subsection (c) of (k) Inquiries and complaints notice. Your proposed prepaid this section; funeral benefits contract must disclose how a purchaser, potential pur­ (3) what actions you must take to obtain a second review by chaser or consumer can make consumer inquiries and complaints to the department or a hearing before the commissioner if the department the department as required by Finance Code, §11.307(a), and §25.41 denies approval of your proposed non-model document, in subsection of this title (relating to How Do I Provide Information to Consumers (d) of this section; on How to File a Consumer Complaint), and to other specified state regulatory agencies with appropriate jurisdiction. (4) how you may request a hearing before the commis­ sioner, how the hearing will be conducted, and what the staff of the (1) This disclosure must appear exactly as set out in the rel­ department must prove to uphold the disapproval, in subsection (e) of evant model contract, including the names and contact information for this section; and each regulatory agency, without modification, and will vary in context depending on whether the proposed contract is trust-funded or insur­ (5) when you may no longer use an approved contract form, ance-funded. The model disclosures for both trust-funded and insur­ in subsection (f) of this section. ance-funded contracts appear in: (b) Application for approval. Your application for approval of Figure: 7 TAC §25.3(k)(1) your proposed non-model document must be in writing and include all (2) If the disclosure does not appear at the bottom of the last additional information, documents, and fees required by this subsec­ page of the contract following the signatures of the parties, it must be tion. You should file your application as far in advance of the date you placed at the top or bottom of a preceding page and be separated from intend to use your proposed document as possible. other contract text by at least 1/2 inches of white space. The disclosure (1) The additional information, documents, and fees that may not be placed on a page by itself. you must file as part of your application include: (l) Additional requirements. A proposed prepaid funeral ben­ (A) both a printed copy of your proposed non-model efits contract must also contain: document and an electronic version of the document, prepared using (1) page numbers; Microsoft Word or Corel WordPerfect software;

35 TexReg 212 January 8, 2010 Texas Register (B) except as provided in §25.2(d) of this title, an Eng­ (A) If your proposed non-model contract filing is the lish translation if the proposed non-model document is in Spanish and result of legislative amendments to Finance Code Chapter 154 effective acertification from a translation service acceptable to the department on or after September 1, 2009, your non-model contract filing will be that the filed English version is a true and correct translation of the pro­ considered a new contract filing and the department will approve or posed Spanish non-model document filed for approval; deny approval on or before the 45th day after the date your application is accepted for filing. (C) if your application is for approval of amendments to a previously approved non-model document: (B) If your proposed non-model document is a non-model waiver or an amended version of a non-model contract (i) a printed copy of the proposed non-model docu­ previously approved by the department under this section, the depart­ ment that is specifically marked to show all text proposed to be added ment will approve or deny approval on or before the 30th day after the and all text proposed to be deleted; and date your application is accepted for filing, except the department will (ii) a written summary of the amendments, both ad­ either approve or deny approval on or before the 10th day after the date ditions and deletions, explaining their purpose; your application is accepted for filing if the proposed amendments are limited to changed or added information about you or a funeral home. (D) a certification on a form supplied by the department, signed and acknowledged by you or your authorized agent, that you (2) The department may extend the date its decision is due have reviewed the proposed non-model document that you filed for under this subsection by up to an additional 30 days if it determines that approval and to the best of your knowledge: your application raises issues requiring additional information or addi­ tional time for analysis. The department may request additional infor­ (i) your proposed non-model document complies mation from you in writing if the information is reasonably necessary with all applicable state and federal law, including Finance Code, foraninformed decisiontoapprove or deny approval of your proposed Chapter 154, and this chapter; and non-model document. If you receive a written request for additional (ii) if your application is for approval of amend­ information, you must file the information or a satisfactory written ex­ ments to a previously approved non-model document, the proposed planation of when the information can be filed with the department on non-model document is identical to the previously approved document or before the 30th day after the date you receive the request. If you fail except for text specifically marked as additions and deletions; to reply within this time period the department may exercise its discre­ tion to conclude that you have withdrawn your application. (E) unless you notify the department that it already has a copy on file: (3) The department will approve your proposed non-model document unless a specific basis exists to deny approval. The depart­ (i) a copy of all related contracts and agreements that ment will deny approval if your proposed non-model document fails to are part of your prepaid funeral arrangement, such as a separate finance comply with the standards of this subchapter that apply. If the depart­ charge agreement; and ment discovers and confirms that use of the proposed non-model docu­ (ii) if the proposed non-model document is an insur­ ment will clearly violate a mandatory requirement of an applicable state ance-funded contract, a copy of the insurance policy form you intend to or federal law other than Finance Code, Chapter 154, and this chapter, use and written evidence from the Texas Department of Insurance that the department will deny approval. However, the department will or­ the insurance policy has been approved for use in conjunction with the dinarily not review a proposed non-model document for compliance sale of prepaid funeral benefits; and with other law, and approval of a non-model document under this sec­ tion does not mean the department has determined that the non-model (F) payment of a $250 filing fee, except that upon re­ document complies with any state and federal law other than Finance quest the department may waive or reduce the fee for review of minor Code, Chapter 154, and this chapter. amendments to a previously approved non-model document that are submitted under subparagraph (C) of this paragraph. (4) If the department denies approval of your proposed non-model document, the department will send you a written notice (2) Your application is considered accepted for filing and of denial that: eligible for consideration if the application is substantially complete with all information, documents, and fees required by paragraph (1) (A) states the specific basis for the denial in writing and of this subsection. At your request, the department will inform you in cites the specific provisions of law that the document does not satisfy; writing of the date it considers your application accepted for filing. (B) informs you that, on or before the 30th day after the (3) If the department’s review of a non-model document date you receive the notice of denial, you must exercise your rights takes longer than four employee hours, you must pay a review fee of under subsection (d) of this section, to file either a written request for $60 per employee hour in excess of four hours. If you fail to pay review hearing or a revised non-model document for second review, or the fees on or before the 10th day after you receive a written statement denial will become final. of charges due from the department, the department may exercise its (d) Your rights after initial denial. This subsection describes discretion to conclude that you have withdrawn your application. the further actions you may take to obtain approval of your non-model (c) Review process. This subsection describes when you may document if the department initially denies approval under subsection reasonably expect the department to approve or deny approval of your (c) of this section. proposed non-model document and the procedure the department will (1) If the department denies approval of your proposed followinmakingits initial decision. non-model document under subsection (c) of this section, you may file (1) The time the department’s decision is due regarding a written request for hearing before the commissioner under subsection your proposed non-model document will vary depending upon the date (e) of this section or seek the department’s second review by filing your application is accepted for filing under subsection (b)(2) of this a new version of your proposed non-model document that you have section and on the nature of the document you seek to have approved. specifically revised to address the reasons for denial.

ADOPTED RULES January 8, 2010 35 TexReg 213 (2) If you elect to file a new version of your proposed non- ment, and, if applicable, new Figure 7 TAC §25.3(i)(4)(E), are included model document for second review, the department will consider the as part of the contracting transaction until the later of: revised document to be part of your original application and will not (A) February 1, 2010; require a new filing fee but may charge additional review fees under subsection (b)(3) of this section. The department will approve or deny (B) June 1, 2010, if you filed a proposed non-model approval of your revised non-model document on or before the 10th contract with the department for approval before February 1, 2010; or day following the date of its filing. (C) a later date if, before February 1, 2010, you request (3) If the department denies approval of your revised non- an extension of time to permit completion of a pending approval pro­ model document, the department will send you a second written notice ceeding under this section and the commissioner approves your request of denial that: in writing. (A) states the specificbasisforthe denial in writing and (3) Notwithstanding the provisions of paragraph (2) of this cites the specific provisions of law that the revised non-model docu­ subsection, you may not continue using an obsolete contract after the ment does not satisfy; 30th day following the date the department approves your non-model contract. (B) if minor changes to the proposed document would result in approval and you have not previously been given the oppor­ This agency hereby certifies that the adoption has been reviewed tunity to make these changes, informs you of the opportunity to obtain by legal counsel and found to be a valid exercise of the agency’s approval by submitting your document with the specified changes on legal authority. or before the 10th day after the date you receive the department’s sec­ ond written notice of denial; and Filedwiththe Office of the Secretary of State on December 18, (C) informs you that you must file a written request for 2009. hearing with the department under subsection (e) of this section on or TRD-200905973 before the 30th day after the date you receive the department’s second A. Kaylene Ray written notice of denial or the denial will become final. General Counsel (e) Commissioner hearing. This subsection describes how you Texas Department of Banking may obtain a hearing before the commissioner and how the hearing will Effective date: January 7, 2010 be conducted. Proposal publication date: October 30, 2009 (1) To obtain a hearing before the commissioner, you must For further information, please call: (512) 475-1300 file a written request for hearing with the department on or before the 30th day after the date you receive the department’s written notice of ♦ ♦ ♦ denial. Your written request for hearing must state with specificity the reasons you allege the department’s denial of approval is in error. PART 4. TEXAS DEPARTMENT OF (2) The department will forward your request for hearing SAVINGS AND MORTGAGE LENDING to the administrative law judge, who shall enter appropriate orders and conduct the hearing on or before the 60th day after the date your request CHAPTER 81. MORTGAGE BANKER for hearing was received, under Chapter 9 of this title (relating to Rules REGISTRATION AND RESIDENTIAL of Procedure for Contested Case Hearings, Appeals, and Rulemaking) and Government Code, Chapter 2001. Your complete application, the MORTGAGE LOAN OFFICER LICENSING department’s notice or notices of denial, and your request for hearing The Finance Commission of Texas ("Finance Commission") will be made a part of the record. adopts the amendments to 7 TAC Chapter 81, §81.1 and §81.2; (3) At the hearing, the staff of the department bears the and new §§81.3 - 81.19, concerning Mortgage Banker Registra­ burden of proof that approval of your proposed non-model document tion and Residential Mortgage Loan Officer Licensing, without should be denied. changes to the proposed text as published in the October 30, 2009, issue of the Texas Register (34 TexReg 7460). (4) The proposal for decision, exceptions and replies to the proposal for decision, the order of the commissioner, and motions for The amendments and new sections are adopted in order to rehearing are governed by Chapter 9 of this title and Government Code, implement the provisions of House Bills 10, 963 and 2779 as Chapter 2001. passed by the 81st Texas Legislature, as well as a previous legislative session change to Chapter 55, Occupations Code (f) Withdrawn approval. This subsection describes circum­ and to assist the Department in preparing to participate in the stances under which you may not use a previously approved document. National Mortgage License System Registry. These bills make (1) The department may withdraw its approval of a model substantial modifications to the Mortgage Banker Registration or previously approved non-model document for future use if govern­ Act, Finance Code, Chapter 157, relating to the registration and ing law is changed or clarified by statute, rule, or judicial opinion. The regulation of mortgage bankers and residential mortgage loan department will notify you in writing if you are affected by a withdrawn originators. These amendments and new sections substantially approval. mirror rules currently in place in 7 TAC Chapter 80, Mortgage Broker and Loan Officer Licensing. (2) You may not use a prepaid funeral benefits contract form that was approved by the department before the effective date The adopted amendment to §81.1, concerning Definitions, ex­ of this rule (an obsolete contract), except that you may continue using pands the definition section in order to define terms used in the an obsolete contract if the model supplement developed by the depart­ adopted new sections.

35 TexReg 214 January 8, 2010 Texas Register The adopted amendment to §81.2, concerning Loan Status The new §81.18, concerning Enforceability of Liens, clarifies that Forms, adds the term residential mortgage loan originator which a violation of this chapter does not render an otherwise enforce­ is used in the federally mandated Secure and Fair Enforcement able lien invalid. Licensing Act of 2008 ("SAFE"). The new §81.19, concerning Savings Clause, provides for a por­ The new §81.3, concerning Licensing - General, provides for the tion or provision of this chapter to be held invalid without affecting placing of a license in inactive status and the fee for renewing a the remainder of the chapter. license. There were no comments received during the comment period The new §81.4, concerning Qualifications for Obtaining Li­ which ended November 30, 2009. censes, authorizes the Commissioner to require additional information in order to determine that the requirements of the SUBCHAPTER A. LICENSING Act have been met. 7 TAC §§81.1 - 81.6 The new §81.5, concerning Renewals, adds language pursuant The amendments and new sections are adopted under Finance to Chapter 55, Occupations Code, which exempts licensees on Code, §157.011, which authorizes the Finance Commission to active military duty from late filing penalties and allows additional adopt rules as provided by Chapter 157 oftheAct. time to complete continuing education requirements. The section of the Act affected by the proposed amendments The new §81.6, concerning Criminal History, implements House and new sections is Finance Code, §157.011, relating to author­ Bill 963 which amended Chapter 55, Occupations Code, by pro­ ity for the Finance Commission to adopt rules to implement the viding a means for a potential applicant to request a determina­ intended purpose of the Act or to enforce the Act. The adopted tion of eligibility relating to the effect a criminal history may have amendments and new sections relate to the following sections on the approval of the applicant. of the Finance Code: §§157.001, 157.002, 157.007, 157.008, The new §81.7, concerning Required Disclosures, requires a 157.012, 157.015, 157.016, 157.020, and 157.021. residential mortgage loan originator to post the Complaint no­ This agency hereby certifies that the adoption has been reviewed tice required in Finance Code, §157.007. by legal counsel and found to be a valid exercise of the agency’s The new §81.8, concerning Prohibition on False, Misleading, legal authority. or Deceptive Practices and Improper Dealings, describes what constitutes those acts and is substantially similar to 7 TAC §80.9. Filed with the Office of the Secretary of State on December 18, The new §81.9, concerning Advertising, describes the require­ 2009. ments for a residential mortgage loan originator to follow with re­ TRD-200905985 gard to advertising and is substantially similar to 7 TAC §80.11. Caroline Jones The new §81.10, concerning Books and Records, provides for General Counsel what books and records are to be maintained and is substantially Texas Department of Savings and Mortgage Lending similar to 7 TAC §80.13. Effective date: January 7, 2010 Proposal publication date: October 30, 2009 The new §81.11, concerning Complaints and Investigations, au­ thorizes the Commissioner or the Commissioner’s designee to For further information, please call: (512) 475-1352 investigate complaints and follows the complaint and investiga­ ♦ ♦ ♦ tion procedure found in 7 TAC §80.15. The new §81.12, concerning Examinations, describes the exam­ SUBCHAPTER B. PROFESSIONAL CONDUCT ination process and is substantially similar to 7 TAC §80.20. 7 TAC §§81.7 - 81.9 The new §81.13, concerning Investigations, authorizes the Com­ The new sections are adopted under Finance Code, §157.011, missioner to conduct an investigation of someone licensed under which authorizes the Finance Commission to adopt rules as pro­ the Act and is substantially similar to 7 TAC §80.21. vided by Chapter 157 of the Act. The new §81.14, concerning Hearings and Appeals, provides The section of the Act affected by the new sections is Finance for hearings under this chapter to be conducted in accordance Code, §157.011, relating to authority for the Finance Commis­ with 7 TAC Chapter 9 and designates the Hearings Officer for sion to adopt rules to implement the intended purpose of the Act the Finance Commission as the hearings officer under Chapter or to enforce the Act. The adopted sections relate to the follow­ 81. This section is substantially similar to 7 TAC §80.16. ing sections of the Finance Code: §§157.001, 157.002, 157.007, The new §81.15, concerning Annual Call Reports, provides for 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. annual reporting to the Commissioner and is similar to 7 TAC This agency hereby certifies that the adoption has been reviewed §80.23. by legal counsel and found to be a valid exercise of the agency’s The new §81.16, concerning Recovery Fund, clarifies allocation legal authority. of license and renewal fees to the Recovery Fund in compliance with Finance Code, Chapter 180 and administration of the Re­ Filed with the Office of the Secretary of State on December 18, covery Fund in accordance with Finance Code, Chapter 156. 2009. The new §81.17, concerning Interpretations, authorizes the TRD-200905986 Commissioner to publish written interpretations of the Act and the regulations.

ADOPTED RULES January 8, 2010 35 TexReg 215 Caroline Jones Caroline Jones General Counsel General Counsel Texas Department of Savings and Mortgage Lending Texas Department of Savings and Mortgage Lending Effective date: January 7, 2010 Effective date: January 7, 2010 Proposal publication date: October 30, 2009 Proposal publication date: October 30, 2009 For further information, please call: (512) 475-1352 For further information, please call: (512) 475-1352 ♦ ♦ ♦ ♦ ♦ ♦ SUBCHAPTER C. ADMINISTRATION AND SUBCHAPTER E. EXAMINATIONS AND RECORDS INVESTIGATIONS 7 TAC §81.10 7 TAC §81.12, §81.13 The new section is adopted under Finance Code, §157.011, The new sections are adopted under Finance Code, §157.011, which authorizes the Finance Commission to adopt rules as which authorizes the Finance Commission to adopt rules as pro­ provided by Chapter 157 of the Act. vided by Chapter 157 of the Act. The section of the Act affected by the new section is Finance The section of the Act affected by the new sections is Finance Code, §157.011, relating to authority for the Finance Commis­ Code, §157.011, relating to authority for the Finance Commis­ sion to adopt rules to implement the intended purpose of the Act sion to adopt rules to implement the intended purpose of the Act or to enforce the Act. The adopted section relates to the follow­ or to enforce the Act. The adopted sections relate to the follow­ ing sections of the Finance Code: §§157.001, 157.002, 157.007, ing sections of the Finance Code: §§157.001, 157.002, 157.007, 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. This agency hereby certifies that the adoption has been reviewed This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s by legal counsel and found to be a valid exercise of the agency’s legal authority. legal authority.

Filed with the Office of the Secretary of State on December 18, Filedwiththe Office of the Secretary of State on December 18, 2009. 2009. TRD-200905987 TRD-200905990 Caroline Jones Caroline Jones General Counsel General Counsel Texas Department of Savings and Mortgage Lending Texas Department of Savings and Mortgage Lending Effective date: January 7, 2010 Effective date: January 7, 2010 Proposal publication date: October 30, 2009 Proposal publication date: October 30, 2009 For further information, please call: (512) 475-1352 For further information, please call: (512) 475-1352 ♦ ♦ ♦ ♦ ♦ ♦ SUBCHAPTER D. COMPLAINTS AND SUBCHAPTER F. HEARINGS AND APPEALS INVESTIGATIONS 7 TAC §81.14 7 TAC §81.11 The new section is adopted under Finance Code, §157.011, which authorizes the Finance Commission to adopt rules as The new section is adopted under Finance Code, §157.011, provided by Chapter 157 of the Act. which authorizes the Finance Commission to adopt rules as provided by Chapter 157 of the Act. The section of the Act affected by the new section is Finance Code, §157.011, relating to authority for the Finance Commis­ The section of the Act affected by the new section is Finance sion to adopt rules to implement the intended purpose of the Act Code, §157.011, relating to authority for the Finance Commis­ or to enforce the Act. The adopted section relates to the follow­ sion to adopt rules to implement the intended purpose of the Act ing sections of the Finance Code: §§157.001, 157.002, 157.007, or to enforce the Act. The adopted section relates to the follow­ 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. ing sections of the Finance Code: §§157.001, 157.002, 157.007, 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s This agency hereby certifies that the adoption has been reviewed legal authority. by legal counsel and found to be a valid exercise of the agency’s legal authority. Filedwiththe Office of the Secretary of State on December 18, Filed with the Office of the Secretary of State on December 18, 2009. 2009. TRD-200905991 TRD-200905989

35 TexReg 216 January 8, 2010 Texas Register Caroline Jones Caroline Jones General Counsel General Counsel Texas Department of Savings and Mortgage Lending Texas Department of Savings and Mortgage Lending Effective date: January 7, 2010 Effective date: January 7, 2010 Proposal publication date: October 30, 2009 Proposal publication date: October 30, 2009 For further information, please call: (512) 475-1352 For further information, please call: (512) 475-1352 ♦ ♦ ♦ ♦ ♦ ♦ SUBCHAPTER G. ANNUAL CALL REPORTS SUBCHAPTER I. INTERPRETATIONS 7 TAC §81.15 7 TAC §81.17 The new section is adopted under Finance Code, §157.011, The new section is adopted under Finance Code, §157.011, which authorizes the Finance Commission to adopt rules as which authorizes the Finance Commission to adopt rules as provided by Chapter 157 of the Act. provided by Chapter 157 of the Act. The section of the Act affected by the new section is Finance The section of the Act affected by the new section is Finance Code, §157.011, relating to authority for the Finance Commis­ Code, §157.011, relating to authority for the Finance Commis­ sion to adopt rules to implement the intended purpose of the Act sion to adopt rules to implement the intended purpose of the Act or to enforce the Act. The adopted section relates to the follow­ or to enforce the Act. The adopted section relates to the follow­ ing sections of the Finance Code: §§157.001, 157.002, 157.007, ing sections of the Finance Code: §§157.001, 157.002, 157.007, 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. This agency hereby certifies that the adoption has been reviewed This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s by legal counsel and found to be a valid exercise of the agency’s legal authority. legal authority.

Filed with the Office of the Secretary of State on December 18, Filed with the Office of the Secretary of State on December 18, 2009. 2009. TRD-200905992 TRD-200905994 Caroline Jones Caroline Jones General Counsel General Counsel Texas Department of Savings and Mortgage Lending Texas Department of Savings and Mortgage Lending Effective date: January 7, 2010 Effective date: January 7, 2010 Proposal publication date: October 30, 2009 Proposal publication date: October 30, 2009 For further information, please call: (512) 475-1352 For further information, please call: (512) 475-1352 ♦ ♦ ♦ ♦ ♦ ♦ SUBCHAPTER H. RECOVERY FUND SUBCHAPTER J. ENFORCEMENT OF LIENS 7 TAC §81.16 7 TAC §81.18 The new section is adopted under Finance Code, §157.011, The new section is adopted under Finance Code, §157.011, which authorizes the Finance Commission to adopt rules as which authorizes the Finance Commission to adopt rules as provided by Chapter 157 of the Act. provided by Chapter 157 of the Act. The section of the Act affected by the new section is Finance The section of the Act affected by the new section is Finance Code, §157.011, relating to authority for the Finance Commis­ Code, §157.011, relating to authority for the Finance Commis­ sion to adopt rules to implement the intended purpose of the Act sion to adopt rules to implement the intended purpose of the Act or to enforce the Act. The adopted section relates to the follow­ or to enforce the Act. The adopted section relates to the follow­ ing sections of the Finance Code: §§157.001, 157.002, 157.007, ing sections of the Finance Code: §§157.001, 157.002, 157.007, 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. This agency hereby certifies that the adoption has been reviewed This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s by legal counsel and found to be a valid exercise of the agency’s legal authority. legal authority.

Filed with the Office of the Secretary of State on December 18, Filed with the Office of the Secretary of State on December 18, 2009. 2009. TRD-200905993 TRD-200905995

ADOPTED RULES January 8, 2010 35 TexReg 217 Caroline Jones rules were available for public comment from October 30, 2009 General Counsel through November 30, 2009. Texas Department of Savings and Mortgage Lending SUMMARY OF COMMENTS, STAFF RESPONSE AND BOARD Effective date: January 7, 2010 ACTION. Proposal publication date: October 30, 2009 Public comments and the Department’s responses are pre­ For further information, please call: (512) 475-1352 sented in the order in which the sections appeared, starting with ♦ ♦ ♦ comments concerning §60.102 and ending with comments con­ cerning §60.105. Following the section number is the title of the SUBCHAPTER K. SAVINGS CLAUSE section as it appears in the rule. Each number corresponds to a person or entity who commented on the particular rule section. 7 TAC §81.19 The key relating each number to a particular commenter is listed The new section is adopted under Finance Code, §157.011, below. Following the identification of the related commenter which authorizes the Finance Commission to adopt rules as is a summary of the comment and staff’s response, including provided by Chapter 157 of the Act. a statement of the factual basis for why the agency agreed or disagreed with the comment. The section of the Act affected by the new section is Finance Code, §157.011, relating to authority for the Finance Commis­ Public comments on the proposed amendments were received sion to adopt rules to implement the intended purpose of the Act from: (1) Texas Affiliation of Affordable Housing Providers; (2) or to enforce the Act. The adopted section relates to the follow­ Debra Coddington/South Plains Community Action Agency; and ing sections of the Finance Code: §§157.001, 157.002, 157.007, (3) Betsy Medina Cruz. 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021. §60.102. Definitions. This agency hereby certifies that the adoption has been reviewed COMMENT (1): Commenter suggested that the definition of sub­ by legal counsel and found to be a valid exercise of the agency’s stantial construction should be amended as follows: legal authority. (22) Substantial construction-­ Filed with the Office of the Secretary of State on December 18, (A) The minimum activity necessary to meet the requirements of 2009. substantial construction for new construction Developments will be defined as: TRD-200905998 Caroline Jones (i) delivery of an executed partnership agreement with the in­ General Counsel vestor; Texas Department of Savings and Mortgage Lending (ii) delivery of the executed loan note, deed of trust, and con­ Effective date: January 7, 2010 struction loan agreement; Proposal publication date: October 30, 2009 (iii) having infrastructurepermits; For further information, please call: (512) 475-1352 ♦ ♦ ♦ (iv) all necessary utilities available at the property; and (v) all Right of Way access or letter from municipality that such TITLE 10. COMMUNITY DEVELOPMENT will be completed by the completion date, and one of the follow­ ing: PART 1. TEXAS DEPARTMENT OF (I) 10 percent of the construction contract amount for the Devel­ HOUSING AND COMMUNITY AFFAIRS opment expended, adjusted for any change orders, and certified by the inspecting architect; or CHAPTER 60. COMPLIANCE ADMINISTRA­ (II) 100 percent of the foundations in place and 50 percent of the TION framing completed, or SUBCHAPTER A. COMPLIANCE (III) 25 percent of all residential buildings roofed. MONITORING The changes were recommended because the criteria are too 10 TAC §60.102, §60.105 specificforthe "...vari ety of styles of construction and locations in the program" and because "...each contractor, site and locality The Texas Department of Housing and Community Affairs (the may have different schedules". Department) adopts amendments to 10 TAC Chapter 60, Sub­ STAFF RESPONSE: The purpose of this benchmark is to en­ chapter A, §60.102 and §60.105 concerning Compliance Moni­ sure that construction has begun in a meaningful and measur­ toring with changes to the proposed text as published in the Oc­ able way. The reduction in the construction contract from 10% to tober 30, 2009, issue of the Texas Register (34 TexReg 7474). 20% negates the necessity for the other two bench marks. Staff The adopted amendments make changes to the Definitions and recommended the following definition which incorporates some the Reporting Requirements. of the suggested language: At the October Board meeting, the Board approved draft amend­ (22) Substantial Construction-­ ments to §60.102 and §60.105 of the Compliance Monitoring (A) The minimum activity necessary to meet the requirements of rules to be published for comment in the Texas Register. The substantial construction for new construction Developments will be defined as:

35 TexReg 218 January 8, 2010 Texas Register (i) delivery of an executed partnership agreement with the in­ the Affordability Period the Department shall monitor to ensure vestor; compliance with programmatic rules, regulations, and Application representations. (ii) delivery of the executed construction loan and construction loan agreement; (2) Application--An Application, in the form prescribed by the Department, filed with the Department by an Applicant, including (iii) completion of the foundation of the clubhouse (if applicable); any exhibits or other supporting material, pursuant to §2306.6702 in (iv) having all infrastructure permits; the Texas Government Code. (v) all grading completed (not including landscaping); (3) Architect of Record--The architect licensed in the ju­ risdiction that the project is located in, who prepares, stamps and signs (vi) all necessary utilities available at the property; the construction documents, and is legally recorded as the architect for (vii) all Right of Way access; and the project. (viii) 10 percent of the construction contract amount for the De­ (4) Board--The governing Board of the Texas Department velopment expended, adjusted for any change orders, and cer­ of Housing and Community Affairs. tified by the inspecting architect. (5) Code--The U.S. Internal Revenue Code of 1986, as §60.105. Reporting Requirements. amended from time-to-time, together with any applicable regulations, rules, rulings, revenue procedures, information statements or other COMMENT (2): Commenter suggested that §60.105 not be official pronouncements issued by the United States Department of changed to require a quarterly report in addition to an annual the Treasury or the Internal Revenue Service (IRS). report. (6) Compliance Period--With respect to a Housing Tax STAFF RESPONSE: The Department is requiring quarterly re­ Credit (HTC) building, the period of fifteen (15) taxable years, begin­ ports in response to Senate Bill 1717 which requires the De­ ning with the first year of the Credit Period, pursuant to §42(i)(1) in partment to adopt rules requiring Owners to report quarterly. No the Code. changes were recommended. (7) Continuously Occupied--The same household has §60.105. Reporting Requirements. residedintheUnit foratleast twelve (12) months. COMMENT (3): Commenter requested clarification on the due (8) Credit Period--With respect to a HTC building, the pe­ dates for the quarterly reports. riod of ten (10) taxable years, beginning with the taxable year the build­ STAFF RESPONSE: Staff concurred and recommended the fol­ ing is placed in service or at the election of the Development Owner, lowing amendment: the succeeding taxable year, as more fully defined in §42(f)(1) in the Code. (h) Periodic Unit Status Reports. All Developments must sub­ mit a quarterly Unit Status report to the Department through the (9) Department--The Texas Department of Housing and Compliance Monitoring and Tracking System (CMTS). Quarterly Community Affairs, an official and public agency of the State of reports are due in January, April, July and October on the 10th Texas, pursuant to Chapter 2306 in the Texas Government Code. day of the month. The report must show occupancy as of the (10) Development--A property or work, or a project, build­ last day of the previous month for the reporting period. For ex­ ing, structure, facility or undertaking, whether existing, new construc­ ample, the report due October 10th should report occupancy as tion, remodeling, improvement or rehabilitation, that meets or is de­ of September 30th. The first quarterly report is due January 10, signed to meet minimum property standards required by the Depart­ 2010. ment and that is financed under the provisions of Chapter 2306 in the The Board approved the final order adopting the amended sec­ Texas Government Code. tions, as well as administrative changes as needed for consis­ (11) Extended Use Period--With respect to a HTC building, tency within this chapter on December 17, 2009. the period beginning onthe first day of the Compliance Period and The amended sections are adopted pursuant to the authority of ending the later of: the Texas Government Code, Chapter 2306 which provides the (A) the date specified in the Land Use Restriction Department with the authority to adopt rules governing the ad­ Agreement; or ministration of the Department and its programs. (B) the date which is fifteen (15) years after the close of §60.102. Definitions. the Compliance Period. The following words and terms, when used in this subchapter, shall (12) Historically Underutilized Business (HUB)--Any en­ have the following meanings, unless the context clearly indicates oth­ tity defined as a historically underutilized business with its principal erwise. place of business in the State of Texas in accordance with Chapter 2161 (1) Affordability Period--The Affordability Period com­ in the Texas Government Code. mences as specified in the Land Use Restriction Agreement (LURA) (13) Housing Quality Standards--The property condition or federal regulation, or commences on the first day of the Compliance standards described in 24 CFR §982.401 in the Code of Federal Regu­ Period as defined by §42(i)(1) in the United States Internal Revenue lations. Code of 1986 and continues through the appropriate program’s afford- ability requirements or termination of the LURA, whichever is earlier. (14) HTC Development--Sometimes referred to as "HTC The term of the Affordability Period shall be imposed by the LURA Property." A Development using Housing Tax Credits allocated by the or other deed restriction and may be terminated upon foreclosure. The Department. Department reserves the right to extend the Affordability Period for HOME properties that fail to meet program requirements. During

ADOPTED RULES January 8, 2010 35 TexReg 219 (15) HUD--The United States Department of Housing and (vi) all necessary utilities available at the property; Urban Development. (vii) all Right of Way access; and (16) HUD-regulated Building--The rents and utility al­ (viii) 10 percent of the construction contract amount lowances of the building are reviewed by HUD on an annual basis. for the Development expended, adjusted for any change orders and (17) Low Income Unit--A Unit that is intended for occu­ certified by the inspecting architect. pancy by an income eligible household, as defined by the Department (B) The minimum activity necessary to meet the or the Code. requirement of Commencement of Substantial Construction for reha­ (18) Land Use Restriction Agreement or LURA--An bilitation Developments will be defined as having: agreement between the Department and the Development Owner (i) building permits issued or a clearance from the which is a binding covenant upon the Development Owner’s succes­ City stating that building permits are not required; sors in interest that encumbers the Development with respect to the requirements of Chapter 2306 in the Texas Government Code, the (ii) a certification that there are no reasonably fore­ Code, and the requirements of the various programs administered or seeable issues or circumstances which may prevent or delay the start funded by the Department. and progress of construction or the timely successful completion of re­ habilitation; and (19) Material Noncompliance-­ (iii) at least twenty (20) percent of the construction (A) A HTC Development located within the state of budget expended as documented by the inspecting architect. Texas will be classified by the Department as being in Material Non­ compliance status if the noncompliance score for such Development (23) Unit--Any residential rental Unit in a Development is equal to or exceeds a threshold of 30 points in accordance with the consisting of an accommodation, including a single room used as an Material Noncompliance provisions, methodology, and point system accommodation on a non-transient basis that contains complete physi­ of this title. cal facilities and fixtures for living, sleeping, eating, cooking, and san­ itation. (B) Non-HTC Developments monitored by the Depart­ ment with 1 - 50 Low Income Units will be classified as being in Ma­ (24) Unit Type--Units will be considered different Unit terial Noncompliance status if the noncompliance score is equal to or Types if there is any variation in the number of bedroom, bathrooms or exceeds a threshold of 30 points. Non-HTC Developments monitored a square footage difference equal to or more than one-hundred twenty by the Department with 51 - 200 Low Income Units will be classified as (120) square feet. Example 102(1): A two (2) bedroom/one (1) bath being in Material Noncompliance status if the noncompliance score is Unit is considered a different Unit Type than a two (2) bedroom/two equal to or exceeds a threshold of 50 points. Non-HTC Developments (2) bath Unit. A three (3) bedroom/two (2) bath Unit with 1,000 square monitored by the Department with 201 or more Low Income Units will feet is considered a different Unit Type than a three (3) bedroom/two be classified as being in Material Noncompliance status if the noncom­ (2) bath Unit with 1,200 square feet. A one (1) bedroom/one (1) bath pliance score is equal to or exceeds a threshold of 80 points. Unit with 700 square feet will be considered equivalent to a one (1) bedroom/one (1) bath Unit with 800 square feet. (C) For all programs, a Development will be in Mate­ rial Noncompliance if the noncompliance is stated in §60.121 of this (25) UPCS--Uniform Physical Condition Standards as de­ chapter to be Material Noncompliance. veloped by the Real Estate Assessment Center of the Department of Housing and Urban Development. (20) Non-HTC Development--Sometimes referred to as Non-HTC Property. Any Development not utilizing Housing Tax §60.105. Reporting Requirements. Credits. (a) The Department requires reports to be submitted electroni­ cally through the Department’s web-based Compliance Monitoring and (21) Owner--An individual, joint venture, partnership, Tracking System (CMTS) and in the format prescribed by the Depart­ limited partnership, trust, firm, corporation, limited liability company, ment. The Electronic Compliance Reporting Filing Agreement and the other form of business organization or cooperative that is approved by Owner’s Designation of Administrator of Accounts forms must be filed the Department as qualified to own, construct, acquire, rehabilitate, no later than September 1st of the year following the award. The De­ operate, manage, or maintain a housing Development, subject to the partment will provide general instruction regarding the electronic trans­ regulatory powers of the Department and other terms and conditions. ferofdata. Underspecial circumstances, the Department may, at its (22) Substantial Construction-­ discretion, waive the online reporting requirements where a hardship can be demonstrated. In the absence of a written waiver, all Develop­ (A) The minimum activity necessary to meet the re­ ments are required to submit reports online. quirements of substantial construction for new construction Develop­ ments will be definedas: (b) Each Development is required to submit an Annual Owner’s Compliance Report (AOCR). Depending on the property, (i) delivery of an executed partnership agreement some or all of the Report must be submitted. The first AOCR is due with the investor; the second year following the award. For example, if a Development (ii) delivery of the executed construction loan and is awarded funds in calendar year 2007, the first report is due in 2009. construction loan agreement; The AOCR is comprised of 4 sections: (iii) completion of the foundation of the clubhouse (1) Part A "Owner’s Certification of Program Compli­ (if applicable); ance." All Development Owners must annually certify to compliance with applicable program requirements. The AOCR Part A shall include (iv) having all infrastructure permits; answers to all questions required by Treasury Regulation 1.42-5(b)(1) (v) all grading completed (not including landscap­ or the applicable program rules. In addition, Owners are required to ing); report on the race and ethnicity, family composition, age, income, use

35 TexReg 220 January 8, 2010 Texas Register of rental assistance, disability status, and monthly rental payments of (h) Periodic Unit Status Reports. All Developments must sub­ individuals and families applying for and receiving assistance. HTC mit a Quarterly Unit Status report to the Department through the Com­ Developments during the Compliance Period will also be required to pliance Monitoring and Tracking System (CMTS). Quarterly reports provide the name and mailing address of the syndicator in the Annual are due in January, April, July, and October on the 10th day of the Owner’s Compliance Report. month. The report must show occupancy as of the last day of the pre­ vious month for the reporting period. For example, the report due Oc­ (2) Part B "Unit Status Report." All Developments must tober 10th should report occupancy as of September 30th. The first annually report the information related to individual household income, quarterly report is due January 10, 2010. rent, certification dates and other necessary data to ensure compliance with applicable program regulations. (i) Owners are encouraged to continuously maintain current resident data in the Department’s CMTS. Under certain circumstances, (3) Part C "Housing for Persons with Disabilities." The De­ such as in the event of a natural disaster, the Department may require partment must establish a system that requires Owners of state or fed­ all Developments to provide current occupancy data through CMTS. erally assisted housing Developments with 20 or more housing Units to report information regarding housing Units designed for persons with (j) All rental Developments funded or administered by the De­ disabilities. The questions on Part C satisfy this requirement. partment will be required to submit a current Unit Status Report prior to an onsite monitoring visit. (4) Part D "Owner’s Financial Certification." Develop­ ments funded by the Department must annually provide the data This agency hereby certifies that the adoption has been reviewed requested in the Owner’s Financial Certification. by legal counsel and found to be a valid exercise of the agency’s legal authority. (c) Parts A, B and C of the Annual Owner’s Compliance Re­ port must be provided to the Department no later than March 1st of each Filed with the Office of the Secretary of State on December 18, year, reporting data current as of December 31st of the previous year (the reporting year). Part D, "Owner’s Financial Certification", which 2009. includes the current audited financial statements and income and ex­ TRD-200905983 penses of the Development for the prior year, must be submitted to the Michael Gerber Department no later than the last day of April each year. Executive Director (d) Any Development for which the AOCR, Part A, "Owner’s Texas Department of Housing and Community Affairs Certification of Program Compliance," is not received or is received Effective date: January 7, 2010 past the due date will be considered not in compliance with this section. Proposal publication date: October 30, 2009 If Part A is incomplete, improperly completed, or is not submitted by For further information, please call: (512) 475-3916 the Development Owner, it will be considered not received and not in compliance with this section. The Department will report to the ♦ ♦ ♦ IRS on Form 8823, Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition, any HTC Development that TITLE 16. ECONOMIC REGULATION fails to comply with this requirement. PART 2. PUBLIC UTILITY (e) Department staff will review Part A of the AOCR for com­ pliance with the requirements of the appropriate program. If it appears COMMISSION OF TEXAS that the Development is not in compliance based upon the report, the Owner will be given written notice and provided a corrective action CHAPTER 25. SUBSTANTIVE RULES period to clarify or correct the report. If the Owner does not respond to APPLICABLE TO ELECTRIC SERVICE the notice, the report will be subject to the sanctions listed in subsec­ tions (f) and (g) of this section. PROVIDERS (f) If any required section, or sections (Parts A, B, C or D), SUBCHAPTER R. CUSTOMER PROTECTION of the report are not received on or before the deadline for submission RULES FOR RETAIL ELECTRIC SERVICE specified in subsection (c) of this section, a notice of noncompliance will be sent to the Owner, specifying a corrective action deadline. If 16 TAC §25.475 the report is not received on or before the corrective action deadline, The Public Utility Commission of Texas (commission) adopts the Department shall: an amendment to §25.475, relating to General Retail Electric (1) For all HTC properties, issue Form 8823 notifying the Provider Requirements and Information Disclosures to Residen­ IRS of the violation; and tial and Small Commercial Customers, with changes to the pro­ posed text as published in the August 14, 2009, issue of the (2) For all properties, score the noncompliance in accor­ Texas Register (34 TexReg 5461). The amendment implements dance with §60.121 of this chapter. certain portions of House Bill (HB) 1822 from the 81st Regular (g) The Department may assess and enforce the following Legislative Session (2009). The amendment is a competition sanctions against an Owner who fails to submit the AOCR on or before rule subject to judicial review as specified in Public Utility Regu­ March 1st of each year and has multiple, consistent, and/or repeated latory Act (PURA) §39.001(e). The amendment is adopted under violations of failure to submit the AOCR by March 1st of each year: Project Number 37214. (1) a late processing fee in the amount of $1,000; and/or The commission received comments on the proposed amend­ ment from Fox Smolen and Associates, Inc (Fox Smolen); Of­ (2) a HTC Development that fails to submit the required fice of Public Utility Counsel (OPC); CenterPoint Energy; Reliant AOCR for three (3) consecutive years may be reported to the IRS as Energy Retail Services, LLC, Gexa Energy, LP, Green Moun­ no longer in compliance and never expected to comply. tain Energy Company and Stream Energy (Reliant et al.); Oncor

ADOPTED RULES January 8, 2010 35 TexReg 221 Electric Delivery Company, LLC, AEP Texas Central Company, have the power to negotiate or the opportunity to bargain around AEP Texas North Company, and Texas New Mexico Power Com­ the standard form contracts provided by their REPs of choice pany (Joint TDUs); Retail Electric Companies, consisting of ARM and may not have legal representation or expertise in selecting (Constellation New Energy, Inc; Direct Energy, LP; First Choice electric service plans. OPC requested the commission change Power; Green Mountain Energy Company; Gexa Energy, LP; In­ the definition throughout its rules, including §25.471 and §25.5. tegrys Energy Services of Texas, LP; Sempra Energy Solutions, Retail Electric Companies stated that OPC appears to point to LLC; and Stream Energy), CPL Retail, Reliant Energy Retail Ser­ the definition of small commercial customer in PURA §39.202(o) vices, LLC, TEAM (consisting of Accent Energy; Amigo Energy; to supports its argument to change the definition. However, Re­ Cirro Energy; Green Mountain Energy; Just Energy; Hudson En­ tail Electric Companies argued that the only legal effect of the ergy Services; StarTex Power; Stream Energy; Tara Energy; and PURA definition of small commercial customer is to determine TriEagle Energy); TXU Retail Company, LLC; and WTU Retail which customers were eligible for "Price to Beat" service which Energy; and Steering Committee of the Cities Served by Oncor expired on January 1, 2007. Consequently, Retail Electric Com­ (Oncor Cities). panies did not believe there was relevant statutory guidance from Comment Summary PURA §39.202 and that the statutory guidance came from PURA §39.101, which establishes numerous rights for customers but §25.475(a) does not distinguish between customer classes. Retail Electric Retail Electric Companies pointed out that the effect of striking Companies pointed out that the commission has addressed the thelanguagein(a) wouldbetoreverse thedecisionto grandfa­ appropriate threshold on several occasions but has thoughtfully ther contracts and recommended the language be amended to chosen to keep the level at 50 kW. Retail Electric Companies preserve the grandfathering of the existing contract documents. argued that the level has been 50 kW for nearly a decade and should remain at that level as most of the provisions of the cus­ Retail Electric Companies also commented that it will take time tomer protection rules are irrelevant to commercial customers and resources to again modify systems and processes to com­ over 50 kW and are costly for REPs to provide. ply with changes to the disclosure rule and requested an imple­ mentation date of March 1, 2010 for the new contract expira­ Commission Response tion requirements. At a minimum retail electric providers (REPs) The commission agrees with the Retail Electric Companies that would need to modify supply procurement strategies to conform the commission has the authority to set a load threshold above to new contract expiration notice timelines (30-60 days for resi­ which a customer may waive the commission’s various customer dential and 14-60 for small commercial). Retail Electric Compa­ protection rules. The commission has entertained this issue on nies added that if the commission determines that REPs must at least three occasions as the Retail Electric Companies point send both mail and electronic notice to customers then that will out. Most recently a question was asked in the proposal for pub­ require major system changes and March 1 would be a very ag­ lication of §25.475 in 2008 as to whether 50 kW was the appro­ gressive timeline to achieve compliance. They also proposed priate threshold for waiver of the commission’s customer protec­ that until March 1, 2010 the rule in existence today continue to tion rules and the commission determined that the level should apply. OPC felt that the REPs claims were unfounded since HB remain at 50 kW. The commission still believes that 50kW is the 1822 is not intended to be a huge burden on the industry. OPC appropriate level and therefore does not make the change to the stated that REPs have been on notice for quite some time that threshold that OPC suggested. changes were coming and were to be effectuated to provide cus­ tomer’s notice of their fixed price contract expiration dates. OPC Reliant et al. requested the commission allow a direct pass- believed that further delay will only lend to the continued confu­ through of transmission and distribution utility (TDU) charges on sion and frustration of Texas electric customers. variable price products to assure consistency among retail prod­ ucts. Reliant et al. stated that the electricity facts label (EFL) Commission Response of a variable price product is required to display the total aver­ The commission agrees with Retail Electric Companies that the age price reflecting all recurring charges and a statement that fixed price contracts entered into before the effective date of the price quoted is the price that will be applied in the first billing the amendment should not be required to comply with the re­ cycle. However, the definition of fixed rate products and indexed quirements of the amendment, and that the current requirements rate products specifically allow TDU charges and other fees be­ should remain in effect for those contracts. The commission yond a REP’s control to be passed through to customers. Re­ believes the requirements of the amendment should be imple­ liant et al. did not believe there was a sound basis for differ­ mented as soon as possible and therefore believes that com­ entiating between fixed, indexed, and variable and restricting panies should be compliant by April 1, 2010. The commission such a pass through could not have been intended when the changes the rule to make it effective April 1, 2010. commission included the requirement to state that the price will apply during the first billing cycle. Additionally, without chang­ §25.475(b) ing certain billing systems, REPs cannot stop changes in TDU OPC suggested adding a definition of small commercial cus­ charges that are passed through as part of the price from flowing tomer as a customer with a demand less than 500 KW or through automatically to customers, and even if billing systems 1,000 kW as set forth in PURA, during any 12-month period were changed, REPs must try and capture the lost revenues in to ensure more Texas small commercial businesses enjoy the the future and would try to collect higher prices from existing cus­ protections extended to residential and other small commercial tomers to pay those charges on some sort of uplift basis to make customers. OPC expressed concerns regarding typical small the REPs whole. Reliant et al. concluded that it would be incon­ businesses which may exceed the 50 kW threshold set in the sistent and unsound public policy to interpret rules in a way that customer protection rules but not the 1,000 kW threshold set would preclude REPs from passing through such changes for out in PURA, since these may be mom-and-pop businesses, variable price products. churches, schools, or others types of businesses that do not

35 TexReg 222 January 8, 2010 Texas Register The Joint TDUs and CenterPoint agreed that the commission Fox Smolen stated that one of the most troublesome elements should allow direct pass through of TDU charges on variable of contracts are the different ways in which REPs describe and price products. The Joint TDUs pointed out that TDU charges interpret the contract term. For instance, some REPs define are a non-bypassable charge and must be paid by the REP re­ or interpret the contract "term" differently. Some REPs define gardless of whether the REP is paid by the customer for the or assume that the contract begins on the date the contract is charges. The TDUs believed that it was inconsistent for fixed signed and calculate the expiration date of the contract as twelve rate and term products to be able to immediately reflect TDU months from that date; others assume the contract starts on the rates while variable rate products cannot, and that possible out­ date the ESI ID is switched; and other contract terms are for comes would include REPs losing money, REPs being unable 12 meter reads. Therefore, providing notice as required by HB to offer variable products, or REPs opposing TDU rate changes. 1822 will assist Texas small commercial customers in knowing CenterPoint stated that it became aware of this problem dur­ when they may opt for a new plan with their current REP or shop ing the discussions that led to the settlement of Docket Number around and choose another REP. 37200, CenterPoint’s application for a financing order to securi­ Fox Smolen recommended that the commission institute a safe tize the distribution portion of its Hurricane Ike restoration costs harbor provision for customers if the date included on a cus­ and issue system restoration bonds. Under the financing or­ tomer’s bill is in error due to modifications made by the TDU’s der, CenterPoint as the servicer for the bonds is authorized to annually published meter reading schedule since REPs cannot begin collecting the system restoration charges almost immedi­ ensure that the TDU will always adhere to the published sched­ ately after the bonds are sold. CenterPoint commented that the ules. Fox Smolen also believed that REPs should not be held almost immediate collection of revenues to begin repayment of responsible for erroneous dates on the customers’ bills due to the bonds’ principal and interest is one of the features that makes erroneous meter read dates provided by the TDU, and that cus­ securitization bonds highly attractive to investors, which results tomers should not be charged fees or penalties when switch­ in the bonds carrying lower interest rates that ultimately benefit ing to a new provider for inadvertently designating an erroneous retail customers. Given the benefit to consumers, CenterPoint contract end date because of a meter read date that has been argued that it is incongruous and counter-productive for a com­ changed by the TDU. Oncor Cities stated that REPs nonetheless mission rule to cause REPs to suffer unrecovered costs as a have no problem assigning an end date to a contract when it ben­ result of the securitization procedures or changes in Electric Re­ efits the REP to do so, i.e., when the REP wants to charge early liability Council of Texas (ERCOT) fees or regulatory actions. termination penalties. Retail Electric Companies stated that pro­ Commission Response hibiting termination penalties for 14 days before or after the ac­ tual switch date was not practical either since it essentially adds The commission agrees with Reliant et al., CenterPoint, and the a month of termination fee waivers to the uncertainty outside of TDUs that REPs should be allowed to recover actual changes in the REP’s control as to when the TDU will read the meter. Also TDU charges, changes to the ERCOT or Texas Regional Entity as advanced meters are deployed more widely more and more administrative fees charged to loads or changes resulting from meter reads will be performed remotely and predictably, which federal, state or local laws or regulatory actions that impose new will enable the TDU to more reliably commit to a specific date. or modified fees or costs on a REP that were not implemented prior to the issuance of the EFL and were not included in the av­ Oncor Cities stated that there should be no provision for estimat­ erage price calculation. These changes may be passed directly ing the contract date and that the end date of the contract should through to customers on variable price products beginning with always be a specific date that is based on a date x amount of time the first billing cycle. The commission changes the rule accord­ after the contract was activated, and any delay in a meter read ingly. should not be a problem for customers. Retail Electric Compa­ nies did not believe that was a practical solution for the market §25.475(c) as it exists today as REPs and their customers are subject to REPs requested that the requirement to include the end date for the meter reading schedules of the TDUs and the REP has no a fixed rate product be placed in §25.479 relating to bill format. control over when the TDU will read the meter, nor do these com­ OPC agreed and added that requirements relating to the display ments take into account force majeure events such as Hurricane of beginning and ending meter reads on customer billing state­ Ike which render meter reading virtually impossible. ments are more appropriately included in §25.479 since that rule Commission Response relates to all retail customers and §25.475 is limited to REP in­ formation disclosures to residential and small commercial cus­ The commission agrees with Oncor Cities and Fox Smolen that tomers. estimation has caused a great deal of customer confusion be­ cause customers do not know what day they will be switched to Commission Response another provider and when the contract ends. Due to the im­ The commission agrees with the REPs that billing requirements plementation of the commission’s new switching rules, there is shouldbecontained in the billing format rule, §25.479, and no longer a 45-day window for a switch and thus there is less makes the change in that rule since it is also currently open to uncertainty associated with a switch date. The commission rec­ implement HB 1822. ognizes that the exact date the customer will be switched to a new provider is still not known ahead of time and therefore grants §25.475(c)(3)(B) some leeway to the REPs to choose how to present the end date Retail Electric Companies stated that the requirement that of the contract. The commission understands that some REPs a REP’s estimate be based on the TDU meter reading will will be able to determine a specific contract termination date and be problematic especially given that the commission recently other REPs may need to determine the contract termination date reduced the standard switching time to only seven days; the by referencing to the first meter read on or after a specificcalen­ end of the term may not coincide with the TDU’s meter reading dar date. The commission determines that if a REP provides an schedule. exact calendar date for termination, then no termination penalty

ADOPTED RULES January 8, 2010 35 TexReg 223 should apply within 14 days of that contract termination date. If §25.475(e) the REP determines the contract termination date by referenc­ Oncor Cities stated and TX ROSE agreed that the proposed ing the meter read date after a certain period, then no termination amendment creates inconsistent protections between those af­ penalty should apply from the time the customer receives the ter­ forded to residential and those afforded to small commercial. mination notice. The commission amends the rule accordingly. Oncor Cities requested that REPs should be required to send Retail Electric Companies agreed with the proposed rule that the a written notice of contract expiration at least 30 days (or one start and end dates of the contract shouldbeavailabletothe billing cycle) prior to the date of contract expiration regardless of customer upon request. Oncor Cities and TX ROSE disagreed. whether the customer is a residential or small commercial cus­ Oncor Cities stated that HB 1822 does not put the burden on tomer. Retail Electric Companies responded that the contract consumers to request information; it puts the burden on REPs to expiration notice requirements in PURA §39.112 apply only to provide such information on each statement. fixed rate products provided to residential customers. There is no corresponding provision that requires 30 days’ notice of con­ Commission Response tract expiration to small commercial customers. In addition, the The commission agrees with Oncor Cities and Texas Rose that longer the period in advance of contract expiration that a REP having the contract dates simply available to the customer upon is required to provide notice, the greater the hedging costs the request does not meet the spirit or requirements of HB 1822. REP will incur. The commission believes that the end date should be placed Commission Response on the customer’s bill as required by the statute. That require­ ment will be contained in §25.479 and has been deleted from The commission agrees with Retail Electric Companies that this rule. The commission believes the start date may not be there is no requirement to send a contract expiration notice known when the customer signs up, but the end date should be to commercial customers in PURA. Since the commission will a determinable date once the start date is known. When a REP now require the REP to include the contract expiration date on elects to determine the contract termination date by reference to each bill, the termination notice 30-60 days out is no longer the first meter read date on or after a specific date, subsection necessary. The commission agrees with REPs that the costs (e)(1)(C)(iii) has been added so that the customer is not subject of providing termination notices to commercial customers 30-60 to termination penalties upon receipt of contract termination no­ days out can greatly increase costs and the commission is not tice. convinced that the benefit to the customer would exceed the costs to the REP. Retail Electric Companies disagreed with OPC that PURA §39.112(c) requires REPs to include end dates of fixed rate OPC agreed with Retail Electric Companies that a contract ex­ products on bills rendered to both residential and small com­ piration notice could be sent to residential customers via mail or mercial customers, as §39.112 clearly applies only to fixed rate e-mail and need not be sent both ways. products provided to residential customers and the commission Commission Response should ensure that the meaning of the phrase "the fixed rate product" is properly reflectedinthe rule. The commission agrees with Retail Electric Companies and OPC that the expiration notice may be sent by mail or e-mail Commission Response and does not require the notice to be sent both ways. The commission agrees with Retail Electric Companies that HB §25.475(e)(1)(B)(ii)(II) 1822 does not require end dates of fixed rate products on bills for small commercial customers. However, the commission be­ Retail Electric Companies disagreed with the requirement that lieves that knowing the end date of contract is important for small the REP provideoneachbilltosmall commercialcustomers the commercial customers as well as residential and adds the re­ billing cycle and month that the existing contract will expire. They quirement to §25.479. proposed to keep the rule as it currently is for small commercial customers since Section 5 of HB 1822 focuses on expiration no­ §25.475(d)(2)(B) tices for residential customers in particular. Retail Electric Companies raised an issue concerning the option Commission Response for a fixed price product that an allowed price change can be stated on a separate line item on the bill. Retail Electric Com­ The commission agrees with Retail Electric Companies that HB panies stated that this provision cannot always be implemented 1822 does not require this for commercial customers; however, due to the way that TDUs implement rates. For example, re­ the commission agrees that knowing the end date of a contract cently the marketwasnoti fied on a Friday that new rates would is important for commercial customers as well and adds that re­ be implemented effective the previous day, which required can­ quirement to §25.479. celling and rebilling of invoices that had already been generated §25.475(e)(1)(C)(ii) by the TDU. The Retail Electric Companies argued that the rules applicable to REPs must be conformed to accommodate how the Retail Electric Companies disagreed with the requirement to in­ commission is allowing TDU rate changes. clude the specific amount of the termination fees. The statute requires a description of the fees and not the amounts of such Commission Response fees. Retail Electric Companies argued that the amounts may The commission adopts §25.475(d)(2)(B) to provide the option vary significantly depending on which product the customer is of showing price changes on the bill or including in the bill a on and the date the notice was received and it would be costly conspicuous notice stating that the amount billed may include to have to customize these notices to each individual customer. price changes allowed by law or regulatory actions. A REP that OPC disagreed with REPs and asserted that providing the spe­ cannot show the price change as a separate line item on the bill cificamountofany termination fees meets the requirement of de­ should therefore use the second option provided by the rule. scribing the early termination fee as required by the legislation.

35 TexReg 224 January 8, 2010 Texas Register TX ROSE also disagreed and stated that the amount of the fee is cial customer, no termination penalty shall apply 14 days prior to the most important part of the description for the consumer. TX contract expiration, regardless of whether the contract expiration ROSE urged the commission to reject the notion that a descrip­ is on a specificdateorisdefined by reference to a meter-read tion of fees does not include the amount of the fee. Oncor Cities date. The commission makes changes to the rule accordingly. urged the commission to reject the REPs’ arguments as REPs Retail Electric Companies proposed to clarify when statements routinely customize billing notices to reflect different rate plans required by this provision do not need to be included in the notice. and fairness dictates that customers know the amount of fees Retail Electric Companies argued that since the proposed rule or charges that they face for early termination. OPC stated that language states that the statements need not be included when this requirement should apply to small commercial customers as there is no termination fee, it is clear for a contract that never well as residential. had a termination fee but it is not clear for a situation where the Commission Response product includes a termination penalty that the REP is choos­ ing to waive. Retail Electric Companies state that making this The commission recognizes the Retail Electric Providers’ con­ modification will help avoid customer confusion that would be cerns about cost to determine specific termination amounts and created by including bold statements that termination penalties agrees that the statute requires a description of the termination apply when in reality they do not. fees and not the amount. The commission requires REPs to pro­ vide a description of any fees or charges associated with early Commission Response termination but does not require the REP to calculate and pro­ The commission concludes that the REP who provides an exact vide the amount of termination as part of the contract termination date for the contract expiration date should provide a statement notice. in the contract expiration notice stating that no penalty shall apply Oncor Cities stated that this provision can have the effect of pe­ fourteen days prior to the end date stated in the contract expi­ nalizing a customer who wishestopromptlyexercisethepower ration notice and provided to the customer on its bill. Since the to choose an electric provider as soon as he or she receives contractsthatexpireona meterreadonorafter a certain date writtennoticethatthe fixed term contract is expiring. Under the do not allow termination penalties after the termination notice is proposed amendment, any customer who has received notifica­ sent out, the termination notice should state that. The commis­ tion of a contract must wait at least two weeks before switching in sion makes changes to the rule consistent with this. order to avoid a penalty, and this creates an improper burden for §25.475(e)(1)(C)(iv) the customer, and is bad for competition as it exacerbates cus­ tomer stickiness in the market. TX ROSE stated that shopping Oncor Cities stated that the proposed language raises questions for a new REP is a time consuming task. If the switch takes place as to whether REPs will always include important information in ten calendar days a 14 day window allows the consumer four about default plans in the expiration notice. Oncor Cities stated days to get the notice, figure out what needs to be done and in­ that the subsection should be modified to further encourage a vestigate options. Illness, out of town travel, vacation, and civic REP to always include EFLs in contract notices such that there duties can make it impossible to switch REPs without paying a are clear disclaimers that the REP cannot provide pricing details penalty or a high bill because of the increased rates charged af­ and that the default renewal product may be substantially differ­ ter the contract expired. Therefore, Oncor Cities and TX ROSE ent and the rates may be higher. OPC agreed. Retail Electric proposed that any written notice of contract expiration include Companies and TEAM stated that the additional language pro­ the clear language that a customer faces no early termination posed by Oncor Cities is unnecessary and has an alarmist tone penalties for acting upon notice prior to the expiration of the con­ to it and is not appropriate for the contract expiration notice. tract. OPC agreed that REPs should be prohibited from charging Commission Response early termination fees once the customer receives notice of the pending contract termination. Retail Electric Companies stated The commission disagrees with Oncor Cities that the customer that the commission decided to allow for a 14-day termination fee will not have the information contained in the EFL. The commis­ waiver because it is not clear when a switch will be completed. sion still requires an EFL be sent to the customer 14 days before However, changing the time for providing the contract expiration the contract expires. The commission disagrees that language notice for residential customers to 30 days instead of 14 does not proposed by Oncor Cities for the termination notice is necessary. increase the level of uncertainty associated with the time of TDU The commission believes that the requirements for the termina­ meter reads. Also, the Retail Electric Companies restated that tion notice are adequate and does not make changes to the rule its proposal to eliminate statements about termination penalties basedonOncorCi ties’ request. under certain conditions provides an incentive to REPs to waive TEAM stated that this provision is unworkable as the customer the fees when notice is provided in order not to make the termi­ may have selected a different renewal product or even a different nation notice statement. REP based on the notice of contract expiration sent in the 30-60 Commission Response day window and the customer could be confused if he or she had already taken action. In addition, the proposed amendment The commission determines that its requirement for REPs to would impose additional costs to the REP for a second mailing place the contract termination date of fixed-rate products on each that may not even be relevant to the customer. TEAM proposed bill will provide customers with enough notice in advance of ex­ that the EFL be available by reference on the powertochoose piration to shop for a REP. If the contract expiration date for a website or another website or toll-free number rather than be residential customer is a specific date, no termination penalty sent directly to the customer. shall apply 14 days prior to contract expiration. If the contract expiration date for a residential customer is by reference to the TX ROSE asked the commission to revise this provision to in­ first meter-read date on or after a specific calendar date, then clude the EFL for the new product to be included with the ini­ no termination penalty shall apply once the customer receives tial notice and that a REP should be prohibited from charging the written notice of contract expiration. For a small commer­ the early termination fee once the customer receives notice of

ADOPTED RULES January 8, 2010 35 TexReg 225 the pending contract termination and change in electricity price. contracts entered into before this date, but shall provide notice of expi­ TEAM stated that this was unworkable because it would saddle ration as required by subsection (e) of this section. REPs with significant exposure by requiring REPs to commit to (b) Definitions. The following words and terms, when used a default price without an accompanying commitment from the in this section shall have the following meanings, unless the context customer that he will actually take power from the REP under indicates otherwise. the terms of the renewal product, and this goes beyond the re­ quirements of HB 1822. (1) Contract--The Terms of Service document (TOS), the Electricity Facts Label (EFL), Your Rights as a Customer document Commission Response (YRAC), and the documentation of enrollment pursuant to §25.474 of The commission disagrees with TEAM that the default EFL this title (relating to Selection of Retail Electric Provider). should not be sent to the customer. The commission has (2) Contract documents--The TOS, EFL and YRAC. granted REPs leeway by allowing them to send the EFL after the termination notice has gone out in order to allow REPs (3) Contract expiration--The time when the initial term more time to get an accurate price for the default product. contract is completed. A new contract is initiated when the customer However, the commission determines that it is imperative that begins receiving service pursuant to the new EFL. the customer have the information in hand in order to make a (4) Contract term--The time period the contract is in effect. decision as to whether to stay on the default product or choose anewREP. (5) Fixed rate product--A retail electric product with a term of at least three months for which the price (including recurring §25.475(e)(2)(A) charges) for each billing period of the contract term is the same Retail Electric Companies requested that during a call to re-enroll throughout the contract term, except that the price may vary from the with a REP that the customer not be required to provide an ESI ID disclosed amount solely to reflect actual changes in the Transmission and the REP not be required to provide the identification number and Distribution Utility (TDU) charges, changes to the Electric of the TOS and EFL under which thecustomerwillbeserved. Reliability Council of Texas (ERCOT) or Texas Regional Entity They stated that these requirements are time consuming and administrative fees charged to loads or changes resulting from federal, burdensome and provide customers with no additional benefit state or local laws that impose new or modified fees or costs on a REP or protection. that are beyond the REP’s control. Commission Response (6) Indexed product--A retail electric product for which the price, including recurring charges, can vary according to a pre-defined The commission agrees that many customers may not have easy pricing formula that is based on publicly available indices or informa­ access to the ESI ID information and that there is cost without tion and is disclosed to the customer, andtoreflect actual changes in added value to having it recorded. However, the commission dis­ TDU charges, changes to the ERCOT or Texas Regional Entity admin­ agrees that the REP should not be required to state which TOS istrative fees charged to loads or changes resulting from federal, state and EFL under which the customer is being served. It is very or local laws or regulatory actions that impose new or modified fees or important to the customer and to the commission to have this costs on a REP that are beyond the REPs control. An indexed product information when researching whether the customer is receiving may be for a term of three months or more, or may be a month-to-month the correct rate and the terms and conditions under which the contract. customer is being served. (7) Month-to-month contract--A contract with a term of 31 All comments, including any not specifically referenced herein, days or less. A month-to-month contract may not contain a termination were fully considered by the commission. In adopting this fee or penalty. amended rule, the commission makes other minor modifications for the purpose of clarifying its intent. (8) Price--The cost for a retail electric product that includes all recurring charges excluding state and local sales taxes, and reim­ This amendment is adopted under the Public Utility Regulatory bursement for the state miscellaneous gross receipts tax. Act, Texas Utilities Code Annotated §14.002 (Vernon 2007 and Supp. 2009) (PURA), which provides the commission with the (9) Recurring charge--A charge for a retail electric product authority to make and enforce rules reasonably required in the that is expected to appear on a customer’s bill in every billing period exercise of its powers and jurisdiction; and specifically, §17.003, or appear in three or more billing periods in a twelve month period. A which requires that the commission to adopt and enforce rules charge is not considered recurring if it will be billed by the TDU and to require a retail electric provider to give clear and uniform in­ passed on to the customer and will either not be applied to all customers formation about rates, terms, and services; and §39.112, which of that class within the TDU territory, or cannot be known until the requires a REP to provide certain information to a residential cus­ customer enrolls or requests a specific service. tomer who has a fixed rate product. (10) Term contract--A contract with a term in excess of 31 Cross Reference to Statutes: Public Utility Regulatory Act days. §§14.002, 17.003, and 39.112. (11) Variable price product--A retail product for which §25.475. General Retail Electric Provider Requirements and Infor- price may vary according to a method determined by the REP, includ­ mation Disclosures to Residential and Small Commercial Customers. ing a product for which the price, can increase no more than a defined percentage as indexed to the customer’s previous billing month’s (a) Applicability. The requirements of this section apply to re­ price. For residential customers, a variable price product can be only tail electric providers (REPs) and aggregators, when specifically stated, a month-to-month contract. in connection with the provision of service and marketing to residen­ tial and small commercial customers. This section is effective April 1, (c) General Retail Electric Provider requirements. 2010. REPs are not required to modify contract documents related to (1) General Disclosure Requirements.

35 TexReg 226 January 8, 2010 Texas Register (A) All written, electronic, and oral communications, (E) A REP shall not use a credit score, a credit history, including advertising, websites, direct marketing materials, billing or utility payment data as the basis for determining the price for electric statements, TOSs, EFLs and YRACs distributed by a REP or aggre­ service for a product with a contract term of 12 months or less for an gator shall be clear and not misleading, fraudulent, unfair, deceptive, existing residential customer or in response to an applicant’s request to or anti-competitive. Prohibited communications include, but are not become a residential customer. limited to: (F) In any dispute between a customer and a REP con­ (i) Using the term or terms "fixed" to market a prod­ cerning the terms of a contract, any vagueness, obscurity, or ambiguity uct that does not meet the definition of a fixed rate product. in the contract will be construed in favor of the customer. (ii) Suggesting, implying, or otherwise leading (G) For a variable price product, the REP shall disclose someone to believe that a REP or aggregator has been providing retail on the REP’s website and through a toll-free number the current price electric service prior to the time the REP or aggregator was certified and, for residential customers, one year price history, or history for the or registered by the commission. life of the product, if it has been offered less than one year. A REP shall not rename a product in order to avoid disclosure of price history. (iii) Suggesting, implying or otherwise leading The EFL of a variable price product or indexed product shall include someone to believe that receiving retail electric service from a REP a notice of how the current price and, if applicable, historical price will provide a customer with better quality of service from the TDU. information may be obtained. (iv) Falsely suggesting, implying or otherwise lead­ (H) A REP shall comply with its contracts. ing someone to believe that a person is a representative of a TDU or any REP or aggregator. (3) Specific contract requirements. (v) Falsely suggesting, implying or otherwise lead­ (A) The contract term shall be conspicuously disclosed. ing someone to believe that a contract has benefits for a period of time (B) The start and end dates of the contract shall be avail­ longer than the initial contract term. able to the customer upon request. If the REP cannot determine the start (B) Written and electronic communications shall not re­ date, the REP may estimate the start date. After the start date is known, fer to laws, including commission rules without providing a link or the REP shall specify the end date of the contract by: website address where the text of those rules are available. All printed (i) specifying a calendar date; or advertisements, electronic advertising over the Internet, and websites, shall include the REP’s certified name or commission authorized busi­ (ii) reference to the first meter read on or after a spe­ ness name, or the aggregator’s registered name, and the number of the cific calendar date. certification or registration. (C) If a REP specifies a calendar date as the end date, (C) The TOS, EFL, and YRAC shall be provided to the REP may bill the term contract price through the first meter read on each customer upon enrollment. Each document shall be provided to or after the end date of the contract. the customer whenever a change is made to the specific document and (4) Website requirements. upon a customer’s request, at any time free of charge. (A) Each REP that offers residential retail electric prod­ (D) A REP shall retain a copy of each version of the ucts for enrollment on its website shall prominently display the EFL TOS, EFL, and YRAC during the time the plan is in effect for a cus­ for any products offered without a person having to enter any personal tomer and for four years after the contract ceases to be in effect for information other than zip code and information that allows determina­ any customer. REPs shall provide such documents at the request of the tion of the type of offer the consumer wishes to review. Person-specific commission or its staff. information shall not be required. (2) General contracting requirements. (B) The EFL for each product shall be printable in no (A) A TOS, EFL, and YRAC shall be complete, shall more than a two page format. The EFL, TOS, and YRAC for any prod­ be written in language that is clear, plain and easily understood, and ucts offered for enrollment on the website shall be available for viewing shall be printed in paragraphs of no more than 250 words in a font no or downloading. smaller than 10 point. References to laws including commission rules (d) Changes in contract and price and notice of changes. A in these documents shall include a link or internet address to the full REP may make changes to the terms and conditions of a contract or to text of the law. the price of a product as provided for in this section. Changes in term (B) All contract documents shall be available to the (length) of a contract require the customer to enter into a new contract commission to post on its customer education website (if the REP and may not be made by providing the notice described in paragraph chooses to post offers to the website). (3) of this subsection. (C) A contract is limited to service to a customer at a (1) Contract changes other than price. location specified in the contract. If the customer moves from the lo­ (A) A REP may not change the price (other than as al­ cation, the customer is under no obligation to continue the contract at lowed by paragraph (2) of this subsection) or contract term of a term another location. The REP may require a customer to provide evidence contract for a retail electric product, during its term; but may change that it is moving. There shall be no early termination fee assessed to the any other provision of the contract, with notice under paragraph (3) of customer as a result of the customer’s relocation if the customer pro­ this subsection. vides a forwarding address and, if required, reasonable evidence that the customer no longer occupies the location specified in the contract. (B) A REP may not change the terms and conditions of a month-to-month product, indexed or variable price products, unless (D) A TOS and EFL shall disclose the type of product it provides notice under paragraph (3) of this subsection. being described, using one of the following terms: fixed rate product, indexed product or a variable price product. (2) Price changes.

ADOPTED RULES January 8, 2010 35 TexReg 227 (A) A REP may only change the price of a fixed rate (B) Written notice of contract expiration shall be pro­ product, an indexed product, or a variable product consistent with the vided in or with the customer’s bill, or in a separate document. definitions in this section and according to the product’s EFL. Such (i) If notice is provided with a residential customer’s price changes do not require notice under paragraph (3) of this subsec­ bill, the notice shall be printed on a separate page. A statement shall be tion. included on the outside of the envelope sent to a residential customer’s (B) For a fixed rate product, each bill shall either show billing address by mail and in the subject line on the e-mail (if the REP the price changes on one or more separate line items, or shall include sends the notice by e-mail) that states, "Contract Expiration Notice. a conspicuous notice stating that the amount billed may include price See Enclosed." changes allowed by law or regulatory actions. (ii) If the notice is provided in or with a small com­ (C) Each residential bill for a variable price product mercial customer’s bill, the REP must include a statement on the out­ shall include a statement informing the customer how to obtain side of the billing envelope or in the subject line of an electronic bill information about the price that will apply on the next bill. that states, "Contract Expiration Notice" or "Contract Expiration No­ tice. See Enclosed."; or (3) Notice of changes to terms and conditions. A REP must provide written notice to its customers at least 14 days in advance of (iii) If notice is provided in a separate document, a the date that the change in the contract will be applied to the customer’s statement shall be included on the outside of the envelope and in the bill or take effect. Notice is not required for a change that benefits the subject line of the e-mail (if customer has agreed to receive official customer. documents by e-mail) that states, "Contract Expiration Notice. See En­ closed." for residential customers or for small commercial customers, (4) Contents of the notice to change terms and conditions. "Contract Expiration Notice" or "Contract Expiration Notice. See En­ The notice shall: closed." (A) be provided in or with the customer’s bill or in a (C) A written notice of contract expiration (whether separate document; with the bill or in a separate envelope) shall set out the following: (B) include the following statement, "Important notice (i) The date as provided for in subsection (c)(3)(B) regarding changes to your contract" clearly and conspicuously in the of this section that the existing contract will expire. notice; (ii) If the REP provided a calendar date as the end (C) identify the change and thespecific contract provi­ date for the contract, a statement in bold lettering no smaller than 12 sions that address the change; point font that no termination penalty shall apply to residential and (D) clearly specify what actions the customer needs to smallcommercialcustomers 14 days prior to the date stated as the expi­ take if the customer does not accept the proposed changes to the con­ ration date in the notice. In addition, a description of any fees or charges tract; associated with the early termination of a residential customer’s fixed rate product that would apply before 14 days prior to the date stated as (E) state in bold lettering that if the new terms are not the expiration date in the notice must be provided. No such statements acceptable to the customer, the customer may terminate the contract are required if the original contract did not contain a termination fee. and no termination penalty shall apply for 14 days from the date that the notice is sent to the customer but may apply if action is taken after (iii) If the REP defined the contract end date by ref­ the 14 days have expired. No such statement is required if the customer erence to the first meter read on or after a specific calendar date, a state­ would not be subject to a termination penalty under any circumstances; ment in bold lettering no smaller than 12 point font that no termination and penalty shall apply to residential customers after receipt of the contract expiration notice, or that no termination penalty shall apply to small (F) state in bold lettering that establishing service with commercial customers for 14 days prior to the contract end date. No another REP may take up to seven business days. such statement is required if the original contract did not contain a ter­ (e) Contract expiration and renewal offers. The REP shall mination fee. send a written notice of contract expiration at least 30 days or one (iv) A description of any renewal offers the REP billing cycle prior to the date of contract expiration, but no more than chooses to make available to the customer and the location of the TOS 60 days or two billing cycles in advance of contract expiration for a res­ and EFL for each of those products and a description of actions the idential customer, and at least 14 days but no more than 60 days or two customer needs to take to continue to receive service from the REP billing cycles in advance of contract expiration for a small commercial under the terms of any of the described renewal offers and the deadline customer. The REP shall send the notice by mail to a residential cus­ by which actions must be taken. tomer or shall send the required notice to a customer’s e-mail address if available to the REP and if the customer has requested to receive con­ (v) A copy of the EFL for the default renewal prod­ tract-related notices electronically. The REP shall send the notice to a uct if the customer takes no action, or if the EFL is not included with the small commercial customer by mail or may send the notice to the cus­ contract expiration notice, the REP must provide the EFL to the cus­ tomer’s e-mail address if available to the REP and, if the customer has tomer at least 14 days before the expiration of the contract using the requested to receive contract-related notices electronically. Nothing in same delivery method as was used for the notice. The contract expira­ this section shall preclude a REP from offering a new contract to the tion notice must specify how and when the EFL will be made available customer at any other time during the contract term. to the customer. (1) Contract Expiration. (vi) Astatement that if the customer takes no action, service to the customer will continue pursuant to the EFL for the default (A) If a customer takes no action in response to a notice renewal product that shall be included as part of the notice of contract of contract expiration for the continued receipt of retail electric service expiration. The TOS for the default renewal product shall be included upon the contract’s expiration, the REP shall serve the customer pur­ suant to a default renewal product that is a month-to-month product.

35 TexReg 228 January 8, 2010 Texas Register as part of the notice, unless the TOS applicable to the customer’s ex­ (3) Deposits. If the REP requires deposits from its cus­ isting service also applies to the default renewal product. tomers: (vii) A statement that the default service is month-to (A) a description of the conditions that will trigger a month and may be cancelled at any time with nofee. request for a deposit; (2) Affirmative consent. A customer that is currently re­ (B) the maximum amount of the deposit or the manner ceiving service from a REP may be re-enrolled with the REP for service in which the deposit amount will be determined; with the same product under which the customer is currently receiving (C) a statement that interest will be paid on the deposit service, or a different product, by conducting an enrollment pursuant to at the rate approved by the commission, and the conditions under which §25.474 of this title or by obtaining the customer’s consent in a record­ the customer may obtain a refund of a deposit; ing, electronic document, or written letter of authorization consistent with the requirements of this subsection. Affirmative consent is not re­ (D) an explanation of the conditions under which a cus­ quired when a REP serves the customer under a default renewal product tomer may establish satisfactory credit pursuant to §25.478 of this title pursuant to paragraph (1) of this subsection. Each recording, electronic (relating to Credit Requirements and Deposits); document, or written consent form must: (E) the right of a customer or applicant who qualifies (A) Indicate the customer’s name, billing address, ser­ for the rate reduction program to pay a required deposit that exceeds vice address (for small commercial customers, the ESI ID may be used $50 in two equal installments pursuant to §25.478 of this title; and rather than the service address); (F) if applicable, the customer’s right to post a letter of (B) Indicate the identification number of the TOS and guarantee in lieu of a deposit pursuant to §25.478(i) of this title. EFL under which the customer will be served; (4) Rescission, Termination and Disconnection. (C) Indicate if the customer has received, or when the (A) In a conspicuous and separate paragraph or box: customer will receive copies of the TOS, EFL and YRAC; (i) A description of the right of a customer, for (D) Indicate the price(s) which the customer is agreeing switch requests, to rescind service without fee or penalty of any kind to pay; within three federal business days after receiving the TOS, pursuant (E) Indicate the date or estimated date of the re-enroll­ to §25.474 of this title; and ment, the contract term, and the estimated start and end dates of con­ (ii) Detailed instructions for rescinding service, in­ tract term; cluding the telephone number and, if available, facsimile number or (F) Affirmatively inquire whether the customer has de­ e-mail address that the customer may use to rescind service. cided to enroll for service with the product, and contain the customer’s (B) A statement as to how service can be terminated and affirmative response; and any penalties that may apply; (G) Beentirelyinplain,easily understood language, in (C) A statement of customer’s ability to terminate ser­ the language that the customer has chosen for communications. vice without penalty if customer moves to another premises and pro­ (f) Terms of service document. The following information vides evidence that it is moving, if required, and a forwarding address; shall be conspicuously contained in the TOS: and (1) Identity and contact information. The REP’s certified (D) If the REP has disconnection authority, pursuant to name and business name (dba) (if applicable), mailing address, e-mail §25.483 of this title (relating to Disconnection of Service), a statement and Internet address (if applicable), certification number, and a toll-free that the REP may order disconnection of the customer for non-payment. telephone number (with hours of operation and time-zone reference). (5) Antidiscrimination. A statement informing the cus­ (2) Pricing and payment arrangements. tomer that the REP cannot deny service or require a prepayment or deposit for service based on a customer’s race, creed, color, national (A) Description of the amount of any routine non-recur­ origin, ancestry, sex, marital status, lawful source of income, level ring charges resulting from a move-in or switch that may be charged to of income, disability, familial status, location of a customer in a eco­ the customer, including but not limited to an out-of-cycle meter read, nomically distressed geographic area, or qualification for low income and connection or reconnection fees; or energy efficiency services. For residential customers, a statement (B) For small commercial customers, a description of informing the customer that the REP cannot use a credit score, a credit the demand charge and how it will be applied, if applicable; history, or utility payment data as the basis for determining the price for electric service for a product with a contract term of 12 months or (C) An itemization, including name and cost, of any less. non-recurring charges for services that may be imposed on the cus­ tomer for the retail electric product, including an application fee, (6) Other terms. Any other material terms and conditions, charges for default in payment or late payment, and returned checks including exclusions, reservations, limitations of liability, or special charges; equipment requirements, that are a part of the contract for the retail electric product. (D) A description of any collection fees or costs that may be assessed to the customer by the REP and that cannot be quan­ (7) Contract expiration notice. For a term contract, the tified in the TOS; and TOS shall contain a statement informing the customer that a contract expiration notice will be sent at least 14 days prior to the end of the (E) A description of payment arrangements and bill initial contract term. The TOS shall also state that if the customer fails payment assistance programs and low income energy efficiency to take action to ensure the continued receipt of retail electric service programs offered by the REP. upon the contract’s expiration, the customer will continue to be served

ADOPTED RULES January 8, 2010 35 TexReg 229 by the REP automatically pursuant to a default renewal product, which for the purposes of the average price calculation, the cost of the product shall be a month-to-month product. may be figured in over a 12-month period with 1/12 of the cost being attributed to a single month. (8) A statement describing the conditions under which the contract can change and the notice that will be provided if there is a (F) The following shall be included on the EFL for spe­ change. cific product types: (9) Version number. A REP shall assign an identification (i) For indexed products, the formula used to deter­ number to each version of its TOS, and shall publish the number on the mine an indexed product, including a website and phone number cus­ terms of service document. tomers may contact to determine the current price. (g) Electricity Facts Label. The EFL shall be unique for each (ii) For a variable price product that increases no product offered and shall include the information required in this sub­ more than a defined percentage as indexed to the customer’s previous section. Nothing in this subsection precludes a REP from charging a billing month’s price, a notice in bold type no smaller than 12 point price that is less than its EFL would otherwise provide. font: "Except for price changes allowed by law or regulatory action, this price is the price that will be applied during your first billing cycle; (1) Identity and contact information.TheREP’s certi fied this price may increase by no more than {insert percentage} percent name and business name (dba) (if applicable), mailing address, e-mail from month-to-month." For residential customers, the following addi­ and Internet address (if applicable), certification number, and a toll-free tional statement is required: "Please review the historical price of this telephone number (with hours of operation and time-zone reference). product available at {insert specific website address and toll-free tele­ (2) Pricing disclosures. Pricing information shall be dis­ phone number}." In the disclosure chart, the box describing whether the closed by a REP in an EFL. The EFL shall state specifically whether price can change during the contract period shall include the following the product is a fixed rate, variable price or indexed product. statement: "The price applied in the first billing cycle may be differ­ ent from the price in this EFL if there are changes in TDSP charges; (A) For a fixed rate product, the EFL shall provide the changes to the Electric Reliability Council of Texas or Texas Regional total average price for electric service reflecting all recurring charges, Entity administrative fees charged to loads; or changes resulting from excluding state and local sales taxes, and reimbursement for the state federal, state or local laws or regulatory actions that impose new or miscellaneous gross receipts tax, to the customer. modified fees or costs that are outside our control." (B) For an indexed product, the EFL shall provide sam­ (iii) For all other variable price products, a notice in ple prices for electric service reflecting all recurring charges, excluding bold type no smaller than 12 point font: "Except for price changes al­ state and local sales taxes, and reimbursement for the state miscella­ lowed by law or regulatory action, this price is the price that will be neous gross receipts tax, resulting from a reasonable range of values applied during your first billing cycle; this price may change in subse­ for the inputs to the pre-defined pricing formula. quent months at the sole discretion of {insert REP name}. In the dis­ (C) For a variable price product, the EFL shall provide closure chart, the box describing whether the price can change during the total average price for electric service for the first billing cycle re­ the contract period shall include the following statement: "The price flecting all recurring charges, including any TDU charges that may be applied in the first billing cycle may be different from the price in this passed through and excluding state and local sales taxes, and reim­ EFL if there are changes in TDSP charges; changes to the Electric Re­ bursement for the state miscellaneous gross receipts tax, to the cus­ liability Council of Texas or Texas Regional Entity administrative fees tomer. Actual changes in TDU charges, changes to the ERCOT or charged to loads; or changes resulting from federal, state or local laws Texas Regional Entity administrative fees charge to loads or changes or regulatory actions that impose new or modified fees or costs that resulting from federal, state or local laws or regulatory actions that im­ are outside our control." For residential customers, the following addi­ pose new or modified fees or costs on a REP that were not implemented tional statement is required: "Please review the historical price of this prior to the issuance of the EFL and were not included in the average product availableat{insertspeci fic website address and toll-free tele­ price calculation may be directly passed through to customers begin­ phone number}." ning with the customer’s first billing cycle. (3) Fee Disclosures. (D) The total average price for electric service shall be (A) If customers may be subject to a special charge for expressed in cents per kilowatt hour, rounded to the nearest one-tenth underground service or any similar charge that applies only in a part of one cent for the following usage levels: of the TDU service area, the EFL shall include a statement in the elec­ (i) For residential customers, 500, 1,000 and 2,000 tricity price section that some customers will be subject to a special kilowatt hours per month; and charge that is not included in the total average price for electric service and shall disclose how the customer can determine the price and appli­ (ii) For small commercial customers, 1,500, 2,500, cability of the special charge. and 3,500 kilowatt hours per month. If demand charges apply assume a 30 percent load factor. (B) A listing of all fees assessed by the REP that may be charged to the customer and whether the fee is included in the recurring (E) If a REP combines the charges for retail electric ser­ charges. vice with charges for any other product, the REP shall: (4) Term Disclosure. EFL shall include disclosure of the (i) If the electric product is sold separately from the length of term, minimum service term, if any, and early termination other products, disclose the total price for electric service separately penalties, if any. from other products; and (5) Renewable Energy Disclosures. The EFL shall include (ii) If the REP does not permit a customer to pur­ the percentage of renewable energy of the electricity product and the chase the electric product without purchasing the other products or ser­ percentage of renewable energy of the statewide average generation vices, state the total charges for all products and services as the price mix. of the total electric service. If the product has a one-time cost up front,

35 TexReg 230 January 8, 2010 Texas Register (6) Format of Electricity Facts Label. REPs must use the (C) Protections relating to disconnection of service pur­ following format for the EFL with the pricing chart and disclosure chart suant to §25.483 of this title; shown. The additional language is for illustrative purposes. It does not (D) Non-English language requirements pursuant to include all reporting requirements as outlined above. Such subsections §25.473 of this title (relating to Non-English Language Requirements); should be referred to for determination of the required reporting items on the EFL. Each EFL shall be printed in type no smaller than ten points (E) Availability of a Do Not Call List pursuant to in size, unless a different size is specified in this section, and shall be §25.484 of this title (relating to Electric No-Call List) and §26.37 of formatted as shown in this paragraph: this title (relating to Texas No-Call List); and Figure: 16 TAC §25.475(g)(6) (F) Privacy rights regarding customer proprietary infor­ (7) Version number. A REP shall assign an identification mation as provided by §25.472 of this title (relating to Privacy of Cus­ number to each version of its EFL, and shall publish the number on the tomer Information). EFL. (7) Identity and contact information. The REP’s certified (h) Your Rights as a Customer disclosure. The information name and business name (dba), certification number, mailing address, set out in this section shall be included in a REP’s "Your Rights as a e-mail and Internet address (if applicable), and a toll-free telephone Customer" document, to summarize the standard customer protections number (with hours of operation and time-zone reference) at which the provided by this subchapter or additional protections provided by the customer may obtain information concerning the product. REP. (i) Advertising claims. If a REP or aggregator advertises or (1) A YRAC document shall be consistent with the TOS markets the specificbenefits of a particular electric product, the REP for the retail product. or aggregator shall provide the name of the electric product offered in the advertising or marketing materials to the commission or its staff, (2) The YRAC document shall inform the customer of the upon request. All advertisements and marketing materials distributed REP’s complaint resolution policy pursuant to §25.485 of this title (re­ by or on behalf of a REP or aggregator shall comply with this section. lating to Customer Access and Complaint Handling) and payment ar­ REPs and aggregators are responsible for representations to customers rangements and deferred payment policies pursuant to §25.480 of this and prospective customers by employees or other agents of the REP title (relating to Bill Payment and Adjustments). concerning retail electric service that are made through advertising, (3) The YRAC document shall inform the customer of the marketing or other means. REP’s procedures for reporting outages and the steps necessary to have (1) Print advertisements. Print advertisements and market­ service restored or reconnected after an involuntary suspension or dis­ ing materials, including direct mail solicitations that make any claims connection. regarding price, savings, or environmental quality for an electricity (4) The YRAC document shall inform the customer of the product of the REP compared to a product offered by another REP shall customer’s right to have the meter tested pursuant to §25.124 of this include the EFL of the REP making the claim. In lieu of including an title (relating to Meter Testing), or in accordance with the tariffs of a EFL, the following statement shall be provided: "You can obtain im­ transmission and distribution utility, a municipally owned utility, or an portant standardized information that will allow you to compare this electric cooperative, as applicable, and the REP’s ability in all cases to product with other offers. Contact (name, telephone number, and In­ make that request on behalf of the customer by a standard electronic ternet address (if available) of the REP)." If the REPs phone number or market transaction, and the customer’s right to be instructed on how to website address is included on the advertisement, such phone number read the meter, if applicable. or website address is not required in the disclaimer statement. Upon re­ quest, a REP shall provide to the commission the contract documents (5) The YRAC document shall inform the customer of the relating to a product being advertised and any information used to de­ availability of: velop or substantiate comparisons made in the advertisement. (A) Financial and energy assistance programs for resi­ (2) Television, radio, and internet advertisements. A REP dential customers; shall include the following statement in any television, Internet, or ra­ (B) Any special services such as readers or notices in dio advertisement that makes a specific claim about price, savings, or Braille or TTY; environmental quality for an electricity product of the REP compared to a product offered by another REP: "You can obtain important stan­ (C) Special policies or programs available to residential dardized information that will allow you to compare this product with customers with physical disabilities, including residential customers other offers. Contact (name, telephone number and website (if avail­ who have a critical need for electric service to maintain life support able) of the REP)." If the REPs phone number or website address is in­ systems; and cluded on the advertisement, such phone number or website address is (D) Discounts for qualified low-income residential cus­ not required in the disclaimer statement. This statement is not required tomers. for general statements regarding savings or environmental quality, but shall be provided if a specific price is included in the advertisement, (6) The YRAC document shall inform the customer of the or if a specific statement about savings or environmental quality com­ following customer rights and protections: pared to another REP is made. Upon request, a REP shall provide to the (A) Unauthorized switch protections applicable under commission the contract documents relating to a product being adver­ §25.495 of this title (relating to Unauthorized Change of Retail Electric tised and anyinformationused todevelop or substantiate comparisons Provider); made in the advertisement. (B) The customer’s right to dispute unauthorized (3) Outdoor advertisements. A REP shall include, in a font charges on the customer’s bill as set forth in §25.481 of this title size and format that is legible to the intended audience, its certified (relating to Unauthorized Charges); name or commission authorized business name, certification number, telephone number and Internet address (if available).

ADOPTED RULES January 8, 2010 35 TexReg 231 (4) Renewable energy claims. A REP shall authenticate on December 7, 2009. The Department did not receive any its sales of renewable energy in accordance with §25.476 of this title public comments on the rule proposal. (relating to Renewable and Green Energy Verification). If a REP relies The amendments are adopted under Texas Occupations Code, on supply contracts to authenticate its sales of renewable energy, it shall Chapters 51 and 1152 which authorize the Commission, the De­ file a report with the commission, not later than March 15 of each year partment’s governing body, to adopt rules as necessary to im­ demonstrating its compliance with this paragraph and §25.476 of this plement these chapters and any other law establishing a pro­ title. gram regulated by the Department. Also, the amendments are This agency hereby certifies that the adoption has been reviewed adopted under Texas Occupations Code, §1152.051 which au­ by legal counsel and found to be a valid exercise of the agency’s thorize the Commission to adopt rules as necessary to establish legal authority. standards for registrants. The statutory provisions affected by the adoption are those set Filed with the Office of the Secretary of State on December 18, forth in Texas Occupations Code, Chapters 51 and 1152. No 2009. other statutes, articles, or codes are affected by the adoption. TRD-200905988 This agency hereby certifies that the adoption has been reviewed Adriana A. Gonzales by legal counsel and found to be a valid exercise of the agency’s Rules Coordinator legal authority. Public Utility Commission of Texas Effective date: April 1, 2010 Filedwiththe Office of the Secretary of State on December 22, Proposal publication date: August 14, 2009 2009. For further information, please call: (512) 936-7223 TRD-200906015 ♦ ♦ ♦ William H. Kuntz, Jr. Executive Director PART 4. TEXAS DEPARTMENT OF Texas Department of Licensing and Regulation LICENSING AND REGULATION Effective date: January 11, 2010 Proposal publication date: November 6, 2009 CHAPTER 66. REGISTRATION OF PROPERTY For further information, please call: (512) 463-7348 TAX CONSULTANTS ♦ ♦ ♦ 16 TAC §66.20 CHAPTER 87. USED AUTOMOTIVE PARTS The Texas Commission of Licensing and Regulation ("Commis­ RECYCLERS sion") adopts amendments to an existing rule at 16 Texas Admin­ istrative Code ("TAC") §66.20 regarding the property tax consul­ 16 TAC §§87.1, 87.10, 87.15, 87.20 - 87.26, 87.30, 87.40, tant program without changes to the proposed text as published 87.44 - 87.47, 87.50, 87.65, 87.70 - 87.81, 87.85, 87.90 - 87.92 in the November 6, 2009, issue of the Texas Register (34 TexReg The Texas Commission of Licensing and Regulation ("Commis­ 7746). The rule will not be republished. The adopted amend­ sion") adopts new rules at 16 Texas Administrative Code ("TAC"), ments take effect January 11, 2010. Chapter 87, §§87.1, 87.10, 87.15, 87.20 - 87.26, 87.30, 87.40, The amendments implement a change required by House Bill 87.44 - 87.47, 87.50, 87.65, 87.70 - 87.81, 87.85, and 87.90 ­ ("HB") 2591, 81st Legislature, Regular Session (2009) and 87.92 regarding the used automotive parts recyclers program. changes recommended by the Property Tax Consultant Advi­ The new rules are adopted with changes to §§87.10, 87.21, sory Council at its October 22, 2009, meeting to improve the 87.30, 87.80, and 87.81 from the proposed text as published in education process for new property tax consultant registrants. the November 6, 2009, issue of the Texas Register (34 TexReg HB 2591 requires the Texas Department of Licensing and 7747), and these rules are republished. There are no changes to Regulation ("Department") to establish an exam for property the proposed text of §§87.1, 87.15, 87.20, 87.22 - 87.26, 87.40, tax consultants and the standard for passing the exam. The 87.44 - 87.47, 87.50, 87.65, 87.70 - 87.79, 87.85, and 87.90 ­ adopted amendments fulfill that mandate by establishing the 87.92 as published in the November 6, 2009, issue of the Texas exam and passing rate of success at 70%. Register (34 TexReg 7747), and these rules will not be repub­ lished. The new rules take effect January 11, 2010. Additionally, on the recommendation of the Property Tax Con­ sultant Advisory Council, §66.20(d) further designates that the The new rules implement Senate Bill ("SB") 1095, 81st Legisla­ 40 hours of education required for registration under HB 2591 ture, Regular Session (2009), regarding the licensing and reg­ include not only the statutorily mandated four hours of instruc­ ulation of used automotive parts recyclers and used automotive tion in laws and rules but increases that class requirement to parts recyclers employees engaged in the buying of vehicles and eight hours. It also designates that the mandated 40 hours of thesellingofuseda utomotive parts. A summary of each new class time include sixteen hours of appraisal and valuation, eight rule was included in the notice of proposed rules published in hours of property tax consulting, and eight hours of ethics. At the November 6, 2009, issue of the Texas Register (34 TexReg their meeting held December 10, 2009, the Property Tax Con­ 7747). At their meeting held December 9, 2009, the Used Auto­ sultants Advisory Council discussed the rules and unanimously motive Parts Recyclers Advisory Board discussed the rules and recommended adoption by the Commission. unanimously recommended adoption by the Commission. Theproposedrulewas publishedinthe Texas Register on The proposed rules were published in the Texas Register on November 6, 2009. The 30-day public comment period closed November 6, 2009. The 30-day public comment period closed

35 TexReg 232 January 8, 2010 Texas Register on December 7, 2009. The Department received public com­ ties of the Licensee--Hours of Operation Using Heavy Machinery ments from two (2) interested parties, Insurance Auto Auctions in Certain Counties. TARA’s suggestion is consistent with the (IAA) and Texas Automotive Recyclers Association (TARA). The statute and the section heading is revised accordingly. specific comments are summarized below, followed by the De­ The new rules are adopted under Texas Occupations Code, partment’s responses. Chapters 51 and 2309 which authorize the Commission, the Proposed §87.10(15) - Definition of Salvage Vehicle Dealer Department’s governing body, to adopt rules as necessary to implement these chapters and any other law establishing a TARA and IAA both note that the definition of "salvage vehicle program regulated by the Department. dealer" does not correspond to the reviseddefinition in the Trans­ portation Code. The Department agrees with these comments The statutory provisions affected by the adoption are those set andrevisedtherule tore flect the new definition in the Trans­ forth in Texas Occupations Code, Chapter 2309, and Texas portation Code. Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the adoption. Proposed §87.21 - Eligibility Requirements §87.10. Definitions. Section 87.21 provides that a person "is ineligible" if convicted of certain criminal conduct. TARA believes that the language The following words and terms, when used in this chapter, shall have in §87.21 is too restrictive and should be revised to read that a the following meanings, unless the context clearly indicates otherwise, person "may be ineligible" if convicted of certain crimes. The or the words or terms conflict with a definition in the Transportation Department agrees with this comment and modified the rule ac­ Code, §501.002 or §501.091. cordingly. (1) Casual sale--The sale by a salvage vehicle dealer or an Proposed §87.24 - Used Automotive Parts Recycling Employee insurance company of not more than five nonrepairable motor vehicles License--Required Eligibility Requirements or salvage motor vehicles to the same person during a calendar year. TARA expressed concern about owners of unincorporated small The term does not include: businesses obtaining both a business license in addition to an (A) a sale at auction to a salvage vehicle dealer; or employee license. They believe this requirement is unfair since incorporated businesses only need a business license. The rule (B) the sale of an export-only motor vehicle to a person has not been changed in response to this comment because who is not a resident of the United States. the statutory scheme requires a separate business license and (2) Commission--The Texas Commission of Licensing and a license for employees engaged in the buying and selling of Regulation. vehicles. (3) Component part--A major component part as defined Proposed §87.30 - Exemptions by Transportation Code, §501.091, or a minor component part. TARA and IAA note that exemptions for salvage vehicle deal­ (4) Department--The Texas Department of Licensing and ers, insurance companies and salvage pools are included in the Regulation. statute but not the rules. The Department agrees with the com­ ment and revised the rule accordingly, including the exemption (5) Executive director--the executive director of the depart­ for persons who repair, rebuild, or reconstruct fewer than five ve­ ment. hicles in a calendar year. (6) Insurance company-­ Proposed §87.65 - Advisory Board (A) a person authorized to write automobile insurance For ease of reading, TARA suggests the Commission relocate in this state; or §87.65 from the middle the rules to the beginning. The Depart­ (B) an out-of-state insurance company that pays a loss ment notes that placement of the advisory board provisions in claim for a motor vehicle in this state. §87.65 is consistent with the rule format followed by the Commis­ sion in other regulatory programs. Consistency in the location of (7) Interior component part--A motor vehicle’s seat or ra­ rule provisions across programs benefits agency staff and the dio. public because they lose time sifting through the rules in search (8) Major component part--One of the following parts of a of subject matter. For these reasons, in response to this com­ motor vehicle: ment, the Department declines to change the rule. (A) the engine; Proposed §87.80 - Responsibilities of the Licensee--Records of Casual Sales (B) the transmission; TARA suggests deletion of the term "insurance company" from (C) the frame; the section. While the statute does include insurance in the (D) a fender; requirement to keep records of causal sales, the Department agrees with the comment by TARA. Since these rules specifi­ (E) the hood; cally relate to used automotive parts recyclers, the reference to (F) a door allowing entrance to or egress from the pas­ insurance company is deleted. senger compartment of the motor vehicle; Proposed §87.81 - Responsibilities of the Licensee--Hours of (G) a bumper; Operation Using Heavy Machinery (H) a quarter panel; TARA suggests revising the heading of this section to include "in certain counties" so that the heading reads: Responsibili­ (I) a deck lid, tailgate, or hatchback;

ADOPTED RULES January 8, 2010 35 TexReg 233 (J) the cargo box of a one-ton or smaller truck, including (A) A motor vehicle that: a pickup truck; (i) has damage to or is missing a major component (K) the cab of a truck; part to the extent that the cost of repairs, including parts and labor other than the cost of materials and labor for repainting the motor vehicle and (L) the body of a passenger motor vehicle; or excluding sales tax on the total cost of repairs, exceeds the actual cash (M) the roof or floor pan of a passenger motor vehicle, value of the motor vehicle immediately before the damage; or if separate from the body of the motor vehicle. (ii) is damaged and that comes into this state under (9) Metal recycler--A person who: an out-of-state salvage motor vehicle certificate of title or similar out­ of-state ownership document that states on its face "accident damage," (A) is predominately engaged in the business of obtain­ "flood damage," "inoperable," "rebuildable," "salvageable," or similar ing ferrous or nonferrous metal that has served its original economic notation; and purpose to convert the metal, or sell the metal for conversion, into raw material products consisting of prepared grades and having an existing (B) does not include an out-of-state motor vehicle with or potential economic value; a "rebuilt," "prior salvage," "salvaged," or similar notation, a nonre­ pairable motor vehicle, or a motor vehicle for which an insurance com­ (B) has a facility to convert ferrous or nonferrous metal pany has paid a claim for: into raw material products consisting of prepared grades and having an existing or potential economic value, by method other than the ex­ (i) the cost of repairing hail damage; or clusive use of hand tools, including the processing, sorting, cutting, (ii) theft, unless the motor vehicle was damaged dur­ classifying, cleaning, baling, wrapping, shredding, shearing, or chang­ ing the theft and before recovery to the extent described by subpara­ ing the physical form or chemical content of the metal; and graph (A)(i). (C) sells or purchases the ferrous or nonferrous metal (15) Salvage vehicle dealer--A person engaged in this state solely for use as raw material in the production of new products. in the business of acquiring, selling, repairing, rebuilding, reconstruct­ (10) Minor component part--An interior component part, a ing, or otherwise dealing in nonrepairable motor vehicles, salvage mo­ special accessory part, or a motor vehicle part that displays or should tor vehicles, or, if incidental to a salvage motor vehicle dealer’s primary display at least one of the following: business, used automotive parts. The term does not include a person who casually repairs, rebuilds, or reconstructs fewer than five salvage (A) a federal safety certificate; motor vehicles in the same calendar year or, except as provided by sub­ (B) a motor number; paragraph (C), a used automotive parts recycler. The term includes a person engaged in the business of: (C) a serial number or a derivative; or (A) a salvage vehicle dealer, regardless of whether the (D) a manufacturer’s permanent vehicle identification person holds a license issued by the department to engage in that busi­ number or a derivative. ness; (11) Motor vehicle-­ (B) dealing in nonrepairable motor vehicles or salvage (A) any motor driven or propelled vehicle required to motor vehicles; or be registered under the laws of this state; (C) a used automotive parts recycler if the sale of re­ (B) a trailer or semitrailer, other than manufactured paired, rebuilt, or reconstructed nonrepairable motor vehicles or sal­ housing, that has a gross vehicle weight that exceeds 4,000 pounds; vage motor vehicles is more than an incidental part of the used auto­ motive parts recycler’s business. (C) a house trailer; (16) Salvage vehicle title--A document issued by the Texas (D) an all-terrain vehicle, as defined by Transportation Department of Motor Vehicles that evidences ownership of a salvage Code, §502.001, designed by the manufacturer for off-highway use that motor vehicle. is not required to be registered under the laws of this state; or (17) Special accessory part--A motor vehicle’s tire, wheel, (E) a motorcycle, motor-driven cycle, or moped that is tailgate, or removable glass top. not required to be registered under the laws of this state, other than a motorcycle, motor-driven cycle, or moped designed for and used ex­ (18) Used automotive part--A part that is salvaged, dis­ clusively on a golf course. mantled, or removed from a motor vehicle for resale as is or as re­ paired. The term includes a major component part but does not include (12) Nonrepairable motor vehicle--A motor vehicle that: a rebuildable or rebuilt core, including an engine, block, crankshaft, (A) is damaged, wrecked, or burned to the extent that transmission, or other core part that is acquired, possessed, or trans­ the only residual value of the vehicle is as a source of parts or scrap ferred in the ordinary course of business. metal; or (19) Used automotive parts recycler--A person licensed (B) comes into this state under a title or other ownership under this title to operate a used automotive parts recycling business. document that indicates that the vehicle is nonrepairable, junked, or for (20) Used automotive parts recycling--The dismantling parts or dismantling only. and reuse or resale of used automotive parts and the safe disposal of (13) Nonrepairable vehicle title--A document issued by the salvage motor vehicles or nonrepairable motor vehicles, including the Texas Department of Motor Vehicles that evidences ownership of a resale of those vehicles. nonrepairable motor vehicle. §87.21. Licensing Requirements--Used Automotive Parts Recycling (14) Salvage motor vehicle-­ Business License Eligibility.

35 TexReg 234 January 8, 2010 Texas Register An applicant, a partner, principal, officer, or general manager of the vehicle dealer’s license has been issued to that person or at a location applicant, or another license or permit holder with a connection to the approved by the department under this chapter. applicant may be ineligible for a used automotive parts recycling busi­ (10) a salvage vehicle dealer; ness license, if the applicant, a partner, principal, officer, or general manager of the applicant, or another license or permit holder with a (11) an insurance company; and connection to the applicant has: (12) a salvage pool. (1) before the application date, been convicted of, pleaded §87.80. Responsibilities of the Licensee--Records of Casual Sales. guilty or nolo contendere to, or been placed on deferred adjudication for: Each licensed used automotive parts recycler that sells a nonrepairable motor vehicle or a salvage motor vehicle at a casual sale shall keep on (A) a felony; or the business premises a list of all casual sales made during the preced­ (B) a misdemeanor punishable by confinement in jail or ing 36-month period that contains: by a fine exceeding $500; (1) the date of the sale; (2) violated an order of the commission or executive direc­ (2) the name of the purchaser; tor, including an order for sanctions or administrative penalties; or (3) the name of the jurisdiction that issued the identification (3) knowingly submitted false information on the applica­ document provided by the purchaser, as shown on the document; and tion. (4) the vehicle identification number. §87.30. Exemptions. The provisions of this chapter do not apply to: §87.81. Responsibilities of the Licensee--Hours of Operation Using Heavy Machinery in Certain Counties. (1) a person who purchases not more than five nonre­ (a) This section applies only to a used automotive parts facility pairable or salvage motor vehicles at casual sale in a calendar year business located in a county with a population of 2.8 million or more. from: (b) A used automotive parts recycler may not operate heavy (A) a salvage vehicle dealer; machinery in a used automotive parts recycling facility between the (B) a salvage pool operator at auction; or hours of 7 p.m. of one day and 7 a.m. of the following day. (C) an insurance company at auction; (c) This section does not apply to conduct necessary to a sale or purchase by the recycler. (2) a metal recycler, unless a motor vehicle is sold, trans­ ferred, released, or delivered to the metal recycler for the purpose of This agency hereby certifies that the adoption has been reviewed reuse or resale as a motor vehicle or as a source of used parts, and is by legal counsel and found to be a valid exercise of the agency’s used for that purpose; legal authority.

(3) a person who casually repairs, rebuilds, or reconstructs Filed with the Office of the Secretary of State on December 22, fewer than five salvage motor vehicles in the same calendar year; 2009. (4) a person who is a non-United States resident who pur­ chases nonrepairable or salvage motor vehicles for export only; TRD-200906016 William H. Kuntz, Jr. (5) an agency of the United States, an agency of this state, Executive Director or a local government; Texas Department of Licensing and Regulation (6) a financial institution or other secured party that holds Effective date: January 11, 2010 a security interest in a motor vehicle and is selling that motor vehicle Proposal publication date: November 6, 2009 in the manner provided by law for the forced sale of a motor vehicle; For further information, please call: (512) 463-7348 (7) a receiver, trustee, administrator, executor, guardian, or ♦ ♦ ♦ other person appointed by or acting pursuant to the order of a court; (8) a person selling an antique passenger car or truck that is CHAPTER 88. POLYGRAPH EXAMINERS at least 25 years old or a collector selling a special interest motor vehi­ 16 TAC §§88.1, 88.10, 88.20 - 88.24, 88.26 - 88.29, 88.40, cle as defined in Transportation Code, §683.077, if the special interest 88.70 - 88.80, 88.90, 88.91, 88.100 vehicle is at least 12 years old; The Texas Commission of Licensing and Regulation ("Commis­ (9) a licensed auctioneer who, as a bid caller, sells or offers sion") adopts new rules at 16 Texas Administrative Code ("TAC"), to sell property to the highest bidder at a bona fide auction under the Chapter 88, §§88.1, 88.10, 88.20 - 88.24, 88.26 - 88.29, 88.40, following conditions: 88.70 - 88.80, 88.90, 88.91 and 88.100 regarding the licensing (A) neither legal nor equitable title passes to the auc­ and examination of polygraph examiners. The new rules are tioneer; adopted with changes to §§88.10, 88.20, 88.21, 88.24, 88.26, 88.28, 88.29, 88.40, 88.70, 88.71, 88.73, 88.74, 88.76, 88.79, (B) the auction is not held for the purpose of avoiding and 88.100 from the proposed text as published in the October a provision of Texas Occupations Code, Chapter 2302, or this chapter; 30, 2009, issue of the Texas Register (34 TexReg 7483), and and these rules are republished. There are no changes to the pro­ (C) an auction is conducted of motor vehicles owned, posed text of §§88.1, 88.22, 88.23, 88.27, 88.72, 88.75, 88.77, legally or equitably, by a person who holds a salvage vehicle dealer’s 88.78, 88.80, 88.90, and 88.91 as published in the October 30, license and the auction is conducted at a location for which a salvage 2009, issue of the Texas Register (34 TexReg 7483), and these

ADOPTED RULES January 8, 2010 35 TexReg 235 rules will not be republished. The new rules take effect January be recorded for the purpose of verifying truth or detecting recog­ 11, 2010. nition or deception and includes the reading and interpretation of the polygraph records and results. A polygraph examination The new rules implement Senate Bill ("SB") 1005, 81st Legis­ may contain four phases known as the Pre-test phase, Testing lature, Regular Session (2009), which amended Chapter 1703 phase, Chart analysis phase and Post-test phase, any one of of the Texas Occupations Code and transferred the regulatory which constitutes a polygraph examination." authority of polygraph examiners from the Polygraph Examin­ ers Board to the Texas Department of Licensing and Regulation Public Comment: One commenter suggested that the phrase ("Department"). The Commission in a separate rulemaking ac­ "detecting recognition" be deleted from the definition of tion is adopting the repeal of the Polygraph Examiners Board polygraph examination because Texas Occupations Code, rules. §1703.003(3) limits the definition of "instrument" to one that is used to detect deception or verify the truthfulness of state­ The rules were drafted, to the extent possible, from the Poly­ ments and does not include the phrase "detecting recognition". graph Examiners Board rules with some modifications. In all The commenter is concerned that adding this phrase not only sections where a rule previously referred to the "Polygraph Ex­ conflicts with the statutory definition of "instrument" but also aminers Board" or "Board" reference is now made to the "De­ recognizes another type of testing technique that would not partment". Because the Board was abolished by the enactment result in a finding of deception or truthfulness. In addition, of SB 1005, organizational provisions of the Board have been §1703.003(4) defines polygraph examiner as "a person licensed deleted along with general rules of practice and procedure which under this chapter to use an instrument to detect deception or are now covered by the Department’s general provisions relat­ verify the truth of a statement" and does not include the phrase ing to licensing under Texas Occupations Code, Chapter 51. In "detecting recognition". The commenter contends that adding addition, the Department has made minor wording and editorial the phrase "detecting recognition" to the definition of "polygraph changes to the rules that are not substantive in nature. A sum­ examination" would allow a person who uses an instrument to mary of each new rule was included in the notice of proposed "detect recognition" rather than "deception" to avoid regulation rules published in the October 30, 2009, issue of the Texas Reg- because they would not fall within the definition of "polygraph ister (34TexReg7483). examiner". The proposed new rules were published in the Texas Register on Another commenter stated that because §1703.003(3) defines October 30, 2009. The 30-day public comment period closed on "instrument" and does not include the terms "recognition" or "no November 30, 2009. The Department received comments from recognition indicated", the terms should be deleted from the pro­ eight interested parties including the Texas Association of Poly­ posed rules. graph Examiners. The Polygraph Examiners Advisory Commit­ tee reviewed the proposed rules and made recommendations to Department Response: It was not the Department’s intent to amend several rules based upon public comment. Thereafter, create a situation in which a person could avoid regulation by the Advisory Committee unanimously recommended adoption rendering an opinion detecting recognition. In addition, the by the Commission. Thespecific comments and the Commit­ commenter is correct that the statutory definition of "instrument" tee’s and Department’s responses are summarized below. and "polygraph examiner" do not include the phrase "detecting recognition". It was not the Department’s intent to create an General Comment: Two public comments noted that because overly broad definition of "polygraph examination" that would be proposed rule §§88.10(3), (4), (5), (7), and (12), 88.20, 88.21(a), in conflict with the statutory definitions of "polygraph examiner" 88.23(a), 88.26, 88.27, 88.77 and 88.90 are already defined in and "instrument". In response to the comments, the Polygraph Chapter 1703, it was futile to put the above rules out for public Advisory Committee voted to amend the definition of "polygraph comment or to vote on them because they are statutes and can­ examination" by deleting the phrase "or detecting recognition." not be changed or deleted. The Department agrees with the recommendation of the Advi­ Department Response: The Department believes that putting sory Committee and the rule has been changed accordingly. all the definitions and licensing requirements in one place, even Section 88.10(13)-Definition of "Polygraph Testing Format" with the resulting duplication, will make the rules and statutes more accessible to licensees. Provision: Section 88.10(13) defines "polygraph testing format" as a question format approved and accepted as a valid testing General Comment: Another commenter was unclear as to technique by the Defense Academy for Credibility Assessment whether Preceptor Interns will be licensed as interns and al­ (DACA). lowed to administer examinations under a sponsor as they have in the past. The commenter noted that the intent of the original Public Comment: One commenter suggested that this definition statute was to allow police officers whose departments could be excluded from the proposed rules because DACA is not the not send them to an approved polygraph school to still qualify sole repository for validated polygraph testing techniques in the for a license. The commenter would like this path for licensure industry. The commenter cited the Backster Zone Comparison to remain an option. Test, You-Phase, Utah ZCT, Arther Technique and Marcy Tech­ nique as techniques that employ the same principles as those Department Response: Preceptor Trainees will no longer be li­ recognized by DACA. censed as interns under the rules because there is no statutory authority to obtain a license in this manner. The commenter further noted that a large percentage of poly­ graph examinations are administered to sex offenders who are Section 88.10(10) - Definition of "Polygraph examination" on probation or parole and that DACA instructors lack exper­ Provision: Proposed §88.10(10) defines "polygraph examina­ tise in this specialization of polygraph examination administra­ tion" as "the use of any instrument to graphically record simulta­ tion. Another commenter noted that DACA does not publish a neously the physiological changes in human respiration, cardio­ list of validated formats. vascular activity, and any other physiological changes that can

35 TexReg 236 January 8, 2010 Texas Register A third commenter did not think that DACA would be the appro­ Department Response: Section 1703.252(a) authorizes the priate "decider" for test techniques in the state because, while Commission to adopt a system under which polygraph exam­ there are test techniques that have undergone validation stud­ iner licenses expire on various dates during the year. Section ies, they have not been done by DACA. 1703.252(b) specifies that for a year in which the license ex­ piration date is changed, license fees payable on the original A fourth public comment noted that using the term "valid" would expiration date shall be prorated on a monthly basis so that the limit all examinations to "You Phase" only and suggested that license holder pays only the portion of the fee that is allocable there might be another way to list accepted techniques. As an to the number of months the license is valid. On renewal of the example of problems that might arise by using this definition, the license on the new expiration date, the total license renewal fee commenter stated that AFMGQT, routinely used for pre-employ­ is payable. Section 88.21(a) remains unchanged. ment testing, is not listed as a validated testing technique and therefore could not be used. Section 88.28(a)(1) and (2) - Responsibilities of Registered Cur- riculum Providers Two additional members of the public stated that many good polygraph techniques have been taught at various colleges and Provision: Proposed rule §88.28(a)(1) and (2) requires a curricu­ universities and that to limit the sole source for validated exami­ lum provider to register with the Department and to file and obtain nation techniques to DACA would result in micro-managing and approval of the course curriculum required under §88.100. restricting resources. They also recommended deleting this def­ Public Comment: One commenter suggested that the heading inition. of §88.28 be changed to "Responsibilities of Department Ap­ The last comment received statedthat, accordingtoDACA, proved Polygraph Examiner Schools" because he felt that it was validated testing techniques approved by DACA can only be not clear whether the proposed rule is intended to address the obtained by either filing a Freedom of Information Request curriculum taught by department-approved polygraph examiner with DACA or going to the antipolygraph.org website. The schools or by continuing education providers. commenter did not think that these were good options for Department Response: Section 88.28(a)(2) references §88.100 obtaining and updating a list of approved testing techniques for which outlines an internship schedule and lists the minimum type Texas examiners and believes that the rule is so vague as to and number of hours required for all internship training programs. be unenforceable and that it should be stricken. In addition, The Department also believes that the reference to the internship this commenter notes that "recognition" has no definition in the training program in §88.100 makes it sufficiently clear that the proposed rules and that if the term "detecting recognition" is registration requirements refer to polygraph examiner schools. goingtobe useditshould be defined in the rules. Section 88.28(a)(1) and (2) remain unchanged. Department Response: It was not the Department’s intent to cre­ Section 88.29(d) - State Examination for Polygraph Examiner ate a situation in which one organization was the sole reposi­ License. tory for validated polygraph testing techniques. In response to the comments, the Advisory Committee deleted the definition of Provision: Proposed rule §88.29(d) requires that an applicant sit­ "polygraph testing format" from the proposed rules. The Depart­ ting for an examination select five polygraph examinations that ment concurs with the Advisory Committee’s recommendation. they have conducted within the past twenty-four months for sub­ Section 88.10(13) "polygraph testing format" has been deleted mission and grading by three subject matter experts. from the definitions. Public Comment: One commenter suggested that the Commis­ Section 88.20(5)(B) - Licensing Requirements--Polygraph Ex- sion select the files to be reviewed as was previously done by aminer the Polygraph Examiners Board. The commenter noted that al­ lowing the intern to "cherry pick" their best files prohibits review Provision: Section 88.20(5)(A) and (B) lists the requirements for of substandard work and makes it difficult to assist the intern obtaining a polygraph examiner license, which includes either in correcting a deficiency early in their career. The commenter graduating from a department-approved polygraph school and suggested that the Department select the five files that will be completingasix-month internship or in lieu of attending school, reviewed by the subject matter experts. completing a twelve-month internship. Another commenter also felt that having TDLR select the exam­ Public Comment: Thecommenter wouldliketoseethetwelve­ inations would provide a much better "random sample" of the month internship omitted because he believes that it is not a work performed. professional way to obtain a polygraph examiner license. Department Response: Proposed rule §88.70 sets out the gen­ Department Response: Allowing an applicant to complete a eral responsibilities of a Sponsor. Proposed rule §88.70(d) re­ twelve-month internship instead of attending polygraph school quires the sponsor to carefully review each polygraph examina­ is authorized by statute. Section 1703.202, which sets out the tion administered by the trainee for accurate chart interpretation requirements for licensure cannot be changed by rule. Section before giving a final opinion, in addition to other responsibilities 88.20(5)(B) remains unchanged. set forth in §88.70. Both the Advisory Committee and the Depart­ Section 88.21(a) - Licensing Requirements--Polygraph Exam- ment believe that the proposed rules, which establish the duties iner Renewal and responsibilities of both the sponsor and the trainee, are suf­ ficient to assist theinternincorrectingde ficiencies in their work. Provision: Proposed rule §88.21(a) states that a polygraph ex­ Section 88.29(d) remains unchanged. aminer license is valid for one year from the date of issuance and may be renewed annually. Section 88.40 - Financial Security Public Comment: One commenter questioned whether future Provision: Proposed rule §88.40 states that before a license is licenses will expire at various times during the year as opposed issued or renewed a polygraph examiner applicant must provide to expiration on December 31st. proof to the Department that they have obtained either a $5,000

ADOPTED RULES January 8, 2010 35 TexReg 237 insurance policy or surety bond and must maintain the insurance Another commenter also thought that the way the rule was policy, surety bond or continuation bond at all times during the drafted would make the sponsor review the report of the in­ licensing period. The bond must remain in effect for two years tern’s work. The commenter believes that the sponsor should after the effective cancellation date. validate/review the entirety of the intern’s work. Public Comment: One commenter had no suggestions but re­ Department Response: The Advisory Committee felt that quested clarification as to whether the financial security must run §88.70(e), when read in conjunction with §88.70(c), makes it concurrently with the licensing period or whether the financial se­ clear that the sponsor will be reviewing all trainee work product curity can expire on a different date as long as the licensee is and not just the weekly report required in §88.70(e). Section continuously insured during the licensing period. 88.70(e) remains unchanged. A second commenter requested clarification as to whether the Section 88.70(f)(1)(C) - General Responsibilities--Sponsor examiners must pay for surety bonds for two years after they Provision: Section 88.70(f)(1)(C) requires that a sponsor pre­ cease to be examiners or whether this is covered in the bond pare and keep a monthly report of all polygraph related work that existed during the last year of licensure. conducted by the trainee and all curriculum used in the course Department Response: As long as the licensee’s financial secu­ of supervised instruction and that, for examinations directly ob­ rity is continuously in effect during the time the license is active, served by the sponsor, the report must contain the employer’s the applicant has met the requirements of §88.40. In addition, name. the financial security must remain in effect for two years after an Public Comment: One commenter noted that subparagraph (C) examiner ceases to practice to ensure that claims arising after does not indicate whose employer’s name should be signified that date are covered. and that it would be helpful to put a parenthetical example next The Department suggested an amendment to the proposed to the definition of subparagraph (C). Another commenter also rule regarding financial security requirements for state employ­ felt that this section needs more clarification. ees and presented the Advisory Committee with §88.40(e) to Department Response: The Advisory Committee agreed with clarify the fact that a polygraph examiner employed by a state these comments and recommended that the proposed rule be agency and performing duties authorized by the state agency changed to include the parenthetical phrase "(if applicable)" after is exempted from the financial security requirements of §88.40 the phrase "the employer’s name". The Department agreed with pursuant to the State Employee Bonding Act, Texas Govern­ the recommendation and the rule is amended. ment Code, Chapter 653. The Advisory Committee concurred with the changes suggested by the Department and the rule is Section 88.70(f)(1)(E) - General Responsibilities adopted as amended. Provision: Section 88.70(f)(1)(E) requires that when preparing Section 88.70(c) - (g) - General Responsibilities--Sponsor. and keeping a monthly report of all worked conducted by a trainee, the report must also contain the type of test adminis­ Provision: Section 88.70 establishes the general responsibilities tered. required to serve as a sponsor for a trainee and specifies the number of examinations a sponsor must directly observe during Public Comment: One commenter noted that because subpara­ the polygraph examiner internship. graph (E) does not indicate what "type of test" is referred to, a question could arise as to whether it is a specific issue or a Public Comment: One commenter was opposed to remote in­ pre-employment test; a zone comparison or an MGQT test; or ternships and interns administering examinations that are not a pre-conviction or a post-conviction test. The commenter sug­ done under the direct supervision of the sponsor. The com­ gested that it would be helpful to put a parenthetical example menter noted that there are too many critical variables associ­ next to the definition of subparagraph (E). Another commenter ated with each interview and examination to be left to the judg­ also felt that this rule needs more clarification. ment of inexperienced interns. Department Response: The Department believes that because Department Response: The proposed rules were drafted, to the "internship monthly report" form available on the TDLR web- the extent possible, from the Polygraph Examiner’s Board rules. site has a specificcategory for whether the test is a specificis­ The requirement that a sponsor must directly observe eight poly­ sue or pre-employment test, that subparagraph (E) is sufficiently graph examinations has been adopted from §391.5 of the Poly­ clear. Section 88.70(f)(1)(E) remain unchanged. graph Examiner Board rules. Section 88.70(c) - (g) remain un­ changed. Section 88.71(a) General Responsibilities--Polygraph Examiner Internship Section 88.70(e) - General Responsibilities--Sponsor Provision: Section 88.71(a) requires that a trainee observe the Provision: Section 88.70(e) requires that at the conclusion of sponsor conduct a minimum of two polygraph examinations prior each week a sponsor review the report submitted by the trainee to beginning field work in the polygraph examiner internship pro­ describing all polygraph related work conducted during the week. gram. Public Comment: One commenter stated that the rule appears Public Comment: One commenter suggested that because the to allow the trainee to submit a report describing the work done term "field work" has not been defined by statute or rule, the term rather than showing the actual work to the sponsor. The com­ could be interpreted to mean polygraph examinations conducted menter suggested that the if intent of the rule is that the sponsor away from one’s main place of business. With that interpretation, should seeeverythingthe internhasdonepertainingtopoly­ a trainee could conduct an examination in his or her main office graph examinations, then the rule should be amended to require before observing the sponsor conduct two examinations. the sponsor to review the entirety of the files themselves rather than a report about work contained in the files. A second commenter felt the rule needs clarification if the intent is to have the intern observe two examinations by the sponsor.

35 TexReg 238 January 8, 2010 Texas Register Department Response: The proposed rules were drafted, to the Occupations Code, §1703.002 and §1703.003 regulate people extent possible, from the Polygraph Examiner’s Board rules. The who use instrumentation to detect deception and verify truthful­ requirement that a trainee observe the sponsor conduct a mini­ ness of statements, not to give opinions of recognition indicated mum of two polygraph examinations prior to beginning field work or no recognition indicated. Therefore, expanding this rule would in the internship program has been adopted from §391.5(a) of be in conflict with the statutory definition of "polygraph examiner" the Polygraph Examiner Board rules. Section 88.71(a) remains and "instrument". unchanged. Another commenter stated that SR or NSR would be the proper Section 88.73. Responsibility of Licensee--Display of License terminology to use rather than RI/NRI because the former ap­ plies to both screening exams and recognition exams while the Provision: Section 88.73 requires that a licensee prominently converse is not true with RI/NRI. display their license at their place of business or place of intern­ ship and also display their license when conducting remote poly­ A third commenter stated that because polygraph examiners are graph examinations. licensed to "detect deception or verify the truth of statements" through the use of instrumentation, he is opposed to opinions of Public Comment: One commenter stated that the rule adds lan­ "recognition indicated" or "no recognition indicated". The com­ guage to Texas Occupations Code, §1703.303 which only re­ menter noted that these terms are used in the Peak of Tension quires that the license be displayed at the place of business or Test which is designed to be administered during the course of internship. Further, that it is not practical to carry even a pocket polygraph examinations, not as a stand-alone test. The com­ license to every polygraph examination and that in other occu­ menter is also opposed to examination results of "significant re­ pations which TDLR regulates, there is no requirement that the sponse" or "no significant response" for the same reasons and licensee carry a license when conducting business outside of is concerned that use of these terms may open the door to the the principal office. The commenter recommended that §88.73 use of voice stress/CVSA, which is currently illegal in Texas and be eliminated. under EPPA. A fourth commenter stated that "recognition" or "no Another commenter stated that the requirement to display their recognition" should be applied in Guilty Knowledge, Peak of Ten­ license when conducting remote polygraph examinations is im­ sion or Concealed Information tests only. practical because the waiver form that the examinee signs con­ Two additional comments strongly opposed inclusion of these tains the contact information for TDLR. A third commenter felt terms. One felt that the language should not be allowed because that it was unnecessary to require licensees to prominently dis­ polygraph examiners are in the business of detecting deception play their license when conducting remote polygraph examina­ and verifying the truth, not identifying recognition. Further, that tions because in the past, theBoard suppliedeachlicensee with this is a way of not calling someone deceptive or a way not to a photo ID attesting to the licensure which should be sufficient runtwocharts. Inaddition, some examiners refer to this as a to identify the genuineness of the licensee. "screening" not a polygraph and if it is not a polygraph then it is A fourth commenter felt the rule was unnecessary because it possible that a license wouldn’t be required. It also uses similar adds language to the existing statute which only requires dis­ terms to Voice Stress Analysis. play at one’s office. Also, polygraph examiners have a "pocket The final commenter said, "In 28 years of conducting polygraph license’ that they use at jails and other facilities to verify status. examinations and being active in polygraph trade associations, A fifth commenter also deemed this impractical and was con­ I’ve never heard of the term "recognition" or "no recognition"." cerned about what constitutes "display" of a license at a remote location. Department Response: It was not the Department’s intent to ex­ pand a rule that would be in conflict with the statutory definitions Department Response: The Department recommends that of "polygraph examiner" and "instrument". In response to the §88.73 be amended to state that "A licensee must prominently comment, the Department recommended deleting the phrases display their license at their place of business or place of "recognition indicated" and "no recognition indicated" from pro­ internship and must present their pocket license upon request posed rule §88.76(a)(1) and (2). The rule is changed accord­ when conducting remote polygraph examinations." The rule is ingly. changed accordingly. Section 88.79. Responsibility of Licensee--Record Keeping Section 88.76(a)(1) and (2). Responsibility of Licensee--Poly- graph Examination Results Provision: Section 88.79 requires a licensee to retain all charts, written reports, audio and video tapes, chart analysis opinions, Provision: Section 88.76(a)(1) and (2) require that a polygraph and other relevant documents for inspection by the Department examiner, if requested, must advise the examinee of the results for at least two years from the date of the examination. The pro­ of the examination prior to the termination of the polygraph ex­ posed rule also requires that the licensee, upon request, make amination. The proposed rule requires that the result be given available to the Department all records and other relevant docu­ to the examinee as it relates to the specific polygraph testing for­ ments required by the law and rules. mat, which can be deception indicated or recognition indicated; no deception or no recognition indicated; inconclusive; or no Public comment: One commenter expressed his opposition to opinion. the term "inspection" regarding the two year record retention re­ quirement because he feels that the term is misleading in its cur­ Public Comment: One commenter noted that the terms "recogni­ rent context. The commenter cites an April, 2000, Attorney Gen­ tion indicated" (RI) and "no recognition indicated" (NRI) are new eral Opinion which states that "the polygraph examiners board terms in the polygraph profession and appear to have been re­ may not inspect a polygraph examiner’s work product in the ex­ placed or used interchangeably with the terms "significant re­ aminer’s place of business without a search warrant". He further sponse" (SR) and "no significant response" (NSR). The com­ cites EPPA Subpart D 801.35, §9 which prohibits the unautho­ menter stated that proponents of these terms have used them rized disclosure of any information obtained during a polygraph to avoid calling someone deceptive or truthful, however, Texas

ADOPTED RULES January 8, 2010 35 TexReg 239 test by any person, other than the examinee, directly or indirectly, The following words and terms, when used in this chapter, have the except pursuant to a court order requiring the production of such following meanings, unless the context clearly shows otherwise. information. (1) Active investigative experience--Documentation that Department Response: Texas Occupations Code, §51.351 of the applicant has been engaged in the business of conducting in­ TDLR’s enabling statute authorizes the Department to conduct vestigations during the five (5) years preceding the application; or inspections or investigations as necessary to enforce the laws documentation that the applicant has obtained the minimum training administered by the Department. Further, the Department, hours necessary to obtain a basic law enforcement certificate issued during reasonable business hours, may enter the business by the Texas Commission on Law Enforcement Officer’s Standards premises of a person regulated by the Department or a person and has utilized the training during the five (5) years preceding the suspected of being in violation of or threatening to violate a application. law establishing a regulatory program administered by the (2) Applicant--The person submitting an application for a Department or a rule or order of the Commission or Executive license issued by the department under this chapter. Director related to a regulatory program administered by the Department; and examine and copy records pertinent to the (3) Commission--The Texas Commission of Licensing and inspection or investigation. Language is added to §88.79 to Regulation. clarify the Department’s authority. (4) Committee--The Polygraph Advisory Committee. Section 88.80. Fees (5) Department--The Texas Department of Licensing and Provision: Section 88.80 establishes the licensing fee sched­ Regulation. ule for polygraph examiners and trainees. The fee schedule in­ (6) Executive director--The executive director of the de­ cludes fees for an original application, renewal and duplicate. It partment. also includes a $500 licensing fee for polygraph examiners who are applying from out-of-state. (7) Instrument--A device used to test a subject to detect de­ ception or verify the truth of a statement by recording visually, perma­ Public Comment: The Texas Association of Polygraph Exam­ nently, and simultaneously a subject’s cardiovascular and respiratory iners (TAPE) submitted a comment signed by twenty-five of its patterns. The term includes a lie detector, polygraph, deceptograph, or members requesting that the Department significantly reduce all any other similar or related device. fees associated with licensing, annual license renewal, licensing examinations and internships for every licensee or license appli­ (8) Investigation--Obtaining or furnishing information re­ cant in the Texas polygraph profession. lated to the identity, business, occupation, movement, location, acts, associations, reputation or character of a person; or to the location or An individual commenter stated that the rule does not indicate recovery of lost or stolen property or the cause or responsibility for a whether "out of state" refers to a renewal or an original license fire, libel, loss, accident, damage, or injury to a person or property; or and that the rule should be made clear as to which type of license securing evidence to be used before a court, board, officer, or inves­ is being referenced. Further, that because polygraph examiner tigative committee. license fees are already among the highest in the state, the fee should not be raised. Another commenter was concerned that (9) License holder or licensee--The person to whom the de­ the "out of state" fee was a fee for licensees residing out of state partment issued a license. which has never been a fee assessed in the past. (10) Polygraph examination--The use of any instrument Department Response: The Department conducts annual fee to graphically record simultaneously the physiological changes in reviews of all regulated occupations in the fall of each year in human respiration, cardiovascular activity, and any other physiological compliance with Texas Occupations Code, §51.202. These cost changes that can be recorded for the purpose of verifying truth or management procedures enable the Commission to determine deception and includes the reading and interpretation of the polygraph the cost to the Department of each program and activity for records and results. A polygraph examination may contain four (4) which a fee is charged. This allows the Department to determine phases known as the Pre-test phase, Testing phase, Chart analysis whether there is sufficient revenue to cover costs and if so, the phase and Post-test phase, any one of which constitutes a polygraph amount that fees can be reduced. The Department has a history examination. of lowering fees whenever possible and will make an analysis of (11) Polygraph examiner--A person licensed under this the polygraph examiner program during the annual fee review chapter to use an instrument to detect deception or verify the truth of to determine if and by how much fees can be reduced. The astatement. Advisory Committee felt that the proposed rule was sufficiently clear that an applicant with an out-of-state license applying to (12) Polygraph examiner internship--A course of study of be licensed in Texas would pay the out-of-state license fee. polygraph examinations and of the administration of polygraph exam­ Section 88.80 remains unchanged. inations by a trainee under the personal supervision and control of a polygraph examiner as prescribed by the department. The new rules are adopted under Texas Occupations Code, Chapters 51 and 1703, which authorize the Commission, the (13) Sponsor--A person licensed under this chapter for not Department’s governing body, to adopt rules as necessary to less than two (2) years as a polygraph examiner who provides instruc­ implement these chapters and any other law establishing a tion and supervision to a trainee. program regulated by the Department. (14) Trainee--A person who holds a polygraph examiner The statutory provisions affected by the adoption are those set internship license under this chapter. forth in Texas Occupations Code, Chapters 51 and 1703. No §88.20. Licensing Requirements--Polygraph Examiner. other statutes, articles, or codes are affected by the adoption. §88.10. Definitions. To be eligible for a polygraph examiner license, an applicant must:

35 TexReg 240 January 8, 2010 Texas Register (1) submit a completed application on a department-ap­ (7) pay the applicable license application fee required un­ proved form; der §88.80. (2) pay the fee required under §88.80; (b) A person who is applying from a jurisdiction where the examination standards are not substantially equivalent to those in Texas (3) provide a copy of an insurance policy, surety bond or must pass the written and practical examination required under §88.29. bond continuation certificate required under §88.40; (c) A person who is applying from a jurisdiction whose exam­ (4) either: ination standards have been determined by the department to be sub­ (A) hold a baccalaureate degree from a college or uni­ stantially equivalent to those in Texas may waive the written and prac­ versity; or tical examination required under §88.29. (B) have active investigative experience during the five §88.26. Licensing Requirements--Polygraph Examiner Internship (5) years preceding the application; License. (5) either: To be eligible for a polygraph examiner internship license, an applicant (A) graduate from a department-approved polygraph must: school and satisfactorily complete a six (6) month polygraph examiner (1) submit a completed application on a department-ap­ internship; or proved form; (B) satisfactorily complete a twelve (12) month poly­ (2) pay the fee required under §88.80; and graph examiner internship; (3) successfully pass a criminal background check. (6) pass a written and practical examination required under §88.29; and §88.28. Responsibilities of Registered Curriculum Providers. (7) successfully pass a criminal background check. (a) To be eligible to provide a polygraph examiner education course, a registrant must: §88.21. Licensing Requirements--Polygraph Examiner Renewal. (1) submit a completed application on a department-ap­ (a) A polygraph examiner license is valid for one (1) year from proved form; and the date of issuance and may be renewed annually. (2) file and obtain approval of the course curriculum re­ (b) To renew a license, an applicant must: quired under §88.100. (1) submit a completed application on a department-ap­ (b) A registration under this chapterisvalid forone (1)year proved form; and may be renewed annually. (2) pay the applicable fee required under §88.80; §88.29. State Examination for Polygraph Examiner License. (3) provide proof of an insurance policy, surety bond or bond continuation certificate required under §88.40; and (a) To be eligible to sit for an examination, an applicant must: (4) successfully pass a criminal background check. (1) submit a completed license application on a depart­ ment-approved form; (c) Non-receipt of a license renewal notice from the depart­ ment does not exempt a person from any requirements of this chapter. (2) pay the applicable license application fee required un­ der §88.80; §88.24. Licensing Requirements--Polygraph Examiner Applicant with Out-of-State License. (3) satisfy the requirements to obtain a polygraph examiner license required under §88.20(4) and (5); and (a) The holder of an out-of-state polygraph examiner license must meet the following requirements: (4) have completed thirty (30) polygraph examinations. (1) submit a completed application on a department-ap­ (b) The polygraph examiner state examination consists of a proved form; written, scenario, and practical portion. (2) provide information sufficient for the department to (c) A score of seventy is required to pass each portion of the verify that the applicant has, for at least one (1) year, held an active examination. and valid license in another jurisdiction and that the applicant’s license (d) The practical examination consists of five polygraph ex­ is in good standing; aminations selected by the applicant and conducted within 24 months (3) provide information sufficient for the department to prior to the filing of the application for licensure. The examinations verify that the applicant has not been convicted of an offense that will be evaluated and graded by three (3) subject matter experts and directly relates to the duties and responsibilities of a polygraph exam­ the average of these grades will be the score awarded to the applicant iner; for the practical examination. (4) provide information sufficient for the department (e) Mock polygraph examinations do not qualify as polygraph to verify that the applicant has administered thirty (30) polygraph examinations for purposes of satisfying the practical examination re­ examinations before applying for a Texas license; quirements. (5) provide a copy of an insurance policy, surety bond or §88.40. Financial Security. bond continuation certificate required under §88.40; (a) Beforealicense isissu ed and upon each renewal, a poly­ (6) furnish a copy of the applicant’s valid license; and graph examiner applicant must provide proof to the department that the

ADOPTED RULES January 8, 2010 35 TexReg 241 applicant has obtained a $5,000 insurance policy or surety bond guar­ (2) For examinations conducted outside the direct observa­ anteeing payment of up to $5,000 arising out of judgments recovered tion of the sponsor, the report must include paragraph (1)(A) - (E) and: against the applicant for any wrongful or illegal act committed by the (A) the trainee’s preliminary opinion of examination re­ applicant in the course of administering a polygraph examination. sults; (b) A polygraph examiner applicant must maintain an insur­ (B) the date the sponsor reviewed the trainee’s prelimi­ ance policy, surety bond or continuation bond at all times during the nary opinion; license period. (C) whether the sponsor’s opinion confirmed or contra­ (c) The insurance policy or bond must be issued by a company dicted the trainee’s preliminary opinion; authorized to do business in the State of Texas. (D) documentation of any real time communication (d) The insurance policy or bond must remain in effect for two method used by the trainee to confer with the sponsor during the (2) years after the effective cancellation date. course of the examination; and (e) A polygraph examiner employed by a state agency and ex­ (E) a description of the assistance provided by the spon­ clusively performing duties authorized by the state agency is not re­ sor. quired to provide a bond or insurance policy if the polygraph examiner and state agency is otherwise insured as authorized by the State Em­ (3) For curriculum: ployee Bonding Act, Title 6, Government Code, Chapter 653. (A) the number of hours of supervised instruction pro­ §88.70. General Responsibilities--Sponsor. vided to trainee; and (a) To serve as a sponsor for a trainee, a Texas licensed poly­ (B) the type of curriculum used in the course of super­ graph examiner must have held a Texas Polygraph Examiner license vised instruction. continuously for at least two (2) years immediately preceding submis­ (g) The sponsor must use in the course of supervised instruc­ sion of the sponsor application. tion the curriculum approved and adopted under §88.100. (b) No licensed polygraph examiner may sponsor more than (h) At the completion of the polygraph examiner internship, two (2) trainees at any one time. the sponsor must, within ten (10) days, submit notice of the completion (c) The sponsor must be present to directly observe a total of of internship to the department on a department-approved form or in a eight (8) polygraph examinations conducted by the trainee during the manner set by the department. course of the polygraph examiner internship. (i) A sponsor who terminates the sponsorship of a trainee must, (1) The sponsor must directly observe the first five (5) poly­ within ten (10) days: graph examinations and must directly observe a minimum of three (3) (1) notify the trainee in writing; additional polygraph examinations during the remainder of the poly­ graph examiner internship. (2) submit notice of the termination to the department on a department-approved form or in a manner set by the department; and (2) When polygraph examinations are conducted outside the direct observation of the sponsor, the sponsor must be available ei­ (3) submit a copy of all monthly reports required under ther by phone, text messaging, email or other real time communication subsection (f) to both the department and the trainee. method to assist the trainee. (j) The sponsor must retain all polygraph examiner internship (d) The sponsor is responsible for all chart interpretations of records for at least two (2) years and upon request, must make available polygraph examinations conducted by a polygraph examiner internship to the department all records required by the law and this chapter to trainee and must carefully review each polygraph examination admin­ determine compliance with the program. istered by the trainee for accurate chart interpretation before giving a §88.71. General Responsibilities--Polygraph Examiner Internship. final opinion. (a) A trainee must observe the sponsor conduct a minimum of (e) At the conclusion of each week a sponsor must review the two (2) polygraph examinations prior to beginning fieldworkin the report submitted by the trainee describing all polygraph related work polygraph examiner internship program. conducted during the week. (b) At the conclusion of each week, a trainee must provide the (f) The sponsor must prepare and keep a monthly report of all sponsor with a report describing all polygraph related work conducted polygraph related work conducted by the trainee and all curriculum during the week. used in the course of supervised instruction. The report must contain the following information: (c) A preliminary opinion of the results of a polygraph exami­ nation must, if requested, be given by the trainee for examinations that (1) For examinations directly observed by the sponsor: are administered outside the direct observation of the sponsor. The (A) the examination date; trainee must advise the examinee that the opinion is preliminary until the examination is reviewed and an opinion is given by the sponsor. (B) the examinee’s name; (d) A trainee who terminates the polygraph examiner intern­ (C) the employer’s name (if applicable); ship with a sponsor must, within ten (10) days: (D) the technique and type of instrument used; (1) notify the former sponsor in writing; and (E) the type of test; and (2) submit notice of the termination to the department on a (F) the result of test. department-approved form or in a manner set by the department. (e) A trainee who changes sponsors must, within ten (10) days:

35 TexReg 242 January 8, 2010 Texas Register (1) notify the former sponsor in writing; (4) no opinion. (2) submit notice of the change of sponsor to the depart­ (b) The examinee must be given an opportunity to explain the ment on a department-approved form or in a manner set by the depart­ results of the examination to the polygraph examiner. ment; and §88.79. Responsibility of Licensee--Record Keeping. (3) pay the fee required under §88.80. (a) All polygraph charts, question sheets, written reports, data §88.73. Responsibility of Licensee--Display of License. sheets, films, audio and video tapes, opinions of the examiner from chart analysis, electronic records of examinations and other relevant A licensee must prominently display their license at their place of busi­ documents must be retained for inspection pursuant to an investigation ness or place of internship and must present their pocket license upon by the department as authorized in Texas Occupations Code, Chapter request when conducting remote polygraph examinations. 51 for at least two (2) years from the date of the examination. §88.74. Responsibility of Licensee--Conducting Polygraph Exami- (b) The licensee, upon request, must make available to the de­ nations. partment all records and other relevant documents required by the law When conducting a polygraph examination, a licensee must: and this chapter. (1) Mark questions and answers. All questions asked a sub­ §88.100. Technical Requirements--Polygraph Examiner Internship ject during a polygraph examination and all of the subject’s answers Curriculum. must be marked on each polygraph chart. (a) To satisfactorily complete a polygraph examiner intern­ (A) These markings must be done by making a stimulus ship, a trainee must: mark at the exact point on each polygraph chart where questions began, ended, and the subject’s answer was given. (1) graduate from a department-approved polygraph school and complete a six (6) month polygraph examiner internship; or (B) Each polygraph examination given must have a written question sheet which contains the exact wording of every (2) complete a twelve (12) month polygraph examiner in­ question asked. ternship. (C) The use of abbreviations is prohibited, unless they (b) The following internship schedule has been approved and are defined on the question sheet. adopted by the commission as the minimum type, and number of hours, of any internship training program used in the course of supervised (D) Questions on question sheets may be identified by instruction. numbers, letters, or any number-letter combination. (1) History and development of polygraph--four hours. (E) Each question asked on every polygraph chart must be noted by marking the letter, number, or number-letter combination (2) Legal and ethical aspects of polygraph--20 hours. near the stimulus marks so that the relationship of the question asked (A) Texas Polygraph Examiners Act. on the chart and the question sheet may be easily identified. (B) Statements and reports, civil rights, examiner and (2) Ask questions two (2) separate times. The licensee professional ethics hours. must not give a verbal or written opinion, based on chart analysis, until the same relevant questions have been asked a minimum of two (3) Physiology--24 hours. (2) separate times. (A) Nervous system, autonomic nervous system. (3) Observe response intervals. The licensee must allow a (i) Sympathetic system. minimum of twenty (20) seconds between each question to give the examinee enough time to physiologically respond to each verbal stim­ (ii) Parasympathetic system. ulus. (B) Circulatory system and the heart. (A) The twenty (20) second period is measured from the (C) Respiratory system. beginning of one question until the beginning of the next question, or the ending of the examination. (D) Effects of drugs, alcohol, and illness. (B) The requirement does not apply to chart markings (4) Psychology--24 hours. such as the announcement of the start of the examination nor does it (A) General. apply to any comment made by the examiner during the examination that does not require an answer from the examinee such as answering (B) Abnormal. instructions or movement instructions by the examiner. (C) As applied to polygraph. §88.76. Responsibility of Licensee--Polygraph Examination Results. (5) Interrogation and interviews--100 hours. (a) The polygraph examiner must, if requested, advise the ex­ (A) Receiving case briefing. aminee of the results of the examination prior to the termination of the (B) Pre-test interview. polygraph examination. The results will be given to the examinee as it relates to the specific polygraph testing format: (C) Post-test interview. (1) deception indicated; (6) Chart interpretation--120 hours. (2) no deception indicated; (A) All types of tests and responses. (3) inconclusive; or (B) Chart marking.

ADOPTED RULES January 8, 2010 35 TexReg 243 (C) Test results: No Deception Indicated, Deception In­ tion of polygraph examiners; and abolished the Polygraph Exam­ dicated, Inconclusive or No Opinion. iner’s Board. The Commission in a separate rulemaking action is adopting new rules at 16 TAC Chapter 88 that will replace the (7) Question formulation and test construction--120 hours. rules affected by the repeal. (A) All types of tests. At their meeting held December 7, 2009, the Polygraph Exam­ (B) All types of questions. iners Advisory Committee discussed the rules and unanimously recommended adoption by the Commission. (C) Semantics. The proposed repeal was published in the Texas Register on (8) Instrumentation--10 hours. October 30, 2009. The 30-day public comment period closed on (A) Construction and maintenance. November 30, 2009. The Department did not receive any public comments on the proposed repeal. (B) Trouble shooting. The repeal is adopted under SB 1005, 81st Legislature, Regu­ (C) Nomenclature. lar Session (2009) and Texas Occupations Code, Chapters 51 (9) Summary and general review--10 hours. and 1703, which authorize the Commission, the Department’s governing body, to adopt rules as necessary to implement these (10) Supervised testing and interviewing--minimum of 30 chapters and any other law establishing a program regulated by tests conducted in Texas. the Department. (11) Counseling and critique as required in opinion of The statutory provisions affected by the adopted repeal are those sponsor. set forth in Texas Occupations Code, Chapters 51 and 1703. No This agency hereby certifies that the adoption has been reviewed other statutes, articles, or codes are affected by the repeal. by legal counsel and found to be a valid exercise of the agency’s This agency hereby certifies that the adoption has been reviewed legal authority. by legal counsel and found to be a valid exercise of the agency’s legal authority. Filed with the Office of the Secretary of State on December 22, 2009. Filedwiththe Office of the Secretary of State on December 22, TRD-200906017 2009. William H. Kuntz, Jr. TRD-200906018 Executive Director William H. Kuntz, Jr. Texas Department of Licensing and Regulation Executive Director, Texas Department of Licensing and Regulation Effective date: January 11, 2010 Polygraph Examiners Board Proposal publication date: October 30, 2009 Effective date: January 11, 2010 For further information, please call: (512) 463-7348 Proposal publication date: October 30, 2009 ♦ ♦ ♦ For further information, please call: (512) 463-7348 TITLE 22. EXAMINING BOARDS ♦ ♦ ♦ PART 19. POLYGRAPH EXAMINERS CHAPTER 393. GENERAL BOARD 22 TAC §§393.1, 393.3 - 393.7, 393.9 - 393.11 The Texas Commission of Licensing and Regulation ("Commis­ CHAPTER 391. POLYGRAPH EXAMINER sion") adopts the repeal of 22 Texas Administrative Code ("TAC") INTERNSHIP Chapter 393, §§393.1, 393.3 - 393.7, and 393.9 - 393.11, re­ garding general rules of the polygraph examiners board, without 22 TAC §§391.1 - 391.10 changes to the proposal as published in the October 30, 2009, The Texas Commission of Licensing and Regulation ("Com­ issue of the Texas Register (34 TexReg 7507) and will not be mission") adopts the repeal of 22 Texas Administrative Code republished. The adopted repeal takes effect January 11, 2010. ("TAC"), Chapter 391, §§391.1 - 391.10, regarding polygraph The Commission adopts the repeal of the Polygraph Examiner’s examiner internship, without changes to the proposal as pub­ Board rules in order to implement Senate Bill 1005 ("SB 1005"), lished in the October 30, 2009, issue of the Texas Register (34 81st Legislature, Regular Session (2009) and to reorganize and TexReg 7506) and will not be republished. The adopted repeal clarify the rules regulating polygraph examiners under Title 16, takes effect January 11, 2010. Texas Administrative Code, the rules of the Texas Department of The Commission adopts the repeal of the Polygraph Examiner’s Licensing and Regulation ("Department"). SB 1005 transferred Board rules in order to implement Senate Bill 1005 ("SB 1005"), the regulation of polygraph examiners from the Polygraph Exam­ 81st Legislature, Regular Session (2009) and to reorganize and iners Board to the Department effective May 13, 2009; amended clarify the rules regulating polygraph examiners under Title 16, Texas Occupations Code, Chapter 1703 relating to the regula­ Texas Administrative Code, the rules of the Texas Department of tion of polygraph examiners; and abolished the Polygraph Exam­ Licensing and Regulation ("Department"). SB 1005 transferred iner’s Board. The Commission in a separate rulemaking action the regulation of polygraph examiners from the Polygraph Exam­ is adopting new rules at 16 TAC Chapter 88 that will replace the iners Board to the Department effective May 13, 2009; amended rules affected by the repeal. Texas Occupations Code, Chapter 1703 relating to the regula­

35 TexReg 244 January 8, 2010 Texas Register At their meeting held December 7, 2009, the Polygraph Exam­ At their meeting held December 7, 2009, the Polygraph Exam­ iners Advisory Committee discussed the rules and unanimously iners Advisory Committee discussed the rules and unanimously recommended adoption by the Commission. recommended adoption by the Commission. The proposed repeal was published in the Texas Register on The proposed repeal was published in the Texas Register on October 30, 2009. The 30-day public comment period closed on October 30, 2009. The 30-day public comment period closed on November 30, 2009. The Department did not receive any public November 30, 2009. The Department did not receive any public comments on the proposed repeal. comments on the proposed repeal. The repeal is adopted under SB 1005, 81st Legislature, Regu­ The repeal is adopted under SB 1005, 81st Legislature, Regu­ lar Session (2009) and Texas Occupations Code, Chapters 51 lar Session (2009) and Texas Occupations Code, Chapters 51 and 1703, which authorize the Commission, the Department’s and 1703, which authorize the Commission, the Department’s governing body, to adopt rules as necessary to implement these governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by chapters and any other law establishing a program regulated by the Department. the Department. The statutory provisions affected by the adopted repeal are those The statutory provisions affected by the adopted repeal are those set forth in Texas Occupations Code, Chapters 51 and 1703. No set forth in Texas Occupations Code, Chapters 51 and 1703. No other statutes, articles, or codes are affected by the repeal. other statutes, articles, or codes are affected by the repeal. This agency hereby certifies that the adoption has been reviewed This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s by legal counsel and found to be a valid exercise of the agency’s legal authority. legal authority.

Filed with the Office of the Secretary of State on December 22, Filed with the Office of the Secretary of State on December 22, 2009. 2009. TRD-200906019 TRD-200906020 William H. Kuntz, Jr. William H. Kuntz, Jr. Executive Director, Texas Department of Licensing and Regulation Executive Director, Texas Department of Licensing and Regulation Polygraph Examiners Board Polygraph Examiners Board Effective date: January 11, 2010 Effective date: January 11, 2010 Proposal publication date: October 30, 2009 Proposal publication date: October 30, 2009 For further information, please call: (512) 463-7348 For further information, please call: (512) 463-7348 ♦ ♦ ♦ ♦ ♦ ♦ CHAPTER 395. CODE OF OPERATING CHAPTER 397. GENERAL RULES OF PROCEDURE OF POLYGRAPH EXAMINERS PRACTICE AND PROCEDURE 22 TAC §§395.1 - 395.6, 395.8 - 395.11, 395.13 - 395.16, 22 TAC §§397.1 - 397.33 395.18 The Texas Commission of Licensing and Regulation ("Commis­ The Texas Commission of Licensing and Regulation ("Commis­ sion") adopts the repeal of 22 Texas Administrative Code ("TAC") sion") adopts the repeal of 22 Texas Administrative Code ("TAC") Chapter 397, §§397.1 - 397.33, regarding general rules of prac­ Chapter 395, §§395.1 - 395.6, 395.8 - 395.11, 395.13 - 395.16, tice and procedure of polygraph examiners, without changes to and 395.18, regarding code of operating procedure of polygraph the proposal as published in the October 30, 2009, issue of the examiners, without changes to the proposal as published in the Texas Register (34TexReg7509) and will not be republished. October 30, 2009, issue of the Texas Register (34 TexReg 7508) The adopted repeal takes effect January 11, 2010. and will not be republished. The adopted repeal takes effect Jan­ The Commission adopts the repeal of the Polygraph Examiner’s uary 11, 2010. Board rules in order to implement Senate Bill 1005 ("SB 1005"), The Commission adopts the repeal of the Polygraph Examiner’s Acts of the 81st Legislature, Regular Session (2009) and to reor­ Board rules in order to implement Senate Bill 1005 ("SB 1005"), ganize and clarify the rules regulating polygraph examiners un­ 81st Legislature, Regular Session (2009) and to reorganize and der Title 16, Texas Administrative Code, the rules of the Texas clarify the rules regulating polygraph examiners under Title 16, Department of Licensing and Regulation ("Department"). SB Texas Administrative Code, the rules of the Texas Department of 1005 transferred the regulation of polygraph examiners from the Licensing and Regulation ("Department"). SB 1005 transferred Polygraph Examiners Board to the Department effective May 13, the regulation of polygraph examiners from the Polygraph Exam­ 2009; amended Texas Occupations Code, Chapter 1703 relat­ iners Board to the Department effective May 13, 2009; amended ing to the regulation of polygraph examiners; and abolished the Texas Occupations Code, Chapter 1703 relating to the regula­ Polygraph Examiner’s Board. The Commission in a separate tion of polygraph examiners; and abolished the Polygraph Exam­ rulemaking action is adopting new rules at 16 TAC Chapter 88 iner’s Board. The Commission in a separate rulemaking action that will replace the rules affected by the repeal. is adopting new rules at 16 TAC Chapter 88 that will replace the At their meeting held December 7, 2009, the Polygraph Exam­ rules affected by the repeal. iners Advisory Committee discussed the rules and unanimously recommended adoption by the Commission.

ADOPTED RULES January 8, 2010 35 TexReg 245 The proposed repeal was published in the Texas Register on The repeal is adopted under SB 1005, 81st Legislature, Regu­ October 30, 2009. The 30-day public comment period closed on lar Session (2009) and Texas Occupations Code, Chapters 51 November 30, 2009. The Department did not receive any public and 1703, which authorize the Commission, the Department’s comments on the proposed repeal. governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by The repeal is adopted under SB 1005, 81st Legislature, Regu­ the Department. lar Session (2009) and Texas Occupations Code, Chapters 51 and 1703, which authorize the Commission, the Department’s The statutory provisions affected by the adopted repeal are those governing body, to adopt rules as necessary to implement these set forth in Texas Occupations Code, Chapters 51 and 1703. No chapters and any other law establishing a program regulated by other statutes, articles, or codes are affected by the repeal. the Department. This agency hereby certifies that the adoption has been reviewed The statutory provisions affected by the adopted repeal are those by legal counsel and found to be a valid exercise of the agency’s set forth in Texas Occupations Code, Chapters 51 and 1703. No legal authority. other statutes, articles, or codes are affected by the repeal. Filedwiththe Office of the Secretary of State on December 22, This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s 2009. legal authority. TRD-200906022 William H. Kuntz, Jr. Filed with the Office of the Secretary of State on December 22, Executive Director, Texas Department of Licensing and Regulation 2009. Polygraph Examiners Board TRD-200906021 Effective date: January 11, 2010 William H. Kuntz, Jr. Proposal publication date: October 30, 2009 Executive Director, Texas Department of Licensing and Regulation For further information, please call: (512) 463-7348 Polygraph Examiners Board ♦ ♦ ♦ Effective date: January 11, 2010 Proposal publication date: October 30, 2009 TITLE 31. NATURAL RESOURCES AND For further information, please call: (512) 463-7348 CONSERVATION ♦ ♦ ♦ PART 2. TEXAS PARKS AND CHAPTER 401. GRIEVANCE POLICY WILDLIFE DEPARTMENT 22 TAC §401.1 CHAPTER 53. FINANCE The Texas Commission of Licensing and Regulation ("Commis­ sion") adopts the repeal of 22 Texas Administrative Code ("TAC") SUBCHAPTER A. FEES Chapter 401, §401.1, regarding the grievance policy of the poly­ DIVISION 1. LICENSE, PERMIT, AND BOAT graph examiners board, without changes to the proposal as pub­ lished in the October 30, 2009, issue of the Texas Register (34 AND MOTOR FEES TexReg 7510) and will not be republished. The adopted repeal 31 TAC §53.13, §53.16 takes effect January 11, 2010. The Texas Parks and Wildlife Commission (commission) adopts The Commission adopts the repeal of the Polygraph Examiner’s amendments to §53.13, concerning Business License and Board rules in order to implement Senate Bill 1005 ("SB 1005"), Permits (Fishing), and §53.16, concerning Vessel, Motor, and 81st Legislature, Regular Session (2009) and to reorganize and Marine Licensing Fees. The amendment to §53.13 is adopted clarify the rules regulating polygraph examiners under Title 16, with changes to the proposed text as published in the October Texas Administrative Code, the rules of the Texas Department of 2, 2009, issue of the Texas Register (34 TexReg 6829). The Licensing and Regulation ("Department"). SB 1005 transferred amendment to §53.16 is adopted without changes and will not the regulation of polygraph examiners from the Polygraph Exam­ be republished. iners Board to the Department effective May 13, 2009; amended Texas Occupations Code, Chapter 1703 relating to the regula­ Thechangeto§53.13corrects an inadvertent error. The intent tion of polygraph examiners; and abolished the Polygraph Exam­ oftheproposedamendment wastoestablish feeamounts for iner’s Board. The Commission in a separate rulemaking action the resident and nonresident paddle-craft all-water fishing guide is adopting new rules at 16 TAC Chapter 88 that will replace the licenses in the same amounts as the existing fees for fishing rules affected by the repeal. guides licenses. However, the proposed fee amounts failed to reflect the fee increases adopted in the August 7, 2009, issue At their meeting held December 7, 2009, the Polygraph Exam­ of the Texas Register (34 TexReg 5381), which included fish­ iners Advisory Committee discussed the rules and unanimously ing guide license fees. The change, therefore, alters the fee recommended adoption by the Commission. amounts for the resident and nonresident paddle-craft all-water The proposed repeal was published in the Texas Register on fishing guide licenses to be identical to the current fees for the October 30, 2009. The 30-day public comment period closed on other all-water fishing guide licenses (from $200 to $210 for res­ November 30, 2009. The Department did not receive any public idents, and from $1,000 to $1,050 for nonresidents). comments on the proposed repeal. The amendment to §53.13 implements fees for a subcategory of fishing guide license, the recently created resident and nonresi­

35 TexReg 246 January 8, 2010 Texas Register dent paddle-craft all-water fishing guide licenses. The fee for the One commenter opposed adoption and stated that fishing guides resident paddle-craft all-water fishing guide license is $210 and should be required to obtain marine safety training as part of the the fee for the nonresident paddle-craft all-water fishing guide li­ licensing process. The department agrees that marine safety censes is $1,050. In August 2009, the Texas Parks and Wildlife training is important. Although the rules contemplate the fees for Department (department) increased the fee for many licenses fishing guide licenses rather than the requirements for licensure, and permits sold by the department (34 TexReg 5381). Among other rules already in place require safety and first-aid training as the fees that were increased at that time was the resident all-wa­ a condition for issuance of fishing guide licenses. No changes ter fishing guide which was increased from $200 to $210 and the were made as a result of the comment. non-resident all-water fishing guide which was increased from The department received 12 comments supporting adoption of $1,000 to $1,050. Although these fees also applied to the pad- the proposed rules. dle-craft all-water fishing guide license, the department has de­ termined that for, purposes of clarity, the fee for the paddle-craft No groups or associations commented in support of or opposition all-water fishing guide license should be stated separately from to adoption of the proposed rules. the all-water fishing guide license. The amendments are adopted under the authority of Parks As stated when the fee increase adoption was published in and Wildlife Code, §47.006, which authorize the commission to the Texas Register on August 7, 2009 (34 TexReg 5381), establish fees for fishing guide licenses; and under Parks and a fee increase was necessary because the department had Wildlife Code, §31.041(e), which establishes a fee of $500 for a determined additional funds are needed to maintain current marine dealer’s, distributor’s or manufacturer’s license. levels of service to the public. Prior to the August 2009 fee §53.13. Business License and Permits (Fishing). increase, fees for the majority of the license and permits had not been increased since 2003. An analysis of operational (a) Licenses. The fee amounts prescribed in paragraphs (1) ­ expenses since the 2003 fee increase indicated that aggregate (4) of this subsection reflect the total fee paid by the purchaser and major expenses (Salaries and Wages, Other Personnel Costs, include the surcharges established in subsection (b) of this section. Professional Fees and Services, Fuels and Lubricants, Con­ sumable Supplies, Utilities, Travel, Building Rentals, Machine (1) retail fish dealer’s--$92.40; Rentals, Other Operating Expense, and Capital Expenditures) (2) retail fish dealer’s truck--$171.60; had increased at approximately 6.1% per year. Therefore, the department had determined that a fee increase was necessary. (3) wholesale fish dealer’s--$825; The fees as adopted in August 2009, except where noted, had (4) wholesale fish dealer’s truck--$590; been increased by 5%, rounded up to the nearest whole dollar. This calculation was intended to provide the department with (5) bait dealer’s--individual--$38; the minimum amount of revenue necessary to maintain current (6) bait dealer-place of business/building--$38; operations. Although the adoption of the paddle-craft all-water fishing license fee is for purposes of clarification, rather than for (7) bait dealer-place of business/motor vehicle--$38; purposes of a fee increase, the reasoning for the fee increase (8) bait shrimp dealer’s--$215; continues to be applicable to the paddle-craft all-water fishing license. (9) finfish import--$95; Theamendmentto§53.16 reduces the fee for the Marine (10) freshwater fishing guide (required for residents or Dealer, Distributor, and Manufacturer’s license/license transfer nonresidents who operate a boat for anything of value in transport­ from $525 to $500. In August of 2009, a wide range of fee ing or accompanying anyone who is fishinginfreshwaterofthis increases (34 TexReg 5381) were adopted. The Marine Dealer, state)--$132; Distributor, and Manufacturer’s license fee was included but (11) resident all-water fishing guide--$210; should not have been, because Parks and Wildlife Code, §31.041(e), establishes a fee of $500 for that license and the (12) resident paddle craft all-water fishing guide--$210; commission does not have the authority to increase, reduce, or (13) non-resident all-water fishing guide--$1,050; and eliminate that fee. The amendment is necessary to comply with the statute. The department has not imposed the higher fee on (14) non-resident paddle craft all-water fishing guide-­ any license buyer. $1,050. The amendments as adopted will function by establishing fees (b) Business license surcharge for shrimp marketing assis­ for the resident and nonresident paddle-craft all-water fishing tance account. guide licenses and the Marine Dealer, Distributor, and Manufac­ (1) retail fish dealer’s--$8.40; turer’s license. (2) retail fish dealer’s truck--$15.60; The department received two comments opposing adoption of the proposed rules. Both commenters offered specific reasons (3) wholesale fish dealer’s--$75; and or rationales for opposing adoption. Those comments, accom­ (4) wholesale fish dealer’s truck--$51. panied by the department’s response to each, are as follows. (c) License transfers. One commenter opposed adoption and stated that the depart­ ment was arbitrarily raising license fees during hard economic (1) retail fish dealer’s license transfer--$25; times. The department disagrees with the comment and re­ (2) retail fish dealer’s truck license transfer--$25; sponds that the rules as adopted do not increase any fee. No changes were made as a result of the comment. (3) wholesale fish dealer’s license transfer--$25; (4) wholesale fish dealer’s truck license transfer--$25;

ADOPTED RULES January 8, 2010 35 TexReg 247 (5) bait dealer’s license transfer--$25; provisions are necessary for the department to participate in the IWVC according to its terms, as permitted and authorized under (6) bait dealer’s-place of business/building license trans­ the terms of §16 of H.B. 3391. fer--$25; In addition to ensuring compliance with member states’ laws, the (7) bait dealer’s-place of business/motor vehicle license IWVC offers a significant benefit of saving game warden time. transfer--$25; Under the IWVC, when confronting a violator from a member (8) bait shrimp dealer’s license transfer--$25; state, game wardens would have more discretion in issuing a ci­ tation rather than making an arrest and taking the offender to a (9) finfish import license transfer--$25. magistrate. In geographically large counties, such an arrest may This agency hereby certifies that the adoption has been reviewed take a game warden out of the field for several hours rather than by legal counsel and found to be a valid exercise of the agency’s stayinginthe field enforcing fish and game laws. IWVC also of­ legal authority. fers greater convenience for sportsmen from member states who are accused of a minor game violation in another member state. Filed with the Office of the Secretary of State on December 28, These travelers are treated in the same manner as in-state resi­ dents and may receive a citation in lieu of arrest. In many cases, 2009. the citation may be paid by mail. The IWVC compact also pro­ TRD-200906040 vides more accountability for violators and a greater deterrence Ann Bright to poaching. Sportsmen who commit a crime resulting in revo­ General Counsel cation of a hunting or fishing license in one state, may also lose Texas Parks and Wildlife Department their hunting or fishing privileges in all other member states. The Effective date: January 17, 2010 Compact also ensures that violators cannot flee justice merely by Proposal publication date: October 2, 2009 leaving the state. Through IWVC’s database, TPWD will have access to information about wildlife violators who have lost priv­ For further information, please call: (512) 389-4775 ileges in Compact states and can deny Texas licenses to those ♦ ♦ ♦ persons. The new rule will function by prescribing the terms of the state’s CHAPTER 55. LAW ENFORCEMENT participation in the Interstate Wildlife Violator Compact. SUBCHAPTER K. INTERSTATE WILDLIFE The department received two comments opposing adoption of VIOLATOR COMPACT the proposed rule. One of the commenters offered a specificrea­ son or rationale for opposing adoption. The commenter stated 31 TAC §55.675 that the rule constituted excessive regulation. The department The Texas Parks and Wildlife Commission (commission) adopts disagrees with the comment and responds that participation in new §55.675, concerning Interstate Wildlife Violator Compact, the Interstate Wildlife Violator Compact imposes an additional with nonsubstantive changes to the proposed text as published regulatory burden only on persons who have chosen not to com­ in the October 2, 2009, issue of the Texas Register (34 TexReg ply with the law following citation and/or conviction for a conser­ 6831). vation crime covered by the Compact. No changes were made as a result of the comment. The 81st Texas Legislature (2009) enacted House Bill 3391 (H.B. 3391). Section 16 of H.B. 3391 amended the Parks and Wildlife The department received 26 comments supporting adoption of Code by adding new Chapter 92, which authorizes the commis­ the proposed rule. sion, on behalf of the state, to enter into the Interstate Wildlife Vi­ The Texas Wildlife Association and the Texas Deer Association olator Compact (IWVC, or Compact), a multi-state compact that supported adoption of the proposed rule. allows member states to share information about wildlife viola­ tors and to deny licensure to persons who have failed to comply The new rule is adopted under the authority of Parks and Wildlife with conservation law in member states. Code, Chapter 92, which authorizes the commission, on behalf of the state, to enter into the IWVC and to take all actions nec­ The terms of §16 of H.B 3391 authorize the commission to take essary to implement the chapter, including the adoption of rules all actions necessary to implement the provisions of §16, includ­ and the delegation of authority to the director. ing the adoption of rules and the delegation of authority to the di­ rector. Section 16 also authorizes the commission, if necessary §55.675. Interstate Wildlife Violator Compact. to protect the interests of this state, to withdraw from the Inter­ The Texas Parks and Wildlife Commission expresses support for the state Wildlife Violator Compact in accordance with the terms of Interstate Wildlife Violator Compact (Compact) and hereby directs the the compact. executive director of the department to enter into the Compact on behalf The new rule directs the executive director of the Texas Parks of the state of Texas. As provided by the terms of the Compact, and and Wildlife Department (department) to enter into and/or with­ in the manner specified by the Compact, the director or the director’s draw from the Compact; appoint a Compact administrator to designee may: serve as Texas’ representative on the board of Compact admin­ (1) enter into the Compact and/or withdraw from the Com­ istrators; refuse to issue a license, tag or permit in accordance pact; with the Compact; receive information from and provide informa­ tion to other member states; process nonresident violators who (2) appoint a Compact administrator to serve as Texas’ rep­ are residents of other member states; establish policies and pro­ resentative on the board of Compact administrators; cedures to implement the terms of the Compact; and, take other (3) refuse to issue a license, tag or permit; action as necessary to carry out the terms of the Compact. The

35 TexReg 248 January 8, 2010 Texas Register (4) receive information from and provide information to nongame species of fish and wildlife to perpetuate themselves other member states; successfully and requires the commission to establish any limits on the taking, possession, propagation, transportation, impor­ (5) process nonresident violators who are residents of other tation, exportation, sale, or offering for sale of nongame fish or member states; wildlife that the department considers necessary to manage the (6) establish policies and procedures to implement the species. terms of the Compact and this section; and This agency hereby certifies that the adoption has been reviewed (7) take other action as necessary to carry out the terms of by legal counsel and found to be a valid exercise of the agency’s the Compact. legal authority. This agency hereby certifies that the adoption has been reviewed Filed with the Office of the Secretary of State on December 28, by legal counsel and found to be a valid exercise of the agency’s legal authority. 2009. TRD-200906042 Filed with the Office of the Secretary of State on December 28, Ann Bright 2009. General Counsel TRD-200906041 Texas Parks and Wildlife Department Ann Bright Effective date: January 17, 2010 General Counsel Proposal publication date: October 2, 2009 Texas Parks and Wildlife Department For further information, please call: (512) 389-4775 Effective date: January 17, 2010 ♦ ♦ ♦ Proposal publication date: October 2, 2009 For further information, please call: (512) 389-4775 CHAPTER 65. WILDLIFE ♦ ♦ ♦ SUBCHAPTER G. THREATENED AND CHAPTER 57. FISHERIES ENDANGERED NONGAME SPECIES SUBCHAPTER B. MUSSELS AND CLAMS 31 TAC §65.175 31 TAC §57.157 The Texas Parks and Wildlife Commission (commission) adopts an amendment to §65.175, concerning Threatened Species, The Texas Parks and Wildlife Commission (commission) adopts without changes to the proposed text as published in the Octo­ an amendment to §57.157, concerning Mussels and Clams, ber 2, 2009, issue of the Texas Register (34 TexReg 6833). The without changes to the proposed text as published in the Octo­ amendment adds 15 species of freshwater mussels to the list of ber 2, 2009, issue of the Texas Register (34 TexReg 6832). threatened species. The amendment alters §57.157(a) to clarify that mussel or Mussels are an important component of healthy aquatic ecosys­ clam species listed as threatened or endangered under 31 TAC tems, both as a food source for many other aquatic and terres­ Chapter 65, Subchapter G, may not be harvested recreationally trial organisms, and as an important indicator species. In early or commercially. Published elsewhere in this publication is an life stages, mussels are food sources for a variety of aquatic in­ amendment to §65.175, concerning Threatened Species, which sects, small fishes, and water birds; as they mature, they be­ adds 15 species of freshwater mussels to the list of threatened come significant food sources for larger fishes, waterfowl, and species. Under 31 TAC §65.171(b), no person may take, pos­ terrestrial animals. Protection of this resource will preserve and sess, propagate, transport, import, export, sell, or offer for sale enhance the hunting, fishing, and outdoor recreation opportuni­ any species of fish or wildlife listed as a threatened species. ties that are part of Texas’ heritage. The amendment is necessary to prevent confusion by clearly Freshwater mussel populations have declined throughout North stating that the mussel species added to the list of threatened America. They are sensitive to disturbance because they are species, in addition to species of clams on the list of threatened relatively immobile organisms, sometimes staying in a single species, may not be taken, possessed, sold, or offered for sale. spot for their entire lives. They have a complex life cycle that The Texas Parks and Wildlife Department (department) received is easily disrupted, causing reproductive failure. Habitat alter­ one comment opposing adoption of the proposed rule. The com­ ation and loss, illegal and over harvesting, and competition from menter stated that rather than prohibiting the take of species, introduced species are some of the factors in their decline. Mus­ there should be a recreational limit. The department disagrees sels are extremely sensitive to toxic substances, since they en­ with the comment and responds that species are listed as threat­ counter toxins more immediately than most organisms above ened when the department determines that the species is threat­ them in the food chain and at higher concentrations relative to ened with statewide extinction. At that level of sustainability, the body mass. Minute levels of some types of toxic substances prohibition of recreational take is necessary. No changes were (e.g., ammonia) or chronic environmental stresses such as low made as a result of the comment. oxygen levels or siltation caused by bed scouring can quickly devastate mussel communities, in many cases long before the The department received 26 comments supporting adoption of environmental change is reflected by other aquatic species. the proposed rule. Nationwide, more species of freshwater mussels are listed as The amendment is adopted under Parks and Wildlife Code, threatened and endangered than any other group of animals. Of Chapter 67, which requires the department to develop and ad­ thenearly300musselspecies knowntohavelived in theU.S., minister management programs to insure the continued ability of

ADOPTED RULES January 8, 2010 35 TexReg 249 18 are believed to be extinct, and 60 are currently listed as feder­ ditional living specimens, even at sites where the species had ally endangered or threatened, including one species occurring been previously recorded. Extensive historical and current envi­ in Texas (the Ouachita rock-pocketbook mussel). Texas is home ronmental modifications along the Rio Grande of Texas and Mex­ to more than 50 species of freshwater mussels. ico suggest any surviving populations are likely at risk (Howells 2004). NatureServe ranks the Mexican fawnsfoot as critically The Texas Parks and Wildlife Department (department) has imperiled across its range. identified 15 species of freshwater mussels that meet the de­ partment’s criteria for listing as threatened species by virtue of 5. Salina mucket (Potamilus metnecktayi). The Salina mucket, being habitat-limited, known to occur only in specific, limited endemic to the central Rio Grande drainage, has potentially geographical areas, and by virtue of being rare. As a result, been extirpated from its range in New Mexico and Mexico and the department has determined that these species are likely to undergone dramatic declines in Texas (Howells 2009). The become endangered in the future. The species listed are: Salina mucket has a very limited distribution in Texas with live specimens found only from the southern-most point of Big Bend 1. False spike (Quadrula mitchelli). The false spike is known to the mouth of the Pecos River (Howells 2006). This stretch from only two disjunct populations, one in central Texas and the of river has experienced major silt deposition in recent years other in the Rio Grande drainage. Nearly all records of this mus­ and is at risk of dewatering associated with flow restrictions in sel from the Rio Grande are of subfossil and fossil specimens. Mexican rivers upstream. Elsewhere in the Rio Grande and its The only evidence that the species may still persist in Texas was tributaries, including those in Mexico, only dead shell material the discovery of recently dead specimens in the lower San Mar­ has been found in recent decades with no indication of existing cos River in 2000 (Howell 2001b). Several subsequent survey populations (Howells 2001a). NatureServe ranks the Salina efforts have failed to produce additional evidence of live false mucket as critically imperiled across its range. spikes in the aforementioned river. 6. Sandbank pocketbook (Lampsilis satura). The sandbank 2. Golden orb (Quadrula aurea). The golden orb is endemic to pocketbook is known from southern portions of the Mississippi the Guadalupe-San Antonio and Nueces-Frio systems. Only interior basin and western Gulf drainages of Arkansas, Missis­ seven extant populations of this mussel have been noted from sippi, Louisiana, and Texas. The species is considered rare in the upper and central Guadalupe River, central San Antonio all states from which it has been recorded. The only significant River, lower San Marcos River, and Lake Corpus Christi (How- population of this mussel known to exist in Texas was from the ells 2006; Burlakova and Karatayev 2008). Surveys conducted central Neches River. However, a gravel bar where this popu­ over the past 20 years have failed to locate any additional lation was centered has been lost (Howells 2009). Small num­ populations of the golden orb. The species’ limited distribu­ bers of individuals remain in the Sabine and tributaries of the tion makes it particularly susceptible to decline as a result of Neches (Ford and Nicholson 2006; Howells 2006; Karatayev habitat degradation and reduced flow levels. Four golden orb and Burlakova 2007a, Karatayev and Burlakova 2007b; Rand­ populations are downstream from a rapidly expanding urban klev and Kennedy 2008), but abundances at these sites have center (San Antonio) with a fifth population dependent on an declined dramatically and there is only limited evidence of suc­ aquifer impacted by municipal water demands (Howells 2009). cessful reproduction. NatureServe ranks the sandbank pocket­ NatureServe (an international network of biological inventories book as imperiled across its range. and conservation data centers-operating in all 50 U.S. states, Canada, Latin America, and the Caribbean) ranks the golden 7. Smooth pimpleback (Quadrula houstonensis). This endemic orb as critically imperiled across its range. mussel is restricted to the Colorado and Brazos River drainages. In the Colorado River, the smooth pimpleback’s distribution has 3. Louisiana Pigtoe (Pleurobema ridellii). Louisiana Pigtoe historically been restricted to the Highland Lakes area downriver ranged from eastern Texas drainages into Louisiana (Howells to Colorado and Wharton Counties. Shell material has been doc­ et al. 1996; Howells et al. 1997; Vidrine 2008). The species is umented in the Brazos basin as far upriver as Shackelford and currently listed as a species of concern in Louisiana. Louisiana Young Counties and downstream at least as far as Fort Bend pigtoe was once more numerous in Texas waters (R.G. How- County. Surveys conducted from 1980 to 2006 have noted steep ells unpublished database), but has been exceptionally rare declines in the number of extant populations in both river sys­ in recent decades. Since the mid-1990s, small numbers of tems (Howells 2009). Recent surveys of the Colorado River living specimens have been found in the Neches River (How- system failed to locate surviving populations of the smooth pim­ ells 2006), Village Creek, a Neches River tributary in Hardin pleback (Howells 2009). At present, the Brazos River drainage County (Bordelon and Harrel 2004; Howells 2006; Karatayev hosts the only surviving populations of this freshwater mussel and Burlakova 2007a), and the Angelina River (Karatayev and (Karatayev and Burlakova 2007b; Randklev and Kennedy 2008; Burlakova 2007a). In all cases, only a few living individuals have Howells 2009). NatureServe ranks the smooth pimpleback as been found at any given time; no large populations are known imperiled across its range. to occur anywhere in Texas (Howells 2009). NatureServe ranks the Louisiana pigtoe as critically imperiled across its range. 8. Southern hickorynut (Obovaria jacksoniana). Distributed across awideswath of thesouthernUnitedStates, thesouthern 4. Mexican fawnsfoot (Truncilla cognata). The Mexican fawns- hickorynut is considered rare and a species of conservation foot is endemic to the central Rio Grande drainage. Live spec­ concern in seven states (Oesch 1984; Williams et al. 1993; imens of this mussel were collected near Del Rio in 1972. Fol­ Harris et al. 1997; Parmalee and Bogan 1998; Garner et al. lowing that discovery, additional living Mexican fawnsfoot would 2004). This mussel species has never been abundant in Texas, not be observed for another 30 years. In 2003, a single live Mex­ with most in-state collections made prior to the mid-1980s. The ican fawnsfoot was located near Laredo, followed by one addi­ only recent observation of southern hickorynut in Texas was tional specimen in the area some weeks later (Howells 2007), made in Village Creek in 2001-2002 (Bordelon and Harrel 2004). and the eventual collection of five others in 2008 (Burlakova and Subsequent surveys of Village Creek have failed to produce any Karatayev 2008). Mussel surveys and collections throughout the additional specimens of this species (Howells 2006; Karatayev Rio Grande drainage since 1972 have failed to produce any ad­

35 TexReg 250 January 8, 2010 Texas Register and Burlakova 2007a). The southern hickorynut appears to 1990 include the Trinity River above Lake Livingston, a tribu­ have been lost elsewhere in the state and, if the species still tary of theWestBranchSan JacintoRiver,and theSabineRiver occurs in Texas at all, may only persist at the Village Creek site. above Toledo Bend Reservoir. It was also reported alive in the NatureServe ranks the southern hickorynut as imperiled across Angelina River in 1984 and Neches River in 1986, but has not its range. been observed in either location since (Howells et al., 1996). Na­ tureServe ranks the Texas pigtoe as imperiled across its range. 9. Texas fatmucket (Lampsilis bracteata). The Texas fatmucket historically occurred in the Colorado and Guadalupe basins of 14. Texas pimpleback (Quadrula petrina). The Texas pim­ central Texas (Howells et al. 1996; Howells et al. 1997). Over pleback is an endemic species confined to the Colorado and the past thirty years, a combination of natural and human-in­ Guadalupe drainages. Over the past few decades, populations duced stressors has led to the dramatic decline of this species of this species have suffered steep declines. Live Texas pimple- in both river systems (Howells 2009). Only six populations of back have been observed at only five sites since 1992 (Howells the Texas fatmucket have been documented since 1992 (How- 2009). The species has apparently been eliminated from a ells et al. 2003). Several of these populations have since de­ tributary of the Colorado River in Runnels County and the main clined or been eliminated completely (Howells 2006; Burlakova channel of the Colorado River upstream of Lake Buchanan. and Karatayev 2008). Recent surveys indicate that only four of The only confirmed significant population in the Concho River the six known Texas fatmucket populations still survive (Howells persists, but has been badly reduced by dewatering (Howells 2009). The populations that remain are at risk from scouring 2009). NatureServe ranks the Texas pimpleback as imperiled floods, dewatering, and incompatible land management prac­ across its range. tices. NatureServe ranks the Texas fatmucket as critically im­ 15. Triangle pigtoe (Fusconaia lananensis). The triangle pigtoe periled across its range. is endemic to the Neches and San Jacinto Rivers and Village 10. Texas fawnsfoot (Truncilla macrodon). The Texas fawnsfoot Creek in eastern Texas (Howells et al., 1996). It has been extir­ historically occurred in the Colorado and Brazos drainages of pated from Lanana Creek in Nacogdoches County. Extant trian­ central Texas. This species has been considered rare since its gle pigtoe populations are limited and the ecological security of formal description in 1859; only 250-300 specimens have ever most occupied sites is marginal. NatureServe ranks the triangle been collected (Howells 2009). Live Texas fawnsfoot have not pigtoe as critically imperiled across its range. been observed in the Colorado River since 1999. A recently The rule will function by prohibiting the take of 15 species of discovered population in the Brazos River between Possum freshwater mussels. Kingdom and the mouth of the Navasota River represents the only known surviving population of this species (Howells 2009). The department received two comments opposing adoption of NatureServe ranks the Texas fawnsfoot as imperiled across its the proposed rule. range. One commenter provided a specific rationale for opposing adop­ 11. Texas heelsplitter (Potamilus amphichaenus). The Texas tion. The commenter stated that species unable to adapt to heelsplitter is restricted to the Sabine, Neches, and Trinity rivers changes in the environment should not be protected. The de­ of Texas. There is historical evidence the species may have once partment disagrees with the comment and responds that wildlife occurred in Louisiana and Oklahoma. In recent years, only a diversity is a crucial part of maintaining healthy ecosystems that small number of survivors have been found in the upper Sabine support all life. In addition, the department is statutorily required River (Howells 2006) and the Angelina River upstream of Sam to ensure the continued ability of nongame species of fish and Rayburn Reservoir (Karatayev and Burlakova 2007a). A signif­ wildlife to perpetuate themselves successfully. No changes were icant population did persist in B.A. Steinhagen Reservoir and made as a result of the comment. the Neches River immediately below Town Bluff Dam (Howells The department received 28 comments supporting adoption of 2006; Howells 2007). However, that Texas heelsplitter popula­ the proposed rule. tion may have experienced significant reduction recently due to habitat loss (Howells 2009). A recovering population was found The Freshwater Mollusk Conservation Society commented in in the Trinity River upstream of Lake Livingston in 1996 (How- support of adoption of the proposed rule. ells 1997). NatureServe ranks the Texas heelsplitter as critically No groups or associations commented in opposition to adoption imperiled across its range. of the proposed rule. 12. Texas hornshell (Popenaias popeii). The Texas hornshell The amendment is adopted under Parks and Wildlife Code, is a regional endemic species known only from discrete sec­ Chapter 67, which requires the department to develop and ad­ tions of the Rio Grand River in Texas and a short segment of minister management programs to insure the continued ability of the Black River in New Mexico (Howells 2001a; Strenth et al. nongame species of fish and wildlife to perpetuate themselves 2004; Howells 2006; Carman 2007; Burlakova and Karatayev successfully and requires the commission to establish any limits 2008). The discovery of 30 individuals in a Webb County portion on the taking, possession, propagation, transportation, impor­ of the Rio Grande River in 2003 provides the only evidence of an tation, exportation, sale, or offering for sale of nongame fish or extant population in Texas (Howells 2004). NatureServe ranks wildlife that the department considers necessary to manage the the Texas hornshell as critically imperiled across its range. This species. mussel is currently listed as a candidate for protection under the U.S. Endangered Species Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency’s 13. Texas pigtoe (Fusconaia askewi). The Texas pigtoe is a re­ legal authority. gional endemic species limited to a relatively small area in Texas and Louisiana. The species has experienced a drop in numbers Filed with the Office of the Secretary of State on December 28, and a declining area of occupancy over the past decade (How- ells 2009). Populations of the Texas pigtoe documented since 2009.

ADOPTED RULES January 8, 2010 35 TexReg 251 TRD-200906043 an out-of-state source is an offense. The new section is neces­ Ann Bright sary to eliminate confusion surrounding the basis for the former General Counsel rule, which prohibited the possession of deer obtained from an Texas Parks and Wildlife Department out-of-state source. Effective date: January 17, 2010 The provisions of former subsection (f) that prohibit the posses­ Proposal publication date: October 2, 2009 sion of deer obtained from an out-of-state source and create an For further information, please call: (512) 389-4775 exception for deer obtained prior to June 21, 2005, are retained. The provision prohibiting the possession of deer obtained from ♦ ♦ ♦ an out-of-state source is necessary to prevent the introduction of disease to wild populations in Texas. The provision creating SUBCHAPTER T. DEER BREEDER PERMITS an exception for deer obtained prior to June 21, 2005 is neces­ The Texas Parks and Wildlife Commission (commission) adopts sary because June 21, 2005 is the effective date of the provision the repeal of §65.611 and new §65.611, concerning Deer prohibiting the possession of deer obtained from an out-of-state Breeder Permits, without changes to the proposed text as source and the department did not want the rule to be retroac­ published in the October 2, 2009, issue of the Texas Register tive. (34 TexReg 6836). Former §65.611(f) was promulgated in 2005 in response to The repeal and new section are necessary to address Texas concerns about the potential introduction of Chronic Wasting Parks and Wildlife Department (department) concerns about Disease (CWD) to susceptible native ungulate populations. wildlife diseases that could potentially be transmitted to wildlife Although intended at the time to address CWD, the rule for all in Texas by deer originating from out-of-state sources. practical purposes had the additional effect of protecting wildlife and livestock in Texas from all diseases that affect, are carried New §65.611(a) requires that deer obtained from the wild under by, or are transmissible through white-tailed or mule deer. The the authority of a permit or letter of authority issued pursuant to new subsection makes it clear that the act of importing or at­ Parks and Wildlife Code, Chapter 43, Subchapter C, E, or R not tempting to import white-tailed deer or mule deer is an offense, be commingled with deer held in a permitted deer breeding facil­ which is necessary to protect native wildlife populations from ity. The new subsection is identical to former subsection (a) and various disease threats. is necessary because other permits issued by the department authorize the temporary capture of deer from the wild for various Since 2005, the department has become aware of additional purposes, while a deer breeder permit authorizes only transfers potential epidemiological threats to native wildlife, particularly of breeder deer between deer breeders or release to the wild. bluetongue virus (BTV), Epizootic Hemorrhagic Disease Virus (EHDV), Malignant Catarrhal Fever (MCF), and Adenovirus New §65.611(b) makes it an offense for a person to place or hold Hemorrhagic Disease (AHD), all of which are viruses that affect breeder deer in captivity at any place or on any property other deer or can be transmitted by deer to other wildlife or livestock. than property for which a deer breeder’s permit or other lawful permit is issued, and would provideanexceptionforthetrans­ EHDV and BTV are closely related viruses, transmitted by bit­ portation and temporary holding of breeder deer for breeding, ing insects, which cause hemorrhagic diseases in ruminant an­ nursing, or veterinary purposes. The new subsection is identical imals such as sheep, cattle, and deer. Hemorrhagic diseases to former subsection (b) and is necessary to prevent the com­ have been implicated in large-scale mortality in white-tailed deer, mingling of breeder deer with wild deer, except for release or mule deer, and pronghorn antelope (Thorne, 1982; Gibbs and sale from facilities meeting disease management criteria, or on Greiner, 1989). Mortality rates for deer with EHDV or BTV can a temporary basis for legitimate purposes such as breeding at be as high as 50%, according to the Texas Veterinary Medical another facility, nursing, or veterinary care. Diagnostic Laboratory. Studies by the Auburn University Veteri­ nary Diagnostic Laboratory have documented the presence in New §65.611(c) prohibits the holding of breeder deer in a trailer Alabama of the five strains (serotypes) of BTV known to occur in or other vehicle of any type except for the purpose of immediate North America (serotypes 2, 10, 11, 13, and 17). The presence transportation from one location to another. The new subsection of these serotypes raises the concern that the epidemiology of is identical to former subsection (c) and is necessary to ensure these viruses in North America may be changing and could re­ that deer are humanely treated. sult in more extensive disease in U.S. livestock and wildlife. New §65.611(d) stipulates that possession of a deer breeder’s Malignant catarrhal fever (MCF) is a frequently fatal disease permit is not a defense to prosecution under any statute pro­ caused by one of several herpesviruses. White-tailed deer hibiting abuse of animals. The new subsection is identical to are extremely susceptible to MCF, which has been detected in former subsection (d) and is necessary to ensure that deer are populations of captive cervids in the north-central United States. humanely treated. Adenovirus hemorrhagic disease (AHD) was identified in Cali­ New §65.611(e) prohibits deer breeders from exceeding the fornia in 1993 and caused high mortality in mule deer. number of breeder deer allowable for the permitted facility, as specified by the department on the deer breeder’s permit. The emergence of numerous disease threats points to the need The new subsection is identical to former subsection (e) and for the department to be proactive in protecting the state’s wildlife is necessary because only by establishing the number of deer resources and the multi-billion-dollar hunting and ecotourism in­ that may be lawfully possessed in a given facility is the depart­ dustries that depend upon them. The department strongly be­ ment able to prove cases in which people have obtained deer lieves that prohibiting the entry of deer from other states is a crit­ unlawfully. ically important step in minimizing to the greatest extent possible the potential biological and economic impacts that a disease out­ New §65.611(f) clearly and unambiguously states that the impor­ break could cause in Texas. tation of deer or attempted importation of deer into Texas from

35 TexReg 252 January 8, 2010 Texas Register The repeal and new rule will function by prohibiting the importa­ TRD-200906044 tion of white-tailed and mule deer into Texas. Ann Bright The department received three comments opposing adoption of General Counsel the proposed rule. All three commenters offeredaspecificrea­ Texas Parks and Wildlife Department son or rationale for opposing adoption. Those comments, ac­ Effective date: January 17, 2010 companied by the department’s response to each, are as fol­ Proposal publication date: October 2, 2009 lows. For further information, please call: (512) 389-4775 One commenter opposed adoption and stated that rather than ♦ ♦ ♦ prohibit importation, the department should allow importation but subject imported deer to quarantine and testing before allow­ 31 TAC §65.611 ing entry. The department disagrees with the comment and re­ The rule is adopted under the authority of Parks and Wildlife sponds that the current live-animal tests for most viruses make Code, §43.357, which authorizes the commission to make no distinction between an animal that has an active virus and an regulations governing procedures and requirements for the animal that has been exposed in the past but is not active when purchase, transfer, sale, or shipment of breeder deer. the test is administered. Additionally, in order to be an effective screening protocol, all animals would have to be tested, which This agency hereby certifies that the adoption has been reviewed would be prohibitively expensive. With respect to quarantines, by legal counsel and found to be a valid exercise of the agency’s it is possible for an animal to carry the virus without presenting legal authority. clinical signs of infection; therefore, quarantines are not an effec­ tive method for preventing imported deer from potentially intro­ Filed with the Office of the Secretary of State on December 28, ducing diseases to livestock and/or native wildlife. No changes 2009. were made as a result of the comment. TRD-200906046 One commenter opposed adoption on the basis that potential Ann Bright conflict with the department’s rules regarding Deer Management General Counsel Permit rules. The department disagrees with the comment Texas Parks and Wildlife Department and responds that there are no conflicts between the rules as adopted and the Deer Management Permit rules. No changes Effective date: January 17, 2010 were made as a result of the comment. Proposal publication date: October 2, 2009 For further information, please call: (512) 389-4775 One commenter stated that the department should consider making exceptions to the prohibition on the importation of deer. ♦ ♦ ♦ The department understands that the exception requested concerns the transportation of deer through the state. The TITLE 34. PUBLIC FINANCE department disagrees with the comment and responds that the prohibition on importation imposed by the rule is intended to PART 1. COMPTROLLER OF PUBLIC protect native wildlife from disease threats. Given the possibility ACCOUNTS of escape, the temporary transport of deer from an out-of-state source through Texas does not eliminate the threat. In addition, CHAPTER 7. PREPAID HIGHER EDUCATION allowing transport through the state while otherwise prohibiting importation would negatively impact the department’s ability to TUITION PROGRAM enforce the importation ban, resulting in additional threats to SUBCHAPTER I. REFUNDS, TERMINATION thestate’swildlife. Nochangesweremadeasa result of the comment. 34 TAC §7.81 The department received 13 comments supporting adoption of The Comptroller of Public Accounts adopts an amendment to the proposed rule. §7.81, concerning refunds, without changes to the proposed text as published in the November 20, 2009, issue of the Texas Reg- The Texas Wildlife Association supported adoption of the pro­ ister (34 TexReg 8202). This section establishes the criteria posed rule. that determine how refunds will be calculated when a contract of The Texas Deer Association commented on the proposed rule the Prepaid Higher Education Tuition Program (Program) is can­ but neither supported nor opposed adoption. celled or terminated. This Program is also known as the Texas Tomorrow Fund I and the Texas Guaranteed Tuition Plan and 31 TAC §65.611 was the Board’s first prepaid tuition plan established in 1995. It is The repeal is adopted under the authority of Parks and Wildlife governed by the Texas Prepaid Higher Education Tuition Board Code, §43.357, which authorizes the commission to make (Board). The amendments will reinstate the previous version of regulations governing procedures and requirements for the the rule in anticipation of legislative action. purchase, transfer, sale, or shipment of breeder deer. No comments were received regarding adoption of the amend­ This agency hereby certifies that the adoption has been reviewed ment. by legal counsel and found to be a valid exercise of the agency’s This rule amendment is adopted under Texas Education Code, legal authority. §54.618(b)(2) which authorizes the Board to adopt rules to im­ plement the Program. Filed with the Office of the Secretary of State on December 28, 2009.

ADOPTED RULES January 8, 2010 35 TexReg 253 The adopted amendment implements Texas Education Code, Ashley Harden §54.632. General Counsel This agency hereby certifies that the adoption has been reviewed Comptroller of Public Accounts by legal counsel and found to be a valid exercise of the agency’s Effective date: January 12, 2010 legal authority. Proposal publication date: November 20, 2009 For further information, please call: (512) 475-0387 Filed with the Office of the Secretary of State on December 23, ♦ ♦ ♦ 2009. TRD-200906023

35 TexReg 254 January 8, 2010 Texas Register Proposed Rule Reviews or Agency) comprised of §§3.51 - 3.62; Subchapter E (Banking House and Other Facilities) comprised of §3.91 and §3.92; and Subchapter F Texas Department of Banking (Access to Information) comprised of §3.111 and §3.112. Title 7, Part 2 The review is conducted pursuant to Government Code, §2001.039. On behalf of the Finance Commission of Texas (commission), the Comments regarding the review of this chapter, and whether the rea­ Texas Department of Banking files this notice of intention to review sons for initially adopting the sections under review continue to exist, and consider for readoption, revision, or repeal, the following chapter will be accepted for 30 days following the publication of this notice in of Texas Administrative Code, Title 7, in its entirety: the Texas Register. Chapter 33 (Money Services Businesses), comprised of §§33.3, 33.7, Any questions or written comments pertaining to this notice of inten­ 33.13, 33.15, 33.21, 33.23, 33.27, 33.31, 33.33, 33.35, 33.37, 33.51, tion to review should be directed to Kaylene Ray, General Counsel, and 33.61. Texas Department of Banking, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705, or e-mailed to [email protected]. The review is conducted pursuant to Government Code, §2001.039. Comments regarding the review of this chapter, and whether the rea­ Any proposed changes to these sections as a result of the rule review sons for initially adopting the sections under review continue to exist, will be published as proposed rules in the Texas Register. Proposed will be accepted for 30 days following the publication of this notice in rules are subject to public comment for a reasonable period prior to the Texas Register. final adoption by the commission. Any questions or written comments pertaining to this notice of inten­ TRD-200906071 tion to review should be directed to Kaylene Ray, General Counsel, A. Kaylene Ray Texas Department of Banking, 2601 North Lamar Boulevard, Suite General Counsel 300, Austin, Texas 78705, or e-mailed to [email protected]. Finance Commission of Texas Any proposed changes to these sections as a result of the rule review Filed: December 30, 2009 will be published as proposed rules in the Texas Register. Proposed ♦ ♦ ♦ rules are subject to public comment for a reasonable period prior to final adoption by the commission. Public Utility Commission of Texas TRD-200906072 Title 16, Part 2 A. Kaylene Ray The Public Utility Commission of Texas (commission) publishes this General Counsel notice of intention to review Chapter 28, Substantive Rules Applicable Texas Department of Banking to Cable and Video Service Providers pursuant to Texas Government Filed: December 30, 2009 Code §2001.039, Agency Review of Existing Rules. The text of the rule section will not be published. The text of the rule may be found in ♦ ♦ ♦ the Texas Administrative Code, Title 16, Economic Regulation, Part 2, Finance Commission of Texas or through the commission’s website at www.puc.state.tx.us. Project No. 37732, Agency Review of Chapter 28 - Substantive Rules Applica- Title 7, Part 1 ble to Cable and Video Service Providers, Pursuant to Texas Govern- On behalf of the Finance Commission of Texas (commission), the ment Code §2001.039, is assigned to this proceeding. Texas Department of Banking files this notice of intention to review Texas Government Code §2001.039 requires that each state agency and consider for readoption, revision, or repeal, the following chapter review and readopt, readopt with amendments, or repeal the rules of Texas Administrative Code, Title 7, in its entirety: adopted by that agency pursuant to the Texas Government Code, Chap­ Chapter 3 (State Bank Regulation), specifically Subchapter A (Secu­ ter 2001, Subchapter B, Rulemaking. As required by §2001.039(e), rities Activities and Subsidiaries) comprised of §§3.1 - 3.5; Subchap­ this review is to assess whether the reason for adopting or readopting ter B (General) comprised of §§3.21, 3.22, and 3.34 - 3.38; Subchap­ the rule continues to exist. The commission requests specificcom­ ter C (Foreign Bank Branches, Agencies and Representative Offices) ments from interested persons on whether the reasons for adopting the comprised of §§3.40 - 3.45; Subchapter D (Pledge and Maintenance section in Chapter 28 continue to exist. ofAssets by Foreign BankLicensedtoMaintainTexasStateBranch

RULE REVIEW January 8, 2010 35 TexReg 255 The rule in Chapter 28 was adopted pursuant to the provisions in Public The State Board of Trustees of the Texas Emergency Services Retire­ Utility Regulatory Act (PURA), Chapter 66, §§66.001 - 66.004. Sec­ ment System (System) readopts the reviewed rules of the System in tion 28.6 was adopted to establish the certification criteria for a State-Is­ effect on September 1, 2009. The proposed rule review was published sued Certificate of Franchise Authority (CFA) to provide cable and/or for comment in the October 2, 2009, issue of the Texas Register (34 video services in the state and to set forth certain reporting require­ TexReg 6863). No public comments were received. ments of CFA holders as well. The Board has determined that the reasons for adopting the rules con­ If it is determined during this review that the section of Chapter 28 tained in these chapters continue to exist. needs to be repealed or amended, the repeal or amendment will be ini­ The reviewed rules were approved for readoption by the Board at a tiated under a separate proceeding; thus this notice of intention to re­ formal meeting on December 10, 2009, in accordance with the require­ view Chapter 28 has no effect on the section as it currently exist. ments of §2001.039, Texas Government Code. Nara Srinivasa, Director of Reliability and Licensing, Infrastructure This concludes the review of Chapters 302, 304, 306, 308, and 310: and Reliability Division, has determined that this review has no fis­ cal implications for state or local government; no adverse effect on §302.1. Definitions. small businesses or micro-businesses; and no effect on a local econ­ §302.2. Benefit Distributions. omy. There may be economic costs to persons who are required to comply with §28.6. These costs are likely to vary from business to §302.3. Trustee-to-Trustee Transfer. business, and are difficult to ascertain. However, it is believed that §302.4. Reduction or Revocation of Benefits. the benefits accruing from implementation of the proposed section will outweigh these costs. The public benefit is orderly processing of ap­ §302.5. Correction of Errors. plications for certificates of franchise authority. §304.1. Participation by Department. Comments on the review of Chapter 28 (16 copies) may be submitted §306.1. Prior Service Credit for Members of Participating Depart­ to the Filing Clerk, Public Utility Commission of Texas, 1701 North ments. Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326, by Feb­ ruary 8, 2010 (30 days after publication). All comments should refer §308.1. Eligibility for Retirement Annuity. to Project Number 37732. §308.2. Service Retirement Annuity. The rule subject to this review is proposed for publication under the §308.3. Disability Retirement Benefits. Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 2009) (PURA), which provides the Public Utility Commission §308.4. Death Benefits. with the authority to make and enforce rules reasonably required in the §310.1. Officers of State Board. exercise of its powers and jurisdiction; and Texas Government Code §2001.039 (Vernon 2000, Supplement 2009) which requires each state §310.2. Additional Duties of State Board. agency to review its rules every four years. §310.3. Review of Actuarial Services. Cross Reference to Statutes: Public Utility Regulatory Act, §14.002, §310.4. Standard of Conduct for Financial Advisors and Service and Chapter 66, §§66.001- 66.004. Providers. Subchapter B. Provisions Relating to Application for a State-Issued §310.5. Local Board of Trustees. Certificate of Franchise Authority. §310.6. Local Contributions. §28.6. State-Issued Certificate of Franchise Authority (CFA) Certifi­ cation Criteria. §310.7. Administration of Local Fire Fighter Pension Benefits. TRD-200906014 §310.8. Billings. Adriana A. Gonzales §310.9. Periodic Reports; Administrative Penalties. Rules Coordinator Public Utility Commission of Texas §310.10. Voluntary Payments by Departments. Filed: December 22, 2009 TRD-200906013 ♦ ♦ ♦ Kevin Heyburn Assistant Attorney General Adopted Rule Review Office of the Fire Fighters’ Pension Commissioner Office of the Fire Fighters’ Pension Commissioner Filed: December 22, 2009 Title 34, Part 11 ♦ ♦ ♦

35 TexReg 256 January 8, 2010 Texas Register TABLES AND GRAPHICS January 8, 2010 35 TexReg 257 35 TexReg 258 January 8, 2010 Texas Register TABLES AND GRAPHICS January 8, 2010 35 TexReg 259 35 TexReg 260 January 8, 2010 Texas Register TABLES AND GRAPHICS January 8, 2010 35 TexReg 261 35 TexReg 262 January 8, 2010 Texas Register TABLES AND GRAPHICS January 8, 2010 35 TexReg 263 35 TexReg 264 January 8, 2010 Texas Register TABLES AND GRAPHICS January 8, 2010 35 TexReg 265 35 TexReg 266 January 8, 2010 Texas Register TABLES AND GRAPHICS January 8, 2010 35 TexReg 267 35 TexReg 268 January 8, 2010 Texas Register Coastal Coordination Council tion in northern Galveston County, Texas. The project can be located on the U.S.G.S. quadrangle map titled: Algoa, Texas. Approximate Notice and Opportunity to Comment on Requests for Latitude/Longitude Coordinates in NAD 83 (meters): Lat: 29.484604 Consistency Agreement/Concurrence Under the Texas Coastal degrees N; Long: 95.186030 degrees W. Project Description: The ap­ Management Program plicant proposes to discharge fill material into 0.02 acres of jurisdic­ On January 10, 1997, the State of Texas received federal approval tional fringe wetlands and fill and/or relocate a total of 3.43 acres (5,163 of the Coastal Management Program (CMP) (62 Federal Register pp. feet long x 29-foot average width.) of jurisdictional waters of the 1439-1440). Under federal law, federal agency activities and actions United States. The purpose of this project is to provide drainage im­ affecting the Texas coastal zone must be consistent with the CMP goals provements preceding the construction and residential development of and policies identified in 31 TAC Chapter 501. Requests for federal a 357-acre tract within the West Ranch Subdivision in north Galveston consistency review were deemed administratively complete for the fol­ County, Texas. CCC Project No.: 10-0015-F1. Type of Application: lowing project(s) during the period of December 18, 2009, through De­ U.S.A.C.E. permit application #SWG-2005-02260 Rev. is being eval­ cember 22, 2009. As required by federal law, the public is given an op­ uated under §404 of the Clean Water Act (33 U.S.C.A. §1344). Note: portunity to comment on the consistency of proposed activities in the The consistency review for this project may be conducted by the Texas coastal zone undertaken or authorized by federal agencies. Pursuant Commission on Environmental Quality Texas under §401 of the Clean to 31 TAC §§506.25, 506.32, and 506.41, the public comment period Water Act (33 U.S.C.A. §1344). for this activity extends 30 days from the date published on the Coastal Pursuant to §306(d)(14) of the Coastal Zone Management Act of 1972 Coordination Council web site. The notice was published on the web (16 U.S.C.A. §§1451-1464), as amended, interested parties are invited site on December 30, 2009. The public comment period for this project to submit comments on whether a proposed action is or is not consis­ will close at 5:00 p.m. on January 22, 2010. tent with the Texas Coastal Management Program goals and policies FEDERAL AGENCY ACTIONS: and whether the action should be referred to the Coastal Coordination Council for review. Applicant: Coastal Bend Bays and Estuaries Program; Location: The project is located in Nueces Bay on the northwest side of the Indian Further information on the applications listed above, including a Point Peninsula, adjacent to U.S. Highway 181, in Portland, San Patri­ copy of the consistency certifications for inspection, may be obtained cio County. The actual work will occur in Nueces Bay, which is part from Ms. Tammy Brooks, Consistency Review Coordinator, Coastal of Nueces County, Texas. The project can be located on the U.S.G.S. Coordination Council, P.O. Box 12873, Austin, Texas 78711-2873, quadrangle map entitled: Portland, Texas. Approximate UTM Coor­ or [email protected]. Comments should be sent to Ms. dinates in NAD 83 (meters): Zone 14; Easting: 662694; Northing: Brooks at the above address or by fax at (512) 475-0680. 3083493. Project Description: The applicant proposes to amend an ex­ TRD-200906005 isting permit for the applicant’s Portland Causeway Marsh Restoration Larry L. Laine Project. The current permit authorizes the applicant to protect and re­ Chief Clerk/Deputy Land Commissioner, General Land Office store wetlands by constructing either an earthen or stone berm around Coastal Coordination Council a 148-acre area and creating habitat behind it in phases. The appli­ Filed: December 22, 2009 cant proposes to amend its permit to allow the use of fill material to be trucked in from an unidentified source. The fill material would be used ♦ ♦ ♦ to create a temporary construction access road within the project area and raise the elevations within the project area to an elevation suitable Comptroller of Public Accounts for the growth of emergent marsh vegetation. The applicant proposes to Notice of Availability and Request for Applications construct a series of ponds and channels interspersed within the marsh complex to allow for water exchange within the complex. The appli­ Pursuant to Chapter 403, §403.352 and §403.358, Texas Government cant reports that approximately 500,000 cubic yards of dredged and/or Code; Chapter 134, §134.002 and §134.008, Texas Education Code; fill material will be brought in via dump truck and placed over approxi­ and House Bill Nos. 3 and 1935, 81st Texas Legislature, Regular Ses­ mately 104 acres of submerged bay bottom to establish emergent marsh sion (2009), the Comptroller of Public Accounts (Comptroller), an­ habitat. Other fill includes the placement of fill in 7.4 acres of juris­ nounces this Notice of Availability and Request for Applications (RFA dictional area for the construction of a temporary construction access #E-JG2-2010) and invites applications from qualified and interested road. CCC Project No.: 10-0014-F1. Type of Application: U.S.A.C.E. public junior colleges and public technical institutes for Jobs and Edu­ permit application #SWG-2007-00576 is being evaluated under §10 of cation for Texans’ (JET) grants to defray the start-up costs associated the Rivers and Harbors Act of 1899 (33 U.S.C.A. §403) and §404 of with the development of new career and technical education programs the Clean Water Act (33 U.S.C.A. §1344). Note: The consistency re­ that meet the requirements consistent with the terms of the Request view for this project may be conducted by the Texas Commission on for Applications and this notice. The Comptroller reserves the right to Environmental Quality Texas under §401 of the Clean Water Act (33 award more than one grant under the terms of the RFA. If a grant award U.S.C.A. §1344). is made under the terms of this RFA, the recipient should anticipate an effective date no earlier than March 15, 2010, or as soon thereafter as Applicant: Friendswood Development Company; Location: The practical. project is located southeast of the FM 518 and Chigger Creek intersec­

IN ADDITION January 8, 2010 35 TexReg 269 Contact: Parties interested in submitting an application should contact 17th St., Room 510, Austin, Texas 78774, (512) 463-8473. The Comp­ Kevin Deiters, Director, Educational Opportunities & Investment Di­ troller will mail copies of the application and instructions only to those vision, Comptroller of Public Accounts, in the Issuing Office at: 111 E. parties specifically requesting a copy. The application and instructions 17th St., Room 510, Austin, Texas 78774, (512) 463-8473. The Appli­ will be available at http://www.everychanceeverytexan.org/funds after cation and instructions will be available at http://www.everychanceev­ 10:00 a.m. CZT on Friday, January 8, 2010, and during normal busi­ erytexan.org/funds after 10:00 a.m. CZT on January 8, 2010, and dur­ ness hours thereafter. ing normal business hours thereafter. Questions and Non-Mandatory Letters of Intent: All written inquiries, Questions: All written inquiries and questions must be received at the questions, and Non-mandatory Letters of Intent must be received at above-referenced address not later than 2:00 p.m. (CZT) on January the above-referenced address not later than 2:00 p.m. (CZT) on Fri­ 21, 2010. Prospective applicants are encouraged to fax Questions to day, January 15, 2010. Prospective applicants are encouraged to fax (512) 463-4208 or email Questions to [email protected] to en­ non-mandatory Letters of Intent and Questions to (512) 463-4208 to sure timely receipt. On or about January 27, 2010, the Comptroller ex­ ensure timely receipt. Non-mandatory Letters of Intent must be ad­ pects to post responses to questions at http://www.everychanceevery­ dressed to Kevin Deiters, Director, Educational Opportunities & In­ texan.org/funds. Late Questions will not be considered under any cir­ vestment Division, Comptroller of Public Accounts, at: 111 E. 17th cumstances. Applicants shall be solely responsible for verifying timely St., Room 510, Austin, Texas 78774 and be signed by an official of receipt of Questions in the Issuing Office. that entity. On or about Friday, January 22, 2010, the Comptroller ex­ pects to post responses to questions at http://www.everychanceevery­ Closing Date: Applications must be delivered in the Issuing Office to texan.org/funds. Late Non-mandatory Letters of Intent and Questions the attention of the Director no later than 2:00 p.m. (CZT), on Thurs­ will not be considered under any circumstances. Applicants shall be day, February 11, 2010. Late Proposals will not be considered under solely responsible for verifying timely receipt of Non-Mandatory Let­ any circumstances. Respondents shall be solely responsible for verify­ ters of Intent and Questions in the Issuing Office. ing the timely receipt of Applications in the Issuing Office. Closing Date: Applications must be delivered in the Issuing Office to Evaluation Criteria: Applications will be evaluated under the evalua­ the attention of the Director no later than 2:00 p.m. (CZT), on Friday, tion criteria outlined in the application instructions. The Comptroller January 29, 2010. Late applications will not be considered under any will make the final decision. The Comptroller reserves the right to ac­ circumstances. Applicants shall be solely responsible for verifying the cept or reject any or all applications submitted. The Comptroller is not timely receipt of Applications in the Issuing Office. obligated to make a grant award or to execute a contract on the basis of this notice or RFA. The Comptroller shall not pay for any costs in­ Evaluation Criteria: Applications will be evaluated under the evalua­ curred by any entity in responding to this Notice or RFA. tion criteria outlined in the application instructions. The Comptroller will make the final decision. The Comptroller reserves the right to ac­ The anticipated schedule of events pertaining to this grant is as follows: cept or reject any or all applications submitted. The Comptroller is not Issuance of RFA - January 8, 2010, after 10:00 a.m. CZT; Questions obligated to make a grant award or to execute a contract on the basis Due - January 21, 2010, 2:00 p.m. CZT; Official Responses to Ques­ of this notice or RFA. The Comptroller shall not pay for any costs in­ tions posted - January 27, 2010; Proposals Due - February 11, 2010, curredbyany entityi n responding to this Notice or RFA. 2:00 p.m. CZT; Grant Award/Contract Execution - March 15, 2010, 2009, or as soon thereafter as practical; Commencement of Grant Fund­ The anticipated schedule of events pertaining to this grant is as follows: ing - March 22, 2010, or as soon thereafter as practical. Issuance of RFA - January 8, 2010, after 10:00 a.m. CZT; Non-Manda­ TRD-200906030 tory Letters of Intent and Questions Due - January 15, 2010, 2:00 p.m. CZT; Official Responses to Questions posted - January 22, 2010; Ap­ William Clay Harris plications Due - January 29, 2010, 2:00 p.m. CZT; Grant Award/Con­ Assistant General Counsel, Contracts tract Execution - March 31, 2010, or as soon thereafter as practical; Comptroller of Public Accounts Commencement of Grant Funding - April 30, 2010, or as soon there­ Filed: December 28, 2009 after as practical. ♦ ♦ ♦ TRD-200906031 Notice of Availability and Request for Applications William Clay Harris Assistant General Counsel, Contracts Pursuant to Chapter 403, §403.352 and §403.358, Texas Government Comptroller of Public Accounts Code; Chapter 134, §134.002 and §134.008, Texas Education Code; Filed: December 28, 2009 and House Bill Nos. 3 and 1935, 81st Texas Legislature, Regular Ses­ sion (2009), the Comptroller of Public Accounts (Comptroller), an­ ♦ ♦ ♦ nounces this Notice of Availability and Request for Applications (RFA Office of Consumer Credit Commissioner #N-G-2) and invites applications from qualified and interested non­ profit organizations in order to develop, support, or expand programs Notice of Rate Ceilings that prepare low-income students for careers in high-demand occupa­ The Consumer Credit Commissioner of Texas has ascertained the fol­ tions and meet the requirements consistent with the terms of this Re­ lowing rate ceilings by use of the formulas and methods described in quest for Applications and notice. The Comptroller reserves the right §§303.003, 303.009, and 304.003, Texas Finance Code. to award more than one grant under the terms of this RFA. If a grant award is made under the terms of this RFA, the recipient should an­ The weekly ceiling as prescribed by §303.003 and §303.009 ticipate an effective date no earlier than March 31, 2010, or as soon for the period of 12/28/09 - 01/03/10 is 18% for Con- thereafter as practical. sumer1/Agricultural/Commercial2/credit through $250,000. Contact: Parties interested in submitting an application should contact The weekly ceiling as prescribed by §303.003 and §303.009 for the Kevin Deiters, Director, Educational Opportunities & Investment Di­ period of 12/28/09 - 01/03/10 is 18% for Commercial over $250,000. vision, Comptroller of Public Accounts, in the Issuing Office at: 111 E.

35 TexReg 270 January 8, 2010 Texas Register The judgment ceiling as prescribed by §304.003 for the period of these early reading instruments must be reported to the commissioner 01/01/10 - 12/31/10 is 5.00% for Consumer/Agricultural/Commer­ of education, the local school board, and the parent and/or guardian cial/credit through $250,000. of students tested. The list of early reading instruments will be made available so that school districts and open-enrollment charter schools The judgment ceiling as prescribed by §304.003 for the period of may order instruments for the 2010-2011 school year. Instruments se­ 01/01/10 - 01/31/10 is 5.00% for Commercial over $250,000. lected for the commissioner’s list will remain on the list for four years 1Credit for personal, family or household use. unless the approved test is no longer available from the publisher or the publisher submits an updated version of the instrument prior to the end 2Credit for business, commercial, investment or other similar purpose. of the four-year approval cycle. TRD-200906009 Early reading instruments approved in earlier years do not need to be Leslie L. Pettijohn resubmitted this year, but must be resubmitted when the four-year cycle Commissioner has expired. Office of Consumer Credit Commissioner Filed: December 22, 2009 Due to continued budgetary limitations, a $5 per student per year cost cap will still remain on each complete Test Option on the 2010-2011 ♦ ♦ ♦ Commissioner’s List of Early Reading Instruments. For example, if Notice of Rate Ceilings Option G requires two instruments to assess all required domains at a grade level, then the combination of those two instruments will be The Consumer Credit Commissioner of Texas has ascertained the fol­ state funded at no more than $5 per student. For the 2010-2011 school lowing rate ceilings by use of the formulas and methods described in year, school districts and open-enrollment charter schools will purchase §§303.003, 303.005, and 303.009, Texas Finance Code. early reading instruments directly from the publisher/vendor unless the test is published by the TEA. If the cost of the Test Option exceeds The weekly ceiling as prescribed by §303.003 and §303.009 the $5 per student limit established, the state will reimburse the school for the period of 01/04/10 - 01/10/10 is 18% for Con- district or open-enrollment charter school at the limit established. The sumer1/Agricultural/Commercial2/credit through $250,000. school district or open-enrollment charter school is responsible for the The weekly ceiling as prescribed by §303.003 and §303.009 for the remainder of the cost of the Test Option. period of 01/04/10 - 01/10/10 is 18% for Commercial over $250,000. Selection Criteria. Publishers will be responsible for submitting tests 1Credit for personal, family or household use. they wish to have considered for inclusion on the 2010-2011 Commis- sioner’s List of Early Reading Instruments. All tests submitted for re­ 2Credit for business, commercial, investment or other similar purpose. view must be based on scientific research and must be submitted with TRD-200906049 evidence of reliability and validity for assessing key reading domains Leslie L. Pettijohn and identifying children at risk of reading failure, including the iden­ Commissioner tification of children with dyslexia. Submitted evidence must demon­ Office of Consumer Credit Commissioner strate that the test meets the state criteria for reliability and validity. Filed: December 28, 2009 Instruments will be evaluated in terms of validity, reliability, and ease of administration/implementation by the classroom teacher. Consider­ ♦ ♦ ♦ ation will also be given to the number of domains covered by the test Texas Education Agency and the number of additional tests that would need to be purchased by schools in order to cover all required domains. Reading instruments Request for Early Reading Diagnostic Instruments (English and Spanish) submitted for review must address at least one Description. The Texas Education Agency (TEA) is notifying publish­ of the following five domains: (1) phonological awareness; (2) grapho­ ers that early reading diagnostic instruments for Kindergarten, Grade phonemic knowledge; (3) word reading; (4) oral reading accuracy; and 1, and Grade 2 may be submitted for review. The Texas Education (5) comprehension of text, as appropriate for Kindergarten, Grade 1, Code (TEC), §28.006, authorizes the commissioner of education to de­ and Grade 2. Tests submitted for use by Reading First schools may velop recommendations for school districts to administer early reading also assess vocabulary and fluency. As in previous years, it may be instruments to diagnose student reading skill and comprehension de­ necessary to use a combination of instruments to form a Test Option velopment. to assess all required domains. The criteria used to select instruments for the 2010-2011 school year is available through the TEA Division In accordance with the TEC, §28.006(b), the commissioner of educa­ of Curriculum, (512) 463-9581. tion shall adopt a list of early reading instruments that school districts may use to diagnose reading skill and comprehension development. Proposals must be submitted to Dr. David Francis; Texas Institute for Reading instruments placed on the list must be based on scientificre­ Measurement, Evaluation, and Statistics; 100 TLCC Annex; Houston, search, evaluate individual student reading progress, and be used to Texas 77204-6022 by 5:00 p.m. (Central Time), Friday, February 26, identify students at risk for dyslexia or other reading difficulties. The 2010, to be considered for inclusion on the 2010-2011 Commissioner’s list of reading instruments adopted under the TEC, §28.006(b), must List of Early Reading Instruments. also provide for diagnosing the reading development and comprehen­ TRD-200906080 sion of students participating in a program under the TEC, Chapter 29, Cristina De La Fuente-Valadez Subchapter B (Bilingual Education and Special Language Programs). Director, Policy Coordination Program Requirements. Since the 1998-1999 school year, school dis­ Texas Education Agency tricts have been required to administer early reading instruments. Re­ Filed: December 30, 2009 sults from the early reading instruments are used to inform instruction and place students at risk for reading difficulties, including dyslexia, in ♦ ♦ ♦ Accelerated Reading Instruction intervention programs. Results from Request for Grade 3 Early Reading Diagnostic Instruments

IN ADDITION January 8, 2010 35 TexReg 271 Description. The Texas Education Agency (TEA) is notifying publish­ Description. The Texas Education Agency (TEA) is notifying assess­ ers that early reading diagnostic instruments for the 2010-2011 List of ment publishers that proficiency assessments and/or achievement tests Grade 3 Early Reading Instruments may be submitted for review. P.L. may be submitted for review for the List of State Approved Tests for 107-110, Title I, Part B, Subpart 1 of the Elementary and Secondary the Assessment of Limited English Proficient Students. Texas Edu­ Education Act, as amended by the No Child Left Behind Act of 2001, cation Code (TEC), §29.056(a)(2), authorizes the TEA to compile a CFDA #84.357, authorizes the commissioner of education to develop list of approved assessments for the purposes of identifying students recommendations for school districts to administer early reading in­ aslimitedEnglishpro ficient for entry into or exit (when appropriate) struments to diagnose student reading skill and comprehension devel­ from bilingual education and/or English as a second language (ESL) opment. programs; annually assessing oral language proficiency in English and Spanish when required; and measuring reading and writing proficiency Under P.L. 107-110, Title I, Part B, Subpart 1 of the Elementary and in English and Spanish for program placement. The state-approved Secondary Education Act, as amended by the No Child Left Behind Act tests placed on the list must be based on scientific research and must of 2001, CFDA #84.357, the TEA shall adopt a list of Grade 3 early measure oral language proficiency in listening and speaking in Eng­ reading instruments that school districts and open-enrollment charter lish and Spanish from Prekindergarten (PK)-Grade 12. Assessments schools may use to diagnose reading skill and comprehension devel­ must also measure reading and writing in English and Spanish from opment. Reading instruments placed on the list must be based on sci­ PK-Grade 12. entific research, evaluate individual student reading progress, and be used to identify students at risk for dyslexia or other reading difficul­ Norm-referenced standardized achievement tests in English will be ties. The list of reading instruments must also provide for diagnosing used for identification and entry into programs and for exit from pro­ the reading development and comprehension of students participating grams for Grades 1 and 2 and may be used as formative assessments. in a program under the Texas Education Code, Chapter 29, Subchapter Norm-referenced standardized achievement tests in Spanish may be B (Bilingual Education and Special Language Programs). used for placement purposes only. All tests to be included on the List Program Requirements. Since May 2003, school districts and open-en­ of State Approved Tests for the Assessment of Limited English Profi- rollment charter schools participating in Reading First have been re­ cient Students must be re-normed at least every eight years to meet the quired to administer Grade 3 early reading instruments. Results from criteria specified in the TEC, §39.032, which requires that standardiza­ the early reading instruments are used to inform instruction and place tion norms not be more than eight years old at the time the test is ad­ students at risk for reading difficulties, including dyslexia, in Acceler­ ministered. Only new assessments, newly normed assessments, and/or ated Reading Instruction intervention programs. The list of early read­ modified/updated assessments must be submitted for evaluation at this ing instruments will be made available so that school districts and open- time. enrollment charter schools may order instruments for the 2010-2011 The Assessment Committee, comprised of stakeholders from through­ school year. Instruments selected for the 2010-2011 List of Grade 3 out the state, will review and approve the 2010-2011 List of State Ap- Early Reading Instruments will remain on the list for four years unless proved Tests for the Assessment of Limited English Proficient Students. the publisher submits an updated version of the instrument prior to the end of the four-year approval cycle. Grade 3 early reading instruments Selection Criteria. Assessment publishers will be responsible for sub­ approved in earlier years do not need to be resubmitted this year, but mitting tests that they wish to be reviewed for consideration for in­ must be resubmitted when the four-year cycle has expired. clusion on the 2010-2011 List of State Approved Tests for the Assess- ment of Limited English Proficient Students. All tests submitted for Selection Criteria. Publishers will be responsible for submitting tests review must be based on scientific research and must measure oral they wish to have considered for inclusion on the 2010-2011 List of language proficiency in listening and speaking in English and Spanish Grade 3 Early Reading Instruments. All tests submitted for review from PK-Grade 12. Assessments must measure reading and writing in must be based on scientific research and must meet the state criteria for English and Spanish from PK-Grade 12 and must meet the state crite­ reliability and validity. ria for reliability and validity. Therefore, technical manuals must also Instruments will be evaluated in terms of validity, reliability, and ease be submitted and must be available for the review of assessments to be of administration/implementation by the classroom teacher. Reading held on February 26, 2010. Assessments must also measure specific instruments (English and Spanish) submitted for review must address proficiency levels in oral language, reading, and writing in English and at least one of the following four domains: (1) phonological awareness; Spanish. Assessment instruments (English and Spanish) submitted for (2) graphophonemic knowledge; (3) word reading; and (4) oral reading review will be grouped in the following categories: (1) Oral Language accuracy and comprehension of text, as appropriate for Grade 3. Proficiency Tests in English in Listening and Speaking domains; (2) Oral Language Proficiency Tests in Spanish in Listening and Speak­ Proposals must be submitted to Dr. David Francis; Texas Institute for ing domains; (3) Reading and Writing Proficiency in English; and (4) Measurement, Evaluation, and Statistics; 100 TLCC Annex; Houston, Reading and Writing Proficiency in Spanish. Publishers are not re­ Texas 77204-6022 by 5:00 p.m. (Central Time), Friday, February 26, quired to submit proposals for all categories. 2010, to be considered for inclusion on the 2010-2011 List of Grade 3 Early Reading Instruments. Proposals must be submitted and presented on February 26, 2010, to be TRD-200906079 considered for inclusion on the 2010-2011 List of State Approved Tests for the Assessment of Limited English Proficient Students. Assessment Cristina De La Fuente-Valadez publishers will be required to attend the review of the assessments on Director, Policy Coordination February 26, 2010, which will be held at the William B. Travis Build­ Texas Education Agency ing, Room G-100, PDC7, 1701 North Congress Avenue, Austin, Texas. Filed: December 30, 2009 Complete official sample test copies in English and Spanish with com­ ♦ ♦ ♦ prehensive explanations, including (1) scoring information; (2) norm­ ing data information, including ethnicity, gender, grade level, and geo­ Request for Proficiency Tests for the Assessment of Limited graphic region; and (3) technical manuals with validity and reliability English Proficient Students information, must be presented at that time. Only materials presented on February 26, 2010, will be considered for approval. Publishers must

35 TexReg 272 January 8, 2010 Texas Register be available all day at the request of the committee and must make ar­ Information concerning any aspect of this order may be obtained by rangements to pick up all materials at the end of the day. Any materials contacting Jennifer Cook, Staff Attorney at (512) 239-1873, Texas and/or revisions submitted after the deadline cannot be reviewed until Commission on Environmental Quality, P.O. Box 13087, Austin, the following year. Texas 78711-3087. Further Information. For clarifying information, contact Susie Coul­ An agreed order was entered regarding Weldon W. Alders dba Fair­ tress, Assistant Director of Bilingual/ESL, Texas Education Agency, field Estates, dba Meadow Glen Crystal Springs Water, dba Woodway (512) 463-9581. Subdivision Water System, dba Woodland Hills Water Company, dba TRD-200906081 Lakeview Water System, and dba Southampton Subdivision, Docket No. 2008-0362-MLM-E on December 10, 2009 assessing $61,390 in Cristina De La Fuente-Valadez administrative penalties. Director, Policy Coordination Texas Education Agency Information concerning any aspect of this order may be obtained by Filed: December 30, 2009 contacting James Sallans, Staff Attorney at (512) 239-2053, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, ♦ ♦ ♦ Texas 78711-3087. Texas Commission on Environmental Quality An agreed order was entered regarding B.K. Trading, Inc., Docket No. Enforcement Orders 2008-0416-PST-E on December 10, 2009 assessing $3,675 in admin­ istrative penalties. An agreed order was entered regarding City of Marlin, Docket No. 2005-2035-PWS-E on December 10, 2009 assessing $43,880 in ad­ Information concerning any aspect of this order may be obtained by ministrative penalties. contacting Tracy Chandler, Staff Attorney at (512) 239-0629, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Information concerning any aspect of this order may be obtained by 78711-3087. contacting Kari Gilbreth, Staff Attorney at (512) 239-1320, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, A default order was entered regarding Jesus Garcia, Docket No. 2008­ Texas 78711-3087. 0646-MSW-E on December 10, 2009 assessing $4,050 in administra­ tive penalties. A default order was entered regarding Joseph Sandoval dba Plaza Mo­ bile Home Park, Docket No. 2006-0531-MLM-E on December 10, Information concerning any aspect of this order may be obtained by 2009 assessing $2,832 in administrative penalties. contacting Jennifer Cook, Staff Attorney at (512) 239-1873, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Information concerning any aspect of this order may be obtained by Texas 78711-3087. contacting Kari Gilbreth, Staff Attorney at (512) 239-1320, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, An agreed order was entered regarding Nisar Ahmad dba Mesa Coastal Texas 78711-3087. and aka Tahira Company, L.L.C., Docket No. 2008-0793-PST-E on December 10, 2009 assessing $6,971 in administrative penalties. An agreed order was entered regarding Earth Haulers, Inc., Docket No. 2007-0471-MSW-E on December 10, 2009 assessing $15,300 in Information concerning any aspect of this order may be obtained by administrative penalties. contacting Stephanie Frazee, Staff Attorney at (512) 239-3693, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Information concerning any aspect of this order may be obtained by 78711-3087. contacting James Sallans, Staff Attorney at (512) 239-2053, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, An agreed order was entered regarding Equistar Chemicals, LP, Docket Texas 78711-3087. No. 2008-0923-AIR-E on December 10, 2009 assessing $5,575 in ad­ ministrative penalties. An agreed order was entered regarding Ice Melt Products, L.L.C., Docket No. 2007-0748-MLM-E on December 10, 2009 assessing Information concerning any aspect of this order may be obtained by $1,980 in administrative penalties. contacting Samuel Short, Enforcement Coordinator at (512) 239-5363, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Information concerning any aspect of this order may be obtained by Texas 78711-3087. contacting Barham Richard, Staff Attorney at (512) 239-0107, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas A default order was entered regarding Ruby McPike, Docket No. 2008­ 78711-3087. 1140-MLM-E on December 10, 2009 assessing $8,475 in administra­ tive penalties. An agreed order was entered regarding Ray Carpenter dba Carpenter Dirt Work, Docket No. 2007-1807-MLM-E on December 10, 2009 Information concerning any aspect of this order may be obtained by assessing $4,257 in administrative penalties. contacting Stephanie Frazee, Staff Attorney at (512) 239-3693, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Information concerning any aspect of this order may be obtained by 78711-3087. contacting Xavier Guerra, Staff Attorney at (210) 403-4016, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas An agreed order was entered regarding Brothers Paving, LLC, Docket 78711-3087. No. 2008-1838-WQ-E on December 10, 2009 assessing $3,150 in ad­ ministrative penalties. An agreed order was entered regarding Dowd & Sons Automobile Salvage Company, Inc. aka Dowd & Sons, Inc., Docket No. 2007­ Information concerning any aspect of this order may be obtained by 1881-MLM-E on December 10, 2009 assessing $4,673 in administra­ contacting Benjamin Thompson, Staff Attorney at (512) 239-1297, tive penalties. Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087.

IN ADDITION January 8, 2010 35 TexReg 273 An agreed order was entered regarding Brazos Valley Construction, An agreed order was entered regarding City of Palestine, Docket No. Incorporated, Docket No. 2008-1852-WQ-E on December 10, 2009 2009-0659-MWD-E on December 10, 2009 assessing $28,700 in ad­ assessing $4,750 in administrative penalties with $950 deferred. ministrative penalties with $5,740 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Jeremy Escobar, Enforcement Coordinator at (512) 239­ contacting Samuel Short, Enforcement Coordinator at (512) 239-5363, 1460, Texas Commission on Environmental Quality, P.O. Box 13087, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Austin, Texas 78711-3087. Texas 78711-3087. An agreed order was entered regarding Houston Refining, LP, Docket An agreed order was entered regarding Killeen Majestic Homes, Inc., No. 2009-0181-AIR-E on December 10, 2009 assessing $40,524 in Docket No. 2009-0675-WQ-E on December 10, 2009 assessing $750 administrative penalties. in administrative penalties with $150 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Kimberly Morales, Enforcement Coordinator at (713) 422­ contacting Carlie Konkol, Enforcement Coordinator at (361) 825-3422, 8938, Texas Commission on Environmental Quality, P.O. Box 13087, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Austin, Texas 78711-3087. Texas 78711-3087. An agreed order was entered regarding Milos Bednar, Docket No. An agreed order was entered regarding SAJIDA CORPORATION dba 2009-0294-WQ-E on December 10, 2009 assessing $9,630 in admin­ Beach Mobil, Docket No. 2009-0731-PST-E on December 10, 2009 istrative penalties. assessing $4,771 in administrative penalties with $954 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Kari Gilbreth, Staff Attorney at (512) 239-1320, Texas contacting Mike Meyer, Enforcement Coordinator at (512) 239-4492, Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087. Texas 78711-3087. A default order was entered regarding Custom Water Co., L.L.C., An agreed order was entered regarding Grecoair, Inc., Docket No. Docket No. 2009-0312-PWS-E on December 10, 2009 assessing 2009-0753-PST-E on December 10, 2009 assessing $10,015 in ad­ $1,590 in administrative penalties. ministrative penalties with $2,003 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Tracy Chandler, Staff Attorney at (512) 239-0629, Texas contacting Elvia Maske, Enforcement Coordinator at (512) 239-0789, Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Texas Commission on Environmental Quality, P.O. Box 13087, Austin, 78711-3087. Texas 78711-3087. An agreed order was entered regarding Valero Refining-Texas, L.P., An agreed order was entered regarding Thomas Redi-Mix Company, Docket No. 2009-0510-AIR-E on December 10, 2009 assessing Inc., Docket No. 2009-0767-IWD-E on December 10, 2009 assessing $13,706 in administrative penalties with $2,741 deferred. $6,909 in administrative penalties with $1,381 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting John Muennink, Enforcement Coordinator at (361) 825­ contacting Samuel Short, Enforcement Coordinator at (512) 239-5363, 3423, Texas Commission on Environmental Quality, P.O. Box 13087, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Austin, Texas 78711-3087. Texas 78711-3087. An agreed order was entered regarding Hampton-Kelley Investments, An agreed order was entered regarding SALIMA ROHEEN, INC dba LLC, Docket No. 2009-0541-WQ-E on December 10, 2009 assessing Willies Mart 3, Docket No. 2009-0788-PST-E on December 10, 2009 $1,050 in administrative penalties with $210 deferred. assessing $3,820 in administrative penalties with $764 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Lanae Foard, Enforcement Coordinator at (512) 239-2554, contacting Michael Pace, Enforcement Coordinator at (817) 588-5933, TexasCommissiononEnvironmental Quality, P.O. Box 13087, Austin, TexasCommissiononEnvironmental Quality, P.O. Box 13087, Austin, Texas 78711-3087. Texas 78711-3087. An agreed order was entered regarding United States Department of An agreed order was entered regarding MANITEX, INC., Docket No. the Army, Docket No. 2009-0553-EAQ-E on December 10, 2009 as­ 2009-0807-MLM-E on December 10, 2009 assessing $11,222 in ad­ sessing $1,507 in administrative penalties. ministrative penalties with $2,244 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Lauren Smitherman, Enforcement Coordinator at (512) contacting Rajesh Acharya, Enforcement Coordinator at (512) 239­ 239-5223, Texas Commission on Environmental Quality, P.O. Box 0577, Texas Commission on Environmental Quality, P.O. Box 13087, 13087, Austin, Texas 78711-3087. Austin, Texas 78711-3087. An agreed order was entered regarding Charles Mullins dba C & J Tree An agreed order was entered regarding O. B. Barnes, Docket No. 2009­ Service, Docket No. 2009-0652-MLM-E on December 10, 2009 as­ 0825-MSW-E on December 10, 2009 assessing $2,500 in administra­ sessing $2,694 in administrative penalties with $538 deferred. tive penalties with $500 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Martina Kusniadi, Enforcement Coordinator at (713) 767­ contacting Clinton Sims, Enforcement Coordinator at (512) 239-6933, 3682, Texas Commission on Environmental Quality, P.O. Box 13087, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Austin, Texas 78711-3087. Texas 78711-3087.

35 TexReg 274 January 8, 2010 Texas Register An agreed order was entered regarding City of Trinity, Docket No. Texas Commission on Environmental Quality, P.O. Box 13087, Austin, 2009-0826-PWS-E on December 10, 2009 assessing $7,930 in admin­ Texas 78711-3087. istrative penalties with $1,586 deferred. An agreed order was entered regarding Trinity Bay Conservation Dis­ Information concerning any aspect of this order may be obtained trict, Docket No. 2009-0878-MWD-E on December 10, 2009 assessing by contacting Amanda Henry, Enforcement Coordinator at (713) $11,750 in administrative penalties with $2,350 deferred. 767-3672, Texas Commission on Environmental Quality, P.O. Box Information concerning any aspect of this order may be obtained by 13087, Austin, Texas 78711-3087. contacting Samuel Short, Enforcement Coordinator at (512) 239-5363, An agreed order was entered regarding US CAPITAL INVEST­ Texas Commission on Environmental Quality, P.O. Box 13087, Austin, MENTS LLC. dba Shell on Western, Docket No. 2009-0834-PST-E Texas 78711-3087. on December 10, 2009 assessing $4,846 in administrative penalties An agreed order was entered regarding Rohm and Haas Texas Incorpo­ with $969 deferred. rated, Docket No. 2009-0891-AIR-E on December 10, 2009 assessing Information concerning any aspect of this order may be obtained by $10,000 in administrative penalties with $2,000 deferred. contacting Mike Meyer, Enforcement Coordinator at (512) 239-4492, Information concerning any aspect of this order may be obtained Texas Commission on Environmental Quality, P.O. Box 13087, Austin, by contacting Nadia Hameed, Enforcement Coordinator at (713) Texas 78711-3087. 767-3629, Texas Commission on Environmental Quality, P.O. Box A default order was entered regarding Erasmo Aranda, Docket No. 13087, Austin, Texas 78711-3087. 2009-0849-LII-E on December 10, 2009 assessing $262 in adminis­ An agreed order was entered regarding Richard C. Apodaca and Willie trative penalties. Jenkins, Docket No. 2009-0906-MSW-E on December 10, 2009 as­ Information concerning any aspect of this order may be obtained by sessing $1,050 in administrative penalties with $210 deferred. contacting Mike Fishburn, Staff Attorney at (512) 239-0635, Texas Information concerning any aspect of this order may be obtained by Commission on Environmental Quality, P.O. Box 13087, Austin, Texas contacting Clinton Sims, Enforcement Coordinator at (512) 239-6933, 78711-3087. Texas Commission on Environmental Quality, P.O. Box 13087, Austin, An agreed order was entered regarding L & M Woodwaste Recycling, Texas 78711-3087. Inc., Docket No. 2009-0851-MLM-E on December 10, 2009 assessing An agreed order was entered regarding Flint Hills Resources, LP, $5,000 in administrative penalties with $1,000 deferred. Docket No. 2009-0916-AIR-E on December 10, 2009 assessing Information concerning any aspect of this order may be obtained by $18,275 in administrative penalties. contacting Ross Fife, Enforcement Coordinator at (512) 239-2541, Information concerning any aspect of this order may be obtained by Texas Commission on Environmental Quality, P.O. Box 13087, contacting Rebecca Johnson, Enforcement Coordinator at (361) 825­ Austin, Texas 78711-3087. 3420, Texas Commission on Environmental Quality, P.O. Box 13087, An agreed order was entered regarding Chong C. Park dba Dans Long Austin, Texas 78711-3087. Point Texaco, Docket No. 2009-0854-PST-E on December 10, 2009 An agreed order was entered regarding Paris Generation LP, Docket assessing $9,414 in administrative penalties with $1,882 deferred. No. 2009-0931-AIR-E on December 10, 2009 assessing $2,100 in ad­ Information concerning any aspect of this order may be obtained ministrative penalties with $420 deferred. by contacting Wallace Myers, Enforcement Coordinator at (512) Information concerning any aspect of this order may be obtained by 239-6580, Texas Commission on Environmental Quality, P.O. Box contacting Suzanne Walrath, Enforcement Coordinator at (512) 239­ 13087, Austin, Texas 78711-3087. 2134, Texas Commission on Environmental Quality, P.O. Box 13087, An agreed order was entered regarding HOOVER VALLEY COUN­ Austin, Texas 78711-3087. TRY STORE, L.L.C. dba Hoover Valley Country Store, Docket No. An agreed order was entered regarding Nazlin A. Virani, Docket No. 2009-0857-PST-E on December 10, 2009 assessing $3,002 in admin­ 2009-0933-PST-E on December 10, 2009 assessing $8,196 in admin­ istrative penalties with $600 deferred. istrative penalties with $1,639 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Brianna Carlson, Enforcement Coordinator at (956) 430­ contacting Michael Pace, Enforcement Coordinator at (817) 588-5933, 6021, Texas Commission on Environmental Quality, P.O. Box 13087, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Austin, Texas 78711-3087. Texas 78711-3087. An agreed order was entered regarding Munir Nasah dba Express Mart, An agreed order was entered regarding Kaneka Texas Corporation, Docket No. 2009-0870-PST-E on December 10, 2009 assessing $5,550 Docket No. 2009-0935-AIR-E on December 10, 2009 assessing $1,950 in administrative penalties with $1,110 deferred. in administrative penalties with $390 deferred. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this order may be obtained by contacting Judy Kluge, Enforcement Coordinator at (817) 588-5825, contacting Martina Kusniadi, Enforcement Coordinator at (713) 767­ Texas Commission on Environmental Quality, P.O. Box 13087, Austin, 3682, Texas Commission on Environmental Quality, P.O. Box 13087, Texas 78711-3087. Austin, Texas 78711-3087. An agreed order was entered regarding Texas Department of Trans­ An agreed order was entered regarding A&S PETROLEUM LLC dba portation, Docket No. 2009-0877-MWD-E on December 10, 2009 as­ Main Street Food Mart 2, Docket No. 2009-0939-PST-E on Decem­ sessing $5,140 in administrative penalties with $1,028 deferred. ber 10, 2009 assessing $2,574 in administrative penalties with $514 Information concerning any aspect of this order may be obtained by deferred. contacting Lanae Foard, Enforcement Coordinator at (512) 239-2554,

IN ADDITION January 8, 2010 35 TexReg 275 Information concerning any aspect of this order may be obtained by An agreed order was entered regarding BERT SCHRANK, INC., contacting Elvia Maske, Enforcement Coordinator at (512) 239-0789, Docket No. 2009-1051-PST-E on December 10, 2009 assessing Texas Commission on Environmental Quality, P.O. Box 13087, Austin, $2,608 in administrative penalties with $521 deferred. Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Luis Ornelas, Docket No. 2009­ contacting Brianna Carlson, Enforcement Coordinator at (956) 430­ 0941-LII-E on December 10, 2009 assessing $1,945 in administrative 6021, Texas Commission on Environmental Quality, P.O. Box 13087, penalties with $389 deferred. Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Eagle Rock Field Services, L.P., contacting Ross Fife, Enforcement Coordinator at (512) 239-2541, Docket No. 2009-1077-AIR-E on December 10, 2009 assessing $1,875 Texas Commission on Environmental Quality, P.O. Box 13087, in administrative penalties with $375 deferred. Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Buchanan Lake Village, Inc., contacting Terry Murphy, Enforcement Coordinator at (512) 239-5025, Docket No. 2009-0971-PWS-E on December 10, 2009 assessing $856 Texas Commission on Environmental Quality, P.O. Box 13087, Austin, in administrative penalties with $171 deferred. Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Dhukani Investments, Inc. dba contacting Christopher Keffer, Enforcement Coordinator at (512) 239­ Easy Lane, Docket No. 2009-1097-PST-E on December 10, 2009 as­ 5610, Texas Commission on Environmental Quality, P.O. Box 13087, sessing $7,596 in administrative penalties with $1,519 deferred. Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Mansfield Plumbing Products contacting Danielle Porras, Enforcement Coordinator at (512) 239­ LLC, Docket No. 2009-1004-AIR-E on December 10, 2009 assessing 2602, Texas Commission on Environmental Quality, P.O. Box 13087, $12,500 in administrative penalties with $2,500 deferred. Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding DDMRK Management, Inc. contacting James Nolan, Enforcement Coordinator at (512) 239-6634, dba Rumpy’s Convenience Store, Docket No. 2009-1101-PST-E on Texas Commission on Environmental Quality, P.O. Box 13087, Austin, December 10, 2009 assessing $11,724 in administrative penalties with Texas 78711-3087. $2,344 deferred. An agreed order was entered regarding Amanda Koller, Christina Information concerning any aspect of this order may be obtained by Koller, and Johnny Minze Koller dba Koller Dairy, Docket No. contacting Danielle Porras, Enforcement Coordinator at (512) 239­ 2009-1020-AGR-E on December 10, 2009 assessing $770 in adminis­ 2602, Texas Commission on Environmental Quality, P.O. Box 13087, trative penalties with $154 deferred. Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Kenneth Haddad and May­ contacting Thomas Jecha, Enforcement Coordinator at (512) 239-2576, nard Haddad dba H & H Car Wash, Docket No. 2009-1105-PST-E on Texas Commission on Environmental Quality, P.O. Box 13087, Austin, December 10, 2009 assessing $6,105 in administrative penalties with Texas 78711-3087 $1,221 deferred. An agreed order was entered regarding Consumers Water Inc. dba Tall Information concerning any aspect of this order may be obtained by Cedars Mobile Home Subdivision, Docket No. 2009-1030-PWS-E on contacting Judy Kluge, Enforcement Coordinator at (817) 588-5825, December 10, 2009 assessing $2,040 in administrative penalties with Texas Commission on Environmental Quality, P.O. Box 13087, Austin, $408 deferred. Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding City of Olney, Docket No. contacting Stephen Thompson, Enforcement Coordinator at (512) 239­ 2009-1114-MWD-E on December 10, 2009 assessing $3,885 in admin­ 2548, Texas Commission on Environmental Quality, P.O. Box 13087, istrative penalties with $777 deferred. Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained An agreed order was entered regarding Texas Airstream Harbor, Inc., by contacting Heather Brister, Enforcement Coordinator at (254) Docket No. 2009-1041-MWD-E on December 10, 2009 assessing 761-3034, Texas Commission on Environmental Quality, P.O. Box $1,125 in administrative penalties with $225 deferred. 13087, Austin, Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Eagle Rock Field Services, L.P., contacting Lanae Foard, Enforcement Coordinator at (512) 239-2554, Docket No. 2009-1143-AIR-E on December 10, 2009 assessing $1,875 Texas Commission on Environmental Quality, P.O. Box 13087, Austin, in administrative penalties with $375 deferred. Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding Happy Center, LLC, Docket contacting Kirk Schoppe, Enforcement Coordinator at (512) 239-0489, No. 2009-1050-PST-E on December 10, 2009 assessing $8,625 in ad­ Texas Commission on Environmental Quality, P.O. Box 13087, Austin, ministrative penalties with $1,725 deferred. Texas 78711-3087. Information concerning any aspect of this order may be obtained by An agreed order was entered regarding ConocoPhillips Company, contacting Elvia Maske, Enforcement Coordinator at (512) 239-0789, Docket No. 2009-1156-AIR-E on December 10, 2009 assessing Texas Commission on Environmental Quality, P.O. Box 13087, Austin, $17,850 in administrative penalties with $3,570 deferred. Texas 78711-3087. Information concerning any aspect of this order may be obtained by contacting Trina Grieco, Enforcement Coordinator at (210) 403-4006,

35 TexReg 276 January 8, 2010 Texas Register Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087. Texas 78711-3087. An agreed order was entered regarding City of Meadow, Docket No. A field citation was entered regarding Michael R. Horn, Docket No. 2009-1179-MWD-E on December 10, 2009 assessing $2,100 in admin­ 2009-1642-WOC-E on December 10, 2009 assessing $210 in admin­ istrative penalties with $420 deferred. istrative penalties. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this citation may be obtained by contacting Lauren Smitherman, Enforcement Coordinator at (512) contacting Melissa Keller, SEP Coordinator at (512) 239-1768, Texas 239-5223, Texas Commission on Environmental Quality, P.O. Box Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 13087, Austin, Texas 78711-3087. 78711-3087. An agreed order was entered regarding V & SS ENTERPRISES, L.L.C. A field citation was entered regarding Joseph M. Meyers, Docket No. dba Handi Stop 35, Docket No. 2009-1189-PST-E on December 10, 2009-1644-WOC-E on December 10, 2009 assessing $210 in admin­ 2009 assessing $7,349 in administrative penalties with $1,469 deferred. istrative penalties. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this citation may be obtained by contacting Rajesh Acharya, Enforcement Coordinator at (512) 239­ contacting Melissa Keller, SEP Coordinator at (512) 239-1768, Texas 0577, Texas Commission on Environmental Quality, P.O. Box 13087, Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Austin, Texas 78711-3087. 78711-3087. An agreed order was entered regarding TWISTER INVESTMENT, A field citation was entered regarding George Welch Custom Homes INC. dba 149 Exxon, Docket No. 2009-1211-PST-E on December 10, LLC, Docket No. 2009-1656-WQ-E on December 10, 2009 assessing 2009 assessing $7,980 in administrative penalties with $1,596 deferred. $700 in administrative penalties. Information concerning any aspect of this order may be obtained by Information concerning any aspect of this citation may be obtained by contacting Michael Pace, Enforcement Coordinator at (817) 588-5933, contacting Melissa Keller, SEP Coordinator at (512) 239-1768, Texas Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Commission on Environmental Quality, P.O. Box 13087, Austin, Texas Texas 78711-3087. 78711-3087. An agreed order was entered regarding PVR Gas Resources, LLC, TRD-200906027 Docket No. 2009-1225-AIR-E on December 10, 2009 assessing $1,875 LaDonna Castañuela in administrative penalties with $375 deferred. Chief Clerk Information concerning any aspect of this order may be obtained by Texas Commission on Environmental Quality contacting Rebecca Johnson, Enforcement Coordinator at (361) 825­ Filed: December 28, 2009 3420, Texas Commission on Environmental Quality, P.O. Box 13087, ♦ ♦ ♦ Austin, Texas 78711-3087. Notice of a Proposed Amendment and Renewal of a General An agreed order was entered regarding Melrose Water Supply Corpora­ tion, Docket No. 2009-1236-PWS-E on December 10, 2009 assessing Permit Authorizing the Discharge of Hydrostatic Test Water $3,540 in administrative penalties with $708 deferred. The Texas Commission on Environmental Quality (TCEQ) proposes Information concerning any aspect of this order may be obtained by to amend and renew a general permit (Texas Pollutant Discharge Elim­ contacting Epifanio Villarreal, Enforcement Coordinator at (361) 825­ ination System Permit No. TXG670000) authorizing the discharge of 3425, Texas Commission on Environmental Quality, P.O. Box 13087, hydrostatic test water into or adjacent to water in the state. The pro­ Austin, Texas 78711-3087. posed general permit applies to the entire state of Texas. General per­ mits are authorized by Section 26.040 of the Texas Water Code. An agreed order was entered regarding City of Petersburg, Docket No. 2009-1256-MWD-E on December 10, 2009 assessing $2,300 in admin­ PROPOSED GENERAL PERMIT. The Executive Director has pre­ istrative penalties. pared a draft renewal with amendments of an existing general permit that authorizes the discharge of hydrostatic test water. No significant Information concerning any aspect of this order may be obtained degradation of high quality waters is expected and existing uses will be by contacting Merrilee Hupp, Enforcement Coordinator at (512) maintained and protected. The Executive Director proposes to require 239-4490, Texas Commission on Environmental Quality, P.O. Box regulated dischargers to submit a Notice of Intent (NOI) to obtain au­ 13087, Austin, Texas 78711-3087. thorization for some discharges. An agreed order was entered regarding Beechwood Water Supply Cor­ The Executive Director has reviewed this action for consistency with poration, Docket No. 2009-1279-PWS-E on December 10, 2009 as­ the goals and policies of the Texas Coastal Management Program sessing $1,429 in administrative penalties with $285 deferred. (CMP) according to Coastal Coordination Council (CCC) regulations, Information concerning any aspect of this order may be obtained by and has determined that the action is consistent with applicable CMP contacting Epifanio Villarreal, Enforcement Coordinator at (361) 825­ goals and policies. 3425, Texas Commission on Environmental Quality, P.O. Box 13087, A copy of the proposed general permit and fact sheet are available for Austin, Texas 78711-3087. viewing and copying at the TCEQ Office of the Chief Clerk located at An agreed order was entered regarding South Texas Aggregates, Inc., the TCEQ’s Austin office, at 12100 Park 35 Circle, Building F. These Docket No. 2009-1287-AIR-E on December 10, 2009 assessing $2,000 documents are also available at the TCEQ’s sixteen (16) regional of­ in administrative penalties with $400 deferred. fices and on the TCEQ website at http://www.tceq.state.tx.us/permit­ ting/water_quality/wastewater/general/index.html. Information concerning any aspect of this order may be obtained by contacting Trina Grieco, Enforcement Coordinator at (210) 403-4006, PUBLIC COMMENT/PUBLIC MEETING. You may submit public comments or request a public meeting about this proposed general per-

IN ADDITION January 8, 2010 35 TexReg 277 mit. The purpose of a public meeting is to provide the opportunity to 30 DAYS OF THE DATE OF NEWSPAPER PUBLICATION OF THE submit written or oral comment or to ask questions about the proposed NOTICE. general permit. Generally, the TCEQ will hold a public meeting if the INFORMATION SECTION executive director determines that there is a significant degree of public interest in the proposed general permit or if requested by a local legis­ CYPRESS RANCH, LTD., has applied for a renewal of TCEQ Per­ lator. A public meeting is not a contested case hearing. mit No. 14368-001, which authorizes the disposal of treated domestic wastewater at a daily average flow not to exceed 200,000 gallons per Written public comments must be submitted to the Office of the Chief day via subsurface drip irrigation of 45.92 acres of public access land­ Clerk, MC 105, TCEQ, P.O. Box 13087, Austin, TX 78711-3087 scape land. This permit will not authorize a discharge of pollutants into within 30 days from the date this notice is published in the Texas waters in the State. The wastewater treatment facility is located at 5116 Register. Cypress Ranch Boulevard, approximately 6,000 feet northwest of the APPROVAL PROCESS. After the comment period, the Executive Di­ intersection of State Highway 71 and Reimers Ranch Road in Travis rector will consider all the public comments and prepare a written re­ County, Texas 78669. The disposal site is located 5,000 feet southwest sponse. The response will be filed with the TCEQ Office of the Chief of the intersection of State Highway 71 and Hazy Hills Drive in Travis Clerk at least 10 days before the scheduled Commission meeting when County, Texas 78669. the Commission will consider approval of the general permit. The MAVERICK TUBE CORPORATION, which operates Maverick Tube Commission will consider all public comment in making its decision L.L.C. DBA Tenaris Conroe, has applied for a renewal of TPDES Per­ and will either adopt the Executive Director’s response or prepare its mit No. WQ0002365000, which authorizes the discharge of cooling own response. The Commission will issue its written response on the tower blowdown and truck wash water at a daily average flow not to general permit at the same time the Commission issues or denies the exceed 110,800 gallons per day, and storm water runoff at an intermit­ general permit. A copy of any issued general permit and response to tent and flow variable basis. The facility is located on the south side comments will be made available to the public for inspection at the of and adjacent to the Atchison, Topeka, and Santa Fe Railroad, ap­ agency’s Austin and regional offices. A notice of the Commissioner’s proximately 1.0 mile east of the intersection of State Highway 105 and action on the proposed general permit and a copy of its response to Farm-to-Market Road 3083 and approximately 2.0 miles east of the comments will be mailed to each person who made a comment. Also, City of Conroe. a notice of the Commission’s action on the proposed general permit and the text of its response to comments will be published in the Texas BUCKLEY OIL COMPANY, which proposes to operate wholesale dis­ Register. tribution of chemicals and allied products such as industrial and heavy chemicals, has applied for a new permit, proposed Texas Pollutant Dis­ MAILING LISTS. In addition to submitting public comments, you may charge Elimination System (TPDES) Permit No. WQ0004894000, to ask to be placed on a mailing list to receive future public notices mailed authorize the discharge of 1.0 MGD commingled stormwater and prod­ by the Office of the Chief Clerk. You may request to be added to: uct from the bulk storage terminal facility. The facility is located at (1) the mailing list for this specific general permit; (2) the permanent 3807 Southwest Industrial Parkway, Mineral Wells, Texas 76067. mailing list for a specific applicant name and permit number; and/or (3) the permanent mailing list for a specific county. Clearly specify the CITY OF SONORA has applied for a renewal of TPDES Permit No. mailing lists to which you wish to be added and send your request to WQ0010545001, which authorizes the discharge of treated domestic the TCEQ Office of the Chief Clerk at the address above. Unless you wastewater at a daily average flow not to exceed 876,000 gallons per otherwise specify, you will be included only on the mailing list for this day. The facility is located at 1585 Private Road 3451 south of Sonora specific general permit. and south of Dry Devils River, approximately 6,000 feet south and 2,000 feet west of the intersection of U.S. Highway 277 and 290 in INFORMATION. If you need more information about this general per­ Sutton County, Texas 76950. mit or the permitting process, please call the TCEQ Office of Public Assistance, Toll Free, at 1-800-687-4040. General information about THE CITY OF TYLER has applied for a renewal of TPDES Permit No. the TCEQ can be found at our web site at: http://www.tceq.state.tx.us. WQ0010653001, which authorizes the discharge of treated domestic wastewater at an annual average flow not to exceed 13,000,000 gallons Further information may also be obtained by calling the TCEQ’s Water per day. The facility and a 24 acre sludge disposal site are located at Quality Division, Industrial Permits Team, at (512) 239-4671. 14939 County Road 46, approximately 20,000 feet west-northwest of Si desea información en Español, puede llamar al 1-800-687-4040. the intersection of State Highway Loop 323 and U.S. Highway 69 and TRD-200906026 approximately 7 miles northwest of the Smith County Courthouse in the City of Tyler in Smith County, Texas. LaDonna Castañuela Chief Clerk CITY OF BUDA AND GUADALUPE-BLANCO RIVER AUTHOR­ Texas Commission on Environmental Quality ITY have applied for a renewal of TPDES Permit No. WQ0011060001, Filed: December 28, 2009 which authorizes the discharge of treated domestic wastewater at an an­ nual average flow not to exceed 1,500,000 gallons per day. The facility ♦ ♦ ♦ is located at 575 County Road 236, Buda in Hays County, Texas 78610. Notice of Water Quality Applications CITY OF MOUNT VERNON has applied to the Texas Commission on Environmental Quality (TCEQ) for a renewal of TPDES Permit No. The following notices were issued on December 14, 2009 through De­ WQ0011122001, which authorizes the discharge of filter backwash ef­ cember 18, 2009. fluent from a water treatment plant at a daily average flow not to exceed The following require the applicants to publish notice in a newspaper. 20,000 gallons per day. The facility is located between State Highway Public comments, requests for public meetings, or requests for a con­ 37 and 115, approximately 0.5 mile south of Interstate Highway 30 and tested case hearing may be submitted to the Office of the Chief Clerk, below the Mount Vernon Municipal Reservoir Dam in Franklin County, Mail Code 105, P.O. Box 13087, Austin, Texas 78711-3087, WITHIN Texas 75457.

35 TexReg 278 January 8, 2010 Texas Register CITY OF QUEEN CITY has applied for a renewal of TPDES Permit day. The facility will be located along County Road 2526, on the west No. WQ0011225001 which authorizes the discharge of treated domes­ bank of Bearpen Creek, 6,000 feet east of the intersection of State tic wastewater at a daily average flow not to exceed 250,000 gallons Route 35 and County Road 2526 in Hunt County, Texas 75189. per day. The facility is located on the south side of Cypress Creek AQUA UTILITIES, INC. has applied for a renewal of TPDES Permit approximately 1.1 mile east and 0.2 mile north of the intersection of No. WQ0014626001 which authorizes the discharge of treated filter Farm-to-Market Road 96 and U.S. Highway 59 in Cass County, Texas backwash effluent from a water treatment plant at a daily average flow 75572. not to exceed 45,000 gallons per day. The facility is located at 116 CITY OF FAIR OAKS RANCH has applied for a renewal of TCEQ Windmill Drive, 8.5 miles northwest of the City of Floresville just north Permit No. WQ0011867001, which authorizes the disposal of treated of Windmill Drive, and 750 feet east-southeast of the intersection of domestic wastewater at a daily average flow not to exceed 500,000 Windmill Drive and Eagle Creek Ranch Boulevard in Wilson County, gallons per day via surface irrigation of 280 acres of Fair Oaks Ranch Texas 78114. Golf and Country Club land. This permit will not authorize a discharge LBC HOUSTON, L.P., which operates Bayport Terminal, has applied of pollutants into waters in the State. The wastewater treatment facility for a minor amendment to revise the description of the effluent mon­ and disposal site are located on the northern border of Bexar County, itoring location for Outfall 001 to read: At Outfall 001, at the outfall west of Ralph Fair Road and south of Cibolo Creek at the extreme east pipes (3) on the north side of Port Road. The description of the efflu­ side of Fair Oaks Ranch in Bexar County, Texas 78015. ent monitoring location in the existing permit reads: At Outfall 001, AQUA UTILITIES, INC. has applied for a renewal of TPDES Permit the outlet flume for the storm water retention pond on the north side of No. WQ0012563001, which authorizes the discharge of treated do­ Port Road. This permit is reissued pursuant to 30 TAC §305.62(c)(2). mestic wastewater at a daily average flow not to exceed 20,000 gallons The facility is located at 11807 Port Road, on either side of Port Road, per day. The facility is located approximately 1.3 miles west of the approximately 1/2 mile east of the intersection of State Highway 146 intersection of Farm-to-Market Road 729 and Farm-to-Market Road and Port Road, Harris County, Texas. 1969 and approximately 4 miles southwest of the intersection of State 1446 WALLER PARTNERS, LTD. has applied for a new permit, pro­ Highway 49 and Farm-to-Market Road 1969 in Marion County, Texas posed TPDES Permit No. WQ0014944001, to authorize the discharge 78640. of treated domestic wastewater at an annual average flow not to exceed JAMES WAYNE ROBINSON has applied for a renewal of TPDES 1,500,000 gallons per day. The facility will be located approximately 1 Permit No. WQ0012830001 which authorizes the discharge of treated mile northeast of the intersection of Stockdick Road and Farm-to-Mar­ domestic wastewater at a daily average flow not to exceed 6,000 gallons ket Road 362 in Waller County, Texas 77423. per day. The facility is located at the end of Northwinds Street, approx­ If you need more information about these permit applications or the imately 1,590 feet south of the intersection of Northwinds Street and permitting process, please call the TCEQ Office of Public Assistance, Farm-to-Market Road 529 in Harris County, Texas 77041. Toll Free, at 1-800-687-4040. General information about the TCEQ HARMONY INDEPENDENT SCHOOL DISTRICT, has applied for a can be found at our web site at www.tceq.state.tx.us. Si desea informa­ renewal of TPDES Permit No. WQ0013050001, which authorizes the ción en Español, puede llamar al 1-800-687-4040. discharge of treated domestic wastewater at a daily average flow not to TRD-200906024 exceed 30,000 gallons per day. The facility is located approximately LaDonna Castañuela 100 feet north of State Highway 154 on the southwest corner of the Harmony Independent School District campus, 3.9 miles west of the Chief Clerk intersection of State Highway 154 and Farm-to-Market Road 1795, and TexasCommissiononEnvironmental Quality approximately 8 miles west of Gilmer in Upshur County, Texas 75755. Filed: December 28, 2009 HOOKS INDEPENDENT SCHOOL DISTRICT has applied for a re­ ♦ ♦ ♦ newal of TPDES Permit No. WQ0013634001, which authorizes the Notice of Water Quality Applications discharge of treated domestic wastewater at a daily average flow not to exceed 12,500 gallons per day. The facility is located on the east side The following notice was issued on December 21, 2009. of Farm-to-Market Road 560, approximately three (3) miles north of The following require the applicants to publish notice in a newspaper. Interstate Highway 30 in Bowie County, Texas 75561. Public comments, requests for public meetings, or requests for a con­ FALL CREEK UTILITY COMPANY, INC. has applied for a renewal tested case hearing may be submitted to the Office of the Chief Clerk, of TPDES Permit No. WQ0013809001 which authorizes the discharge Mail Code 105, P.O. Box 13087, Austin, Texas 78711-3087, WITHIN of treated domestic wastewater at a daily average flow not to exceed 30 DAYS OF THE DATE OF NEWSPAPER PUBLICATION OF THE 12,000 gallons per day. The facility is located at 7001 Ranch House NOTICE. Road, approximately 7,000 feet west of the intersection of Farm-to- INFORMATION SECTION Market Road 1190 and County Road 303 in Hood County, Texas 76048. CITY OF JONESTOWN has applied for a renewal of TCEQ Permit THE CITY OF BLOOMBURG has applied for a renewal of TPDES No. WQ0014507001, which authorizes the disposal of treated domes­ Permit No. WQ0013930001, which authorizes the discharge of treated tic wastewater at a daily average flow not to exceed 55,000 gallons per domestic wastewater at a daily average flow not to exceed 90,000 gal­ day via drip irrigation of 12.63 acres of non-public access forested land. lons per day. The facility is located approximately 200 feet south of the This permit will not authorize a discharge of pollutants into waters in intersection of Anthony and Louisiana Streets in the City Bloomburg the State. The wastewater treatment facility and disposal site are lo­ in Cass County, Texas 75556. cated 2.4 miles southeast of the intersection of Farm-to-Market Road BEARPEN CREEK has applied to the Texas Commission on En­ 1431 and Old Burnet Road in Travis County, Texas 78645. vironmental Quality (TCEQ) forarenewalofTPDES Permit No. If you need more information about these permit applications or the WQ0014614001, which authorizes the discharge of treated domestic permitting process, please call the TCEQ Office of Public Assistance, wastewater at a daily average flow not to exceed 500,000 gallons per Toll Free, at 1-800-687-4040. General information about the TCEQ

IN ADDITION January 8, 2010 35 TexReg 279 can be found at our web site at www.tceq.state.tx.us. Si desea informa­ affected by the application in a way not common to the general public. ción en Español, puede llamar al 1-800-687-4040. You may also submit any proposed conditions to the requested applica­ TRD-200906053 tion which would satisfy your concerns. Requests for a contested case hearing must be submitted in writing to the TCEQ Office of the Chief LaDonna Castañuela Clerk at the address provided in the information section below. Chief Clerk Texas Commission on Environmental Quality If a hearing request is filed, the Executive Director will not issue the re­ Filed: December 29, 2009 quested permit and may forward the application and hearing request to the TCEQ Commissioners for their consideration at a scheduled Com­ ♦ ♦ ♦ mission meeting. Notice of Water Rights Applications Written hearing requests, public comments or requests for a public meeting should be submitted to the Office of the Chief Clerk, MC 105, Notices issued December 15, 2009 through December 21, 2009 TCEQ, P.O. Box 13087, Austin, TX 78711-3087. For information con­ APPLICATION NO. 12-3486E; Ronnie N. Love and Barbara Ann cerning the hearing process, please contact the Public Interest Counsel, Love, Applicants, 5202 FM 571, Ranger, Texas, 76470, have applied MC 103, at the same address. For additional information, individual for an amendment to Certificate of Adjudication No. 12-3486 to members of the general public may contact the Office of Public As­ extend or delete the expiration date of December 31, 2009 to divert sistance at 1-800-687-4040. General information regarding the TCEQ and use 298 acre-feet of water from four reservoirs on an unnamed can be found at our web site at www.tceq.state.tx.us. Si desea informa­ tributary of Salt Branch and Salt Branch, Brazos River Basin in ción en Español, puede llamar al 1-800-687-4040. Eastland County, Texas. More information on the application and how TRD-200906025 to participate in the permitting process is given below. The application LaDonna Castañuela and a portion of the fees were received on May 14, 2009. Additional information and fees were received on August 17, 2009. The appli­ Chief Clerk cation was accepted for filing and declared administratively complete Texas Commission on Environmental Quality on September 11, 2009. Written public comments and requests for a Filed: December 28, 2009 public meeting should be submitted to the Office of Chief Clerk, at the ♦ ♦ ♦ address provided in the information section below, within 30 days of the date of newspaper publication of the notice. Notice of Water Rights Applications APPLICATION NO. 12419; Rancho Sienna KC, L.P., 3345 Bee Caves Notices issued December 22, 2009 through December 23, 2009. Road, Suite 203, Austin, Texas 75746, Applicant, has applied for a Wa­ APPLICATION NO. 18-2002C; Comanche Trace Ranch & Golf Club ter Use Permit to construct and maintain five dams and reservoirs and L.L.L.P., Applicant, 3074 Bandera Highway, Kerrville, Texas 78028, maintain six existing dams and reservoirs on unnamed tributaries of the has applied to amend Certificate of Adjudication No. 18-2002 to main­ South Fork San Gabriel River and an unnamed tributary of the Middle tain six on-channel reservoirs and one off-channel reservoir and to uti­ Fork San Gabriel River, Brazos River Basin for recreation, flood con­ lize the bed and banks of a segment of an unnamed tributary of Stone trol and sedimentation structure purposes in Williamson County, and Creek, and two separate segments of Stone Creek, Guadalupe River also requests a bed and banks authorization to transport and recirculate Basin, including the reservoirs located therein, to transport the water water between two reservoirs on an unnamed tributary of South Fork to the proposed reservoirs for recreation and recirculation purposes in Gabriel River, Brazos River Basin. More information on the appli­ Kerr County. More information on the application and how to partici­ cation and how to participate in the permitting process is given below. pate in the permitting process is given below. The application was re­ The application and partial fees were received on January 13, 2009, and ceived on October 16, 2008, and additional information and fees were additional information and fees were received on May 28, 2009, and received on February 19, April 7, April 15, May 19, and May 22, 2009. additional information was received on September 8, 2009. The appli­ The application was declared administratively complete and accepted cation was declared administratively complete and filed with the Office for filing with the Office of the Chief Clerk on May 14, 2009. Written of the Chief Clerk on September 23, 2009. Written public comments public comments and requests for a public meeting should be submitted and requests for a public meeting should be submitted to the Office of to the Office of the Chief Clerk, at the address provided in the informa­ Chief Clerk, at the address provided in the information section below, tion section below, within 30 days of the date of newspaper publication within 30 days of the date of newspaper publication of the notice. of the notice. INFORMATION SECTION APPLICATION NO. 12417; Rowe Lane Development LTD., Appli­ To view the complete issued notice, view the notice on our web site at cant, 4421 Rowe Lane, Pflugerville, Texas 78660, has applied for a www.tceq.state.tx.us/comm_exec/cc/pub_notice.html or call the Office Water Use Permit to maintain an existing reservoir and to use the bed of the Chief Clerk at (512) 239-3300 to obtain a copy of the complete and banks of an unnamed tributary of Wilbarger Creek, Colorado River notice. When searching the web site, type in the issued date range Basin, to convey groundwater for subsequent recreation and agricul­ shown at the top of this document to obtain search results. tural purposes in Travis County, Texas. More information on the appli­ cation and how to participate in the permitting process is given below. A public meeting is intended for the taking of public comment, and is The application and partial fees were received on December 31, 2008. not a contested case hearing. Additional information and fees were received on March 23, April 6, The Executive Director can consider approval of an application unless May 5, and July 7, 2009. The application was accepted for filing and a written request for a contested case hearing is filed. To request a con­ declared administratively complete on July 28, 2009. Written public tested case hearing, you must submit the following: (1) your name (or comments and requests for a public meeting should be submitted to the for a group or association, an official representative), mailing address, Office of Chief Clerk, at the address provided in the information sec­ daytime phone number, and fax number, if any: (2) applicant’s name tion below, within 30 days of the date of newspaper publication of the and permit number; (3) the statement "[I/we] request a contested case notice. hearing;" and (4)abriefand specific description of how you would be

35 TexReg 280 January 8, 2010 Texas Register INFORMATION SECTION LaDonna Castañuela To view the complete issued notice, view the notice on our web site at Chief Clerk www.tceq.state.tx.us/comm_exec/cc/pub_notice.html or call the Office Texas Commission on Environmental Quality of the Chief Clerk at (512) 239-3300 to obtain a copy of the complete Filed: December 29, 2009 notice. When searching the web site, type in the issued date range ♦ ♦ ♦ shown at the top of this document to obtain search results. Texas Facilities Commission A public meeting is intended for the taking of public comment, and is not a contested case hearing. Request for Proposals #303-0-10138-A The Executive Director can consider approval of an application unless The Texas Facilities Commission (TFC), on behalf of the Office of the a written request for a contested case hearing is filed. To request a con­ Attorney General (OAG), announces the issuance of Request for Pro­ tested case hearing, you must submit the following: (1) your name (or posals (RFP) #303-0-10138-A. TFC seeks a 5 year lease of approxi­ for a group or association, an official representative), mailing address, mately 10,626 square feet of office space in San Antonio, Bexar, Texas. daytime phone number, and fax number, if any: (2) applicant’s name The deadline for questions is January 18, 2010 and the deadline for and permit number; (3) the statement "[I/we] request a contested case proposals is January 28, 2010 at 3:00 p.m. The award date is March hearing;" and (4) a brief and specific description of how you would be 17, 2010. TFC reserves the right to accept or reject any or all proposals affected by the application in a way not common to the general public. submitted. TFC is under no legal or other obligation to execute a lease You may also submit any proposed conditions to the requested applica­ on the basis of this notice or the distribution of an RFP. Neither this tion which would satisfy your concerns. Requests for a contested case notice nor the RFP commits TFC to pay for any costs incurred prior to hearing must be submitted in writing to the TCEQ Office of the Chief the award of a grant. Clerk at the address provided in the information section below. Parties interested in submitting a proposal may obtain information by If a hearing request is filed, the Executive Director will not issue the re­ contacting TFC Purchaser Sandy Williams at (512) 475-0453. A copy quested permit and may forward the application and hearing request to of the RFP may be downloaded from the Electronic State Business the TCEQ Commissioners for their consideration at a scheduled Com­ Daily at http://esbd.cpa.state.tx.us/bid_show.cfm?bidid=86604. mission meeting. TRD-200906037 Written hearing requests, public comments or requests for a public Kay Molina meeting should be submittedtothe Office of the Chief Clerk, MC 105, General Counsel TCEQ, P.O. Box 13087, Austin, TX 78711-3087. For information con­ cerning the hearing process, please contact the Public Interest Counsel, Texas Facilities Commission MC 103, at the same address. For additional information, individual Filed: December 28, 2009 members of the general public may contact the Office of Public As­ ♦ ♦ ♦ sistance at 1-800-687-4040. General information regarding the TCEQ can be found at our web site at www.tceq.state.tx.us. Si desea informa­ Request for Proposals #303-0-10792 ción en Español, puede llamar al 1-800-687-4040. The Texas Facilities Commission (TFC), on behalf of the Department TRD-200906054 of Assistive and Rehabilitative Services (DARS), announces the is­ LaDonna Castañuela suance of Request for Proposals (RFP) #303-0-10792. TFC seeks a Chief Clerk 10-year lease of approximately 2,341 square feet of office space in TexasCommissiononEnvironmental Quality Katy, Texas. Filed: December 29, 2009 The deadline for questions is January 15, 2010, and the deadline for proposals is January 29, 2010, at 3:00 p.m. The award date is February ♦ ♦ ♦ 26, 2010. TFC reserves the right to accept or reject any or all proposals Proposal for Decision submitted. TFC is under no legal or other obligation to execute a lease on the basis of this notice or the distribution of an RFP. Neither this The State Office of Administrative Hearings issued a Proposal for De­ notice nor the RFP commits TFC to pay for any costs incurred prior to cision and Order to the Texas Commission on Environmental Qual­ the award of a grant. ity on December 17, 2009, in the matter of the Executive Director of the Texas Commission on Environmental Quality, Petitioner v. Ken­ Parties interested in submitting a proposal may obtain information by neth W. Blevins; SOAH Docket No. 582-09-2813; TCEQ Docket No. contacting TFC Purchaser Sandy Williams at (512) 475-0453. A copy 2008-1237-PST-E. The commission will consider the Administrative of the RFP may be downloaded from the Electronic State Business Law Judge’s Proposal for Decision and Order regarding the enforce­ Daily at http://esbd.cpa.state.tx.us/bid_show.cfm?bidid=86531. ment action against Kenneth W. Blevins on a date and time to be de­ TRD-200905996 termined by the Office of the Chief Clerk in Room 201S of Building Kay Molina E, 12100 N. Interstate 35, Austin, Texas. This posting is Notice of General Counsel Opportunity to Comment on the Proposal for Decision and Order. The comment period will end 30 days from date of this publication. Written Texas Facilities Commission public comments should be submitted to the Office of the Chief Clerk, Filed: December 18, 2009 MC-105, TCEQ, P.O. Box 13087, Austin, Texas 78711-3087. If you ♦ ♦ ♦ have any questions or need assistance, please contact Melissa Chao, Office of the Chief Clerk, (512) 239-3300. Request for Proposals #303-0-10888 TRD-200906055 The Texas Facilities Commission (TFC), on behalf of the Department of Assistive and Rehabilitative (DARS), announces the issuance of Re­ quest for Proposals (RFP) #303-0-10888. TFC seeks a 10-year lease

IN ADDITION January 8, 2010 35 TexReg 281 of approximately 3,652 square feet of office space in Rosenberg, Fort its confluence with Dickinson Bayou, same line being the south bound­ Bend County, Texas. ary of Lot 180, Addition D, to the Town of Dickinson, situated at 1110 Tallow Drive, in Dickinson, Texas. The deadline for questions is February 5, 2010, and the deadline for proposals is February 19, 2010, at 3:00 p.m. The award date is March This survey is intended to provide pre-project baseline information re­ 26, 2010. TFC reserves the right to accept or reject any or all proposals lated to an erosion response activity on coastal public lands. An owner submitted. TFC is under no legal or other obligation to execute a lease of uplands adjoining the project area is entitled to continue to exercise on the basis of this notice or the distribution of an RFP. Neither this littoral rights possessed prior to the commencement of the erosion re­ notice nor the RFP commits TFC to pay for any costs incurred prior to sponse activity, but may not claim any additional land as a result of theawardof agrant. accretion, reliction, or avulsion resulting from the erosion response ac­ tivity. Parties interested in submitting a proposal may obtain information by contacting TFC Purchaser Sandy Williams at (512) 475-0453. A copy For a copy of this survey or more information on this matter, contact of the RFP may be downloaded from the Electronic State Business Bill O’Hara, Director of the Survey Division, Texas General Land Of­ Daily at http://esbd.cpa.state.tx.us/bid_show.cfm?bidid=86556. fice by phone at (512) 463-5212, email [email protected], or TRD-200906010 fax (512) 463-5223. Kay Molina TRD-200906007 General Counsel Larry L. Laine Texas Facilities Commission Chief Clerk, Deputy Land Commissioner Filed: December 22, 2009 General Land Office ♦ ♦ ♦ Filed: December 22, 2009 General Land Office ♦ ♦ ♦ Notice of Approval of Coastal Boundary Survey Notice of Approval of Coastal Boundary Survey Pursuant to §33.136 of the Texas Natural Resources Code, notice Pursuant to §33.136 of the Texas Natural Resources Code, notice is is hereby given that Jerry Patterson, Commissioner of the General hereby given that Jerry Patterson, Commissioner of the General Land Land Office, approved a coastal boundary survey, submitted by Sandy Office, approved a coastal boundary survey, submitted by William Freudensprung, Licensed State Land Surveyor, conducted August 25, Merten, Licensed State Land Surveyor, conducted March 19, 2008, 2009, locating the following shoreline boundary: locating the following shoreline boundary: Survey in Matagorda County, a portion of the Texas Gulf Coast shore­ Survey in Galveston County, a portion of the Texas Gulf Coast shore­ line including the eastern shore of Matagorda Bay, same line being line including the north shoreline of Dickinson Bayou, same line being the west boundary line of the Samuel Love Survey, Abstract 59, in the south boundary of Lot 6, Bayou Crest Subdivision, situated at 3921 Matagorda County, situated approximately 1.9 miles northeast of the Rau Drive, in Dickinson, Texas. end of Farm Road 2031, on Matagorda Peninsula. This survey is intended to provide pre-project baseline information re­ This survey is intended to provide pre-project baseline information re­ lated to an erosion response activity on coastal public lands. An owner lated to an erosion response activity on coastal public lands. An owner of uplands adjoining the project area is entitled to continue to exercise of uplands adjoining the project area is entitled to continue to exercise littoral rights possessed prior to the commencement of the erosion re­ littoral rights possessed prior to the commencement of the erosion re­ sponse activity, but may not claim any additional land as a result of sponse activity, but may not claim any additional land as a result of accretion, reliction, or avulsion resulting from the erosion response ac­ accretion, reliction, or avulsion resulting from the erosion response ac­ tivity. tivity. For a copy of this survey or more information on this matter, contact For a copy of this survey or more information on this matter, contact Bill O’Hara, Director of the Survey Division, Texas General Land Of­ Bill O’Hara, Director of the Survey Division, Texas General Land Of­ fice by phone at (512) 463-5212, email [email protected], or fice by phone at (512) 463-5212, email [email protected], or fax (512) 463-5223. fax (512) 463-5223. TRD-200906008 TRD-200906006 Larry L. Laine Larry L. Laine Chief Clerk, Deputy Land Commissioner Chief Clerk, Deputy Land Commissioner General Land Office General Land Office Filed: December 22, 2009 Filed: December 22, 2009 ♦ ♦ ♦ ♦ ♦ ♦ Notice of Proposed Amendments to the Texas Coastal Impact Notice of Approval of Coastal Boundary Survey Assistance Plan Relating to the State of Texas FY 2007 and FY 2008 Allocations Pursuant to §33.136 of the Texas Natural Resources Code, notice is hereby given that Jerry Patterson, Commissioner of the General Land Pursuant to the Federal Coastal Impact Assistance Program, added to Office, approved a coastal boundary survey, submitted by William the Outer Continental Shelf Lands Act by Section 384 of the Energy Merten, Licensed State Land Surveyor, conducted March 19, 2008, Policy Act of 2005 (Pub. L. 109-58), 43 U.S.C. §1356a, the Governor locating the following shoreline boundary: of Texas must solicit local input and provide for public participation in the development of amendments to the Texas Coastal Impact Assis­ Survey in Galveston County, a portion of the Texas Gulf Coast shore­ tance Plan. 43 U.S.C. §1356a(c)(1)(B). Notice is hereby given that the line including a portion of the north shoreline of Magnolia Bayou, at

35 TexReg 282 January 8, 2010 Texas Register Texas General Land Office, on behalf of the Office of the Governor, is 491-1998; or by e-mail to [email protected]. In addition, soliciting public comment regarding proposed amendments to the Plan written comments may be sent by overnight mail or hand delivered to relating to the State of Texas FY 2007 and FY 2008 allocations. All Meisha Scott, HHSC, Rate Analysis, Mail Code H-400, Braker Center, comments must be submitted by February 8, 2010. A copy of the pro­ Building H, 11209 Metric Boulevard, Austin, Texas 78758-4021. posed amendments to the Plan and directions for submitting comments TRD-200906050 may be found at www.glo.state.tx.us/coastal/ciap. Steve Aragon For more information on this matter, contact Kathy Smartt, Coastal Chief Counsel Resources Division, Texas General Land Office, (512) 475-1552. Texas Health and Human Services Commission TRD-200906056 Filed: December 28, 2009 Larry L. Laine ♦ ♦ ♦ Chief Clerk, Deputy Land Commissioner General Land Office Department of State Health Services Filed: December 29, 2009 Extension of the Public Comment Period for the Proposed ♦ ♦ ♦ Rules Concerning the Regulation of Public Interactive Water Features and Fountains in Texas Texas Health and Human Services Commission The Department of State Health Services (department) is extending the Notice of Public Hearing on Proposed Medicaid Payment Rates public comment period for the proposed new rules in 25 Texas Admin­ Hearing. The Texas Health and Human Services Commission will istrative Code §§265.301 - 265.308 concerning the regulation of public conduct a public hearing on January 26, 2010, at 10:30 a.m., to re­ interactive water features and fountains in Texas that were published ceive public comment on proposed rates for Intervener services in the in the Proposed Rules Section of the November 27, 2009, issue of the Deaf-Blind with Multiple Disabilities (DBMD) waiver program, which Texas Register (34 TexReg 8448). The new deadline for submission of is operated by the Texas Department of Aging and Disability Services comments is extended through January 17, 2010, to accept additional (DADS). The hearing will be held in compliance with Human Re­ stakeholder comments. Comments must be received in the department sources Code §32.0282 and Texas Administrative Code (TAC) Title by Midnight on Sunday, January 17, 2010. 1, §355.105(g), which require public notice and a hearing on proposed Comments may be submitted to Paula Anderson, Department of State Medicaid reimbursements. The public hearing will be held in the Lone Health Services - MC 1987, P.O. Box 149347, Austin, Texas 78714­ Star Conference Room of the Health and Human Services Commis­ 9347, Telephone (512) 834-6788, Fax (512) 834-6707, or electronic sion, Braker Center, Building H, located at 11209 Metric Blvd, Austin, mail with the subject stating "Comments for Water Features Rules" to Texas. Entry is through Security at the main entrance of the building, [email protected]. which faces Metric Boulevard. Persons requiring Americans with Dis­ ability Act (ADA) accommodation or auxiliary aids or services should TRD-200906051 contact Meisha Scott by calling (512) 491-1445, at least 72 hours prior Lisa Hernandez to the hearing so appropriate arrangements can be made. General Counsel Department of State Health Services Proposal. HHSC proposes to adopt new rates for Intervener services. Filed: December 29, 2009 The proposed rates will be effective May 1, 2010, and were determined in accordance with the rate setting methodologies listed below under ♦ ♦ ♦ "Methodology and Justification." Texas Department of Insurance Methodology and Justification. Company Licensing The proposed rates were determined in accordance with the rate setting methodologies described at 1 TAC §355.513, Reimbursement Method­ Application for admission to the State of Texas by GUGGENHEIM ology for the Deaf-Blind with Multiple Disabilities Waiver Program. LIFE AND ANNUITY COMPANY, a foreign life company. The home office is in Des Moines, Iowa. These changes are being made in accordance with §531.0973 of the Government Code, which requires a career ladder for persons who pro­ Application for request of AETNA HEALTH INC. to use the assumed vide Intervener services under the DBMD waiver program. The rates name of AETNA BETTER HEALTH, a health maintenance organiza­ must have a structure based on the person’s level of training, education, tion. The home office is in Dallas, Texas. and experience. Any objections must be filed with the Texas Department of Insurance, Briefing Package. Abriefing package describing the proposed pay­ within twenty (20) calendar days from the date of the Texas Regis- ment rates will be available on January 8, 2010. Interested parties ter publication, addressed to the attention of Godwin Ohaechesi, 333 may obtain a copy of the briefing package prior to the hearing by con­ Guadalupe Street, M/C 305-2C, Austin, Texas 78701. tacting Meisha Scott by telephone at (512) 491-1445; by fax at (512) TRD-200906077 491-1998; or by e-mail at [email protected]. The briefing Gene C. Jarmon package also will be available at the public hearing. General Counsel and Chief Clerk Written Comments. Written comments regarding the proposed pay­ Texas Department of Insurance ment rates may be submitted in lieu of, or in addition to, oral testi­ Filed: December 30, 2009 mony until 5:00 p.m. the day of the hearing. Written comments may be sent by U.S. mail to the attention of Meisha Scott, Health and Hu­ ♦ ♦ ♦ man Services Commission, Rate Analysis, Mail Code H-400, P.O. Box Third Party Administrator Applications 85200, Austin, Texas 78708-5200; by fax to Meisha Scott at (512)

IN ADDITION January 8, 2010 35 TexReg 283 The following third party administrator (TPA) applications have been Application of QBE AMERICAS, INC, a foreign third party adminis­ filed with the Texas Department of Insurance and are under considera­ trator. The home office is WILMINGTON, DELAWARE. tion. Application of PATRIOT RISK SERVICES, INC, a foreign third party Application of ALTERNATIVE RISK SOLUTIONS, INC., a for­ administrator. The home office is WILMINGTON, DELAWARE. eign third party administrator. The home office is MANDEVILLE, Any objections must be filed within 20 days after this notice is LOUISIANA. published in the Texas Register, addressed to the attention of David Application of OMNI FINANCIAL GROUP, INC., a foreign third Moskowitz, MC 305-2E, 333 Guadalupe, Austin, Texas 78701. party administrator. The home office is BROCKPORT, NEW YORK. TRD-200906082 Application of GBC BENEFITS, LTD., a domestic third party admin­ Gene C. Jarmon istrator. The home office is FORT WORTH, TEXAS. General Counsel and Chief Clerk Application of COVENTRY HEALTH CARE WORKERS COMPEN­ Texas Department of Insurance SATION, INC., a foreign third party administrator. The home office is Filed: December 30, 2009 TRENTON, NEW JERSEY. ♦ ♦ ♦ Application of INTERNATIONAL BENEFITS ADMINISTRATORS, Texas Lottery Commission LLC, a foreign third party administrator. The home office is GARDEN CITY, NEW YORK. Instant Game Number 1237 "Red, White & Blue Cash" Application of STARR GLOBAL ACCIDENT & HEALTH INSUR­ 1.0 Name and Style of Game. ANCE AGENCY, LLC, a foreign third party administrator. The home A. The name of Instant Game No. 1237 is "RED, WHITE & BLUE office is WILMINGTON, DELAWARE. CASH". The play style is "row, column or diagonal". Any objections must be filed within 20 days after this notice is 1.1 Price of Instant Ticket. published in the Texas Register, addressed to the attention of David Moskowitz, MC 305-2E, 333 Guadalupe, Austin, Texas 78701. A. Tickets for Instant Game No. 1237 shall be $1.00 per ticket. TRD-200906076 1.2 Definitions in Instant Game No. 1237. Gene C. Jarmon A. Display Printing - That area of the instant game ticket outside of the General Counsel and Chief Clerk area where the Overprint and Play Symbols appear. Texas Department of Insurance Filed: December 30, 2009 B. Latex Overprint - The removable scratch-off covering over the Play Symbols on the front of the ticket. ♦ ♦ ♦ C. Play Symbol - The printed data under the latex on the front of the Third Party Administrator Applications instant ticket that is used to determine eligibility for a prize. Each Play Symbol is printed in Symbol font in black ink in positive except for The following third party administrator (TPA) applications have been dual-image games. The possible black play symbols are: 1, 2, 3, 4, filed with the Texas Department of Insurance and are under considera­ 5, 6, 7, 8, 9, EAGLE SYMBOL, $1.00, $2.00, $4.00, $5.00, $10.00, tion. $20.00, $40.00, $50.00, $100, $500 and $1,000. Application of DISCOVERY BENEFITS, INC., a foreign third party D. Play Symbol Caption - the printed material appearing below each administrator. The home office is FARGO, NORTH DAKOTA. Play Symbol which explains the Play Symbol. One caption appears Application of ALLIED EYECARE, LLC, a foreign third party admin­ under each Play Symbol and is printed in caption font in black ink istrator. The home office is CLEARWATER, FLORIDA. in positive. The Play Symbol Caption which corresponds with and verifies each Play Symbol is as follows: Application of PMA MANAGEMENT CORP., a foreign third party administrator. The home office is PHILADELPHIA, PENNSYLVA­ NIA. Application of KSPV INSURANCE ADMINISTRATORS, INC., a foreign third party administrator. The home office is WILMINGTON, DELAWARE.

35 TexReg 284 January 8, 2010 Texas Register E. Serial Number -A unique 14 (fourteen) digit number appearing un­ of these Game Procedures, the State Lottery Act (Texas Government der the latex scratch-off covering on the front of the ticket. There will Code, Chapter 466), and applicable rules adopted by the Texas Lottery be a four (4)-digit "security number" which will be individually boxed pursuant to the State Lottery Act and referenced in 16 TAC Chapter and randomly placed within the number. The remaining ten (10) digits 401. of the Serial Number are the Validation Number. The Serial Number M. Ticket or Instant Game Ticket, or Instant Ticket -A Texas Lottery is positioned beneath the bottom row of play data in the scratched-off "RED, WHITE & BLUE CASH" Instant Game No. 1237 ticket. play area. The Serial Number is for validation purposes and cannot be used to play the game. The format will be: 00000000000000. 2.0 Determination of Prize Winners. The determination of prize win­ ners is subject to the general ticket validation requirements set forth in F. Low-Tier Prize -A prize of $1.00, $2.00, $4.00, $5.00, $10.00 or Texas Lottery Rule 401.302, Instant Game Rules, these Game Proce­ $20.00. dures, and the requirements set out on the back of each instant ticket. G. Mid-Tier Prize -A prize of $40.00, $50.00, $100 or $500. A prize winner in the "RED, WHITE & BLUE CASH" Instant Game is determined once the latex on the ticket is scratched off to expose 10 H. High-Tier Prize -A prize of $1,000. (ten) Play Symbols. If a player reveals 3 "eagle" play symbols in any I. Bar Code -A 24 (twenty-four) character interleaved two (2) of five one row, column or diagonal, the player wins the PRIZE shown. No (5) bar code which will include a four (4) digit game ID, the seven portion of the display printing nor any extraneous matter whatsoever (7) digit pack number, the three (3) digit ticket number and the ten (10) shall be usable or playable as a part of the Instant Game. digit Validation Number. The bar code appears on the back of the ticket. 2.1 Instant Ticket Validation Requirements. J. Pack-Ticket Number -A 14 (fourteen) digit number consisting of the A. To be a valid Instant Game ticket, all of the following requirements four (4) digit game number (1237), a seven (7) digit pack number, and must be met: athree(3)d igit ticket number. Ticket numbers start with 001 and end with 150 within each pack. The format will be: 1237-0000001-001. 1. Exactly 10 (ten) Play Symbols must appear under the latex overprint on the front portion of the ticket; K. Pack -A pack of "RED, WHITE & BLUE CASH" Instant Game tickets contains 150 tickets, packed in plastic shrink-wrapping and fan- 2. Each of the Play Symbols must have a Play Symbol Caption under­ folded in pages of five (5). Tickets 001 to 005 will be on the top page; neath, unless specified, and each Play Symbol must agree with its Play tickets 146 to 150 will be on the last page with backs exposed. Tick­ Symbol Caption; ets 001 will be folded over so the front of ticket 001 and 010 will be 3. Each of the Play Symbols must be present in its entirety and be fully exposed. legible; L. Non-Winning Ticket -A ticket which is not programmed to be a winning ticket or a ticket that does not meet all of the requirements

IN ADDITION January 8, 2010 35 TexReg 285 4. Each of the Play Symbols must be printed in black ink except for A. Consecutive non-winning tickets will not have identical play data, dual image games; spot for spot. 5. The ticket shall be intact; B. No ticket will contain three or more of a kind other than the EAGLE symbol. 6. The Serial Number, Retailer Validation Code and Pack-Ticket Num­ ber must be present in their entirety and be fully legible; 2.3 Procedure for Claiming Prizes. 7. The Serial Number must correspond, using the Texas Lottery’s A. To claim a "RED, WHITE & BLUE CASH" Instant Game prize of codes, to the Play Symbols on the ticket; $1.00, $2.00, $4.00, $5.00, $10.00, $20.00, $40.00, $50.00, $100 or $500, a claimant shall sign the back of the ticket in the space desig­ 8. The ticket must not have a hole punched through it, be mutilated, nated on the ticket and present the winning ticket to any Texas Lot­ altered, unreadable, reconstituted or tampered with in any manner; tery Retailer. The Texas Lottery Retailer shall verify the claim and, 9. The ticket must not be counterfeit in whole or in part; if valid, and upon presentation of proper identification, if appropriate, make payment of the amount due the claimant and physically void the 10. The ticket must have been issued by the Texas Lottery in an autho­ ticket; provided that the Texas Lottery Retailer may, but is not required, rized manner; to pay a $40.00, $50.00, $100 or $500 ticket. In the event the Texas Lot­ 11. The ticket must not have been stolen, nor appear on any list of tery Retailer cannot verify the claim, the Texas Lottery Retailer shall omitted tickets or non-activated tickets on file at the Texas Lottery; provide the claimant with a claim form and instruct the claimant on how to file a claim with the Texas Lottery. If the claim is validated by the 12. The Play Symbols, Serial Number, Retailer Validation Code and Texas Lottery, a check shall be forwarded to the claimant in the amount Pack-Ticket Number must be right side up and not reversed in any man­ due. In the event the claim is not validated, the claim shall be denied ner; and the claimant shall be notified promptly. A claimant may also claim 13. The ticket must be complete and not miscut, and have exactly 10 any of the above prizes under the procedure described in Section 2.3.B (ten) Play Symbols under the latex overprint on the front portion of and Section 2.3.C of these Game Procedures. the ticket, exactly one Serial Number, exactly one Retailer Validation B. To claim a "RED, WHITE & BLUE CASH" Instant Game prize Code, and exactly one Pack-Ticket Number on the ticket; of $1,000, the claimant must sign the winning ticket and present it at 14. The Serial Number of an apparent winning ticket shall correspond one of the Texas Lottery’s Claim Centers. If the claim is validated by with the Texas Lottery’s Serial Numbers for winning tickets, and a the Texas Lottery, payment will be made to the bearer of the validated ticket with that Serial Number shall not have been paid previously; winning ticket for that prize upon presentation of proper identification. When paying a prize of $600 or more, the Texas Lottery shall file the 15. The ticket must not be blank or partially blank, misregistered, de­ appropriate income reporting form with the Internal Revenue Service fective or printed or produced in error; (IRS) and shall withhold federal income tax at a rate set by the IRS 16. Each of the 10 (ten) Play Symbols must be exactly one of those if required. In the event that the claim is not validated by the Texas described in Section 1.2.C of these Game Procedures. Lottery, the claim shall be denied and the claimant shall be notified promptly. 17. Each of the 10 (ten) Play Symbols on the ticket must be printed in the Symbol font and must correspond precisely to the artwork on C. As an alternative method of claiming a "RED, WHITE & BLUE file at the Texas Lottery; the ticket Serial Numbers must be printed in CASH" Instant Game prize, the claimant must sign the winning ticket, the Serial font and must correspond precisely to the artwork on file at thoroughly complete a claim form, and mail both to: Texas Lottery the Texas Lottery; and the Pack-Ticket Number must be printed in the Commission, Post Office Box 16600, Austin, Texas 78761-6600. The Pack-Ticket Number font and must correspond precisely to the artwork risk of sending a ticket remains with the claimant. In the event that the on file at the Texas Lottery; claim is not validated by the Texas Lottery, the claim shall be denied and the claimant shall be notified promptly. 18. The display printing on the ticket must be regular in every respect and correspond precisely to the artwork on file at the Texas Lottery; D. Prior to payment by the Texas Lottery of any prize, the Texas Lottery and shalldeductasufficient amount from the winnings of a person who has been finally determined to be: 19. The ticket must have been received by the Texas Lottery by appli­ cable deadlines. 1. delinquent in the payment of a tax or other money collected by the Comptroller, the Texas Workforce Commission, or Texas Alcoholic B. The ticket must pass all additional validation tests provided for in Beverage Commission; these Game Procedures, the Texas Lottery’s Rules governing the award of prizes of the amount to be validated, and any confidential validation 2. delinquent in making child support payments administered or col­ and security tests of the Texas Lottery. lected by the Attorney General; or C. Any Instant Game ticket not passing all of the validation require­ 3. delinquent in reimbursing the Texas Health and Human Services ments is void and ineligible for any prize and shall not be paid. How­ Commission for a benefit granted in error under the food stamp pro­ ever, the Executive Director may, solely at the Executive Director’s gram or the program of financial assistance under Chapter 31, Human discretion, refund the retail sales price of the ticket. In the event a de­ Resources Code; fective ticket is purchased, the only responsibility or liability of the 4. in default on a loan made under Chapter 52, Education Code; or Texas Lottery shall be to replace the defective ticket with another un­ played ticket in that Instant Game (or a ticket of equivalent sales price 5. in default on a loan guaranteed under Chapter 57, Education Code. from any other current Instant Lottery game) or refund the retail sales E. If a person is indebted or owes delinquent taxes to the State, other price of the ticket, solely at the Executive Director’s discretion. than those specified in the preceding paragraph, the winnings of a per­ 2.2 Programmed Game Parameters. son shall be withheld until the debt or taxes are paid.

35 TexReg 286 January 8, 2010 Texas Register 2.4 Allowance for Delay of Payment. The Texas Lottery may delay claimed within that period, and in the manner specified in these Game payment of the prize pending a final determination by the Executive Procedures and on the back of each ticket, shall be forfeited. Director, under any of the following circumstances: 2.8 Disclaimer. The number of prizes in a game is approximate based A. if a dispute occurs, or it appears likely that a dispute may occur, on the number of tickets ordered. The number of actual prizes available regarding the prize; in a game may vary based on number of tickets manufactured, testing, distribution, sales and number of prizes claimed. An Instant Game B. if there is any question regarding the identity of the claimant; ticket may continue to be sold even when all the top prizes have been C. if there is any question regarding the validity of the ticket presented claimed. for payment; or 3.0 Instant Ticket Ownership. D. if the claim is subject to any deduction from the payment otherwise A. Until such time as a signature is placed upon the back portion of an due, as described in Section 2.3.D of these Game Procedures. No lia­ Instant Game ticket in the space designated, a ticket shall be owned by bility for interest for any delay shall accrue to the benefit of the claimant the physical possessor of said ticket. When a signature is placed on the pending payment of the claim. back of the ticket in the space designated, the player whose signature 2.5 Payment of Prizes to Persons Under 18. If a person under the age appears in that area shall be the owner of the ticket and shall be entitled of 18 years is entitled to a cash prize of less than $600 from the "RED, to any prize attributable thereto. Notwithstanding any name or names WHITE & BLUE CASH" Instant Game, the Texas Lottery shall deliver submitted on a claim form, the Executive Director shall make payment to an adult member of the minor’s family or the minor’s guardian a to the player whose signature appears on the back of the ticket in the check or warrant in the amount of the prize payable to the order of the space designated. If more than one name appears on the back of the minor. ticket, the Executive Director will require that one of those players whose name appears thereon be designated by such players to receive 2.6 If a person under the age of 18 years is entitled to a cash prize payment. of more than $600 from the "RED, WHITE & BLUE CASH" Instant Game, the Texas Lottery shall deposit the amount of the prize in a cus­ B. The Texas Lottery shall not be responsible for lost or stolen Instant todial bank account, with an adult member of the minor’s family or the Game tickets and shall not be required to pay on a lost or stolen Instant minor’s guardian serving as custodian for the minor. Game ticket. 2.7 Instant Ticket Claim Period. All Instant Game prizes must be 4.0 Number and Value of Instant Prizes. There will be approximately claimed within 180 days following the end of the Instant Game or 8,160,000 tickets in the Instant Game No. 1237. The approximate within the applicable time period for certain eligible military person­ number and value of prizes in the game are as follows: nel as set forth in Texas Government Code §466.408. Any prize not

A. The actual number of tickets in the game may be increased or de­ without advance notice, at which point no further tickets in that game creased at the sole discretion of the Texas Lottery Commission. may be sold. The determination of the closing date and reasons for closing the game will be made in accordance with the instant game 5.0 End of the Instant Game. The Executive Director may, at any time, closing procedures and the Instant Game Rules, 16 TAC §401.302(j). announce a closing date (end date) for the Instant Game No. 1237

IN ADDITION January 8, 2010 35 TexReg 287 6.0 Governing Law. In purchasing an Instant Game ticket, the player 1.2 Definitions in Instant Game No. 1265. agrees to comply with, and abide by, these Game Procedures for In­ A. Display Printing - That area of the instant game ticket outside of the stant Game No. 1237, the State Lottery Act (Texas Government Code, area where the Overprint and Play Symbols appear. Chapter 466), applicable rules adopted by the Texas Lottery pursuant to the State Lottery Act and referenced in 16 TAC Chapter 401, and all B. Latex Overprint - The removable scratch-off covering over the Play final decisions of the Executive Director. Symbols on the front of the ticket. TRD-200906028 C. Play Symbol - The printed data under the latex on the front of the Kimberly L. Kiplin instant ticket that is used to determine eligibility for a prize. Each Play General Counsel Symbol is printed in Symbol font in black ink in positive except for Texas Lottery Commission dual-image games. The possible black play symbols are: 1, 2, 3, 4, Filed: December 28, 2009 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, STAR SYM­ BOL, $2.00, $4.00, $5.00, $10.00, $20.00, $50.00, $100, $1,000 and ♦ ♦ ♦ $20,000. Instant Game Number 1265 "Veterans Winnings" D. Play Symbol Caption - The printed material appearing below each Play Symbol which explains the Play Symbol. One caption appears 1.0 Name and Style of Game. under each Play Symbol and is printed in caption font in black ink A. The name of Instant Game No. 1265 is "VETERANS WINNINGS". in positive. The Play Symbol Caption which corresponds with and The play style is "key number match with doubler". verifies each Play Symbol is as follows: 1.1 Price of Instant Ticket. A. Tickets for Instant Game No. 1265 shall be $2.00 per ticket.

35 TexReg 288 January 8, 2010 Texas Register E. Serial Number -A unique 14 (fourteen) digit number appearing un­ a three (3) digit ticket number. Ticket numbers start with 001 and end der the latex scratch-off covering on the front of the ticket. There will with 125 within each pack. The format will be: 1265-0000001-001. be a four (4)-digit "security number" which will be individually boxed K. Pack -A pack of "VETERANS WINNINGS" Instant Game tickets and randomly placed within the number. The remaining ten (10) digits contains 125 tickets, packed in plastic shrink-wrapping and fanfolded of the Serial Number are the Validation Number. The Serial Number in pages of two (2). One ticket will be folded over to expose a front is positioned beneath the bottom row of play data in the scratched-off and back of one ticket on each pack. Please note the books will be in play area. The Serial Number is for validation purposes and cannot be an A, B, C and D configuration. used to play the game. The format will be: 00000000000000. L. Non-Winning Ticket -A ticket which is not programmed to be a F. Low-Tier Prize -A prize of $2.00, $4.00, $5.00, $10.00 or $20.00. winning ticket or a ticket that does not meet all of the requirements G. Mid-Tier Prize -A prize of $50.00 or $100. of these Game Procedures, the State Lottery Act (Texas Government Code, Chapter 466), and applicable rules adopted by the Texas Lottery H. High-Tier Prize -A prize of $1,000 or $20,000. pursuant to the State Lottery Act and referenced in 16 TAC Chapter I. Bar Code -A 24 (twenty-four) character interleaved two (2) of five 401. (5) bar code which will include a four (4) digit game ID, the seven M. Ticket or Instant Game Ticket, or Instant Ticket -A Texas Lottery (7) digit pack number, the three (3) digit ticket number and the ten (10) "VETERANS WINNINGS" Instant Game No. 1265 ticket. digit Validation Number. The bar code appears on the back of the ticket. 2.0 Determination of Prize Winners. The determination of prize win­ J. Pack-Ticket Number -A 14 (fourteen) digit number consisting of the ners is subject to the general ticket validation requirements set forth in four (4) digit game number (1265), a seven (7) digit pack number, and

IN ADDITION January 8, 2010 35 TexReg 289 Texas Lottery Rule 401.302, Instant Game Rules, these Game Proce­ Pack-Ticket Number font and must correspond precisely to the artwork dures, and the requirements set out on the back of each instant ticket. on file at the Texas Lottery; A prize winner in the "VETERANS WINNINGS" Instant Game is 18. The display printing on the ticket must be regular in every respect determined once the latex on the ticket is scratched off to expose 22 and correspond precisely to the artwork on file at the Texas Lottery; (twenty-two) Play Symbols. If a player matches any of YOUR NUM­ and BERS play symbols to either of the WINNING NUMBERS play sym­ bols, the player wins the PRIZE shown for that number. If a player re­ 19. The ticket must have been received by the Texas Lottery by appli­ veals a "star" play symbol, the player wins DOUBLE the PRIZE shown cable deadlines. for that symbol. No portion of the display printing nor any extraneous B. The ticket must pass all additional validation tests provided for in matter whatsoever shall be usable or playable as a part of the Instant these Game Procedures, the Texas Lottery’s Rules governing the award Game. of prizes of the amount to be validated, and any confidential validation 2.1 Instant Ticket Validation Requirements. and security tests of the Texas Lottery. A. To be a valid Instant Game ticket, all of the following requirements C. Any Instant Game ticket not passing all of the validation require­ must be met: ments is void and ineligible for any prize and shall not be paid. How­ ever, the Executive Director may, solely at the Executive Director’s 1. Exactly 22 (twenty-two) Play Symbols must appear under the latex discretion, refund the retail sales price of the ticket. In the event a de­ overprint on the front portion of the ticket; fective ticket is purchased, the only responsibility or liability of the 2. Each of the Play Symbols must have a Play Symbol Caption under­ Texas Lottery shall be to replace the defective ticket with another un­ neath, unless specified, and each Play Symbol must agree with its Play played ticket in that Instant Game (or a ticket of equivalent sales price Symbol Caption; from any other current Instant Lottery game) or refund the retail sales price of the ticket, solely at the Executive Director’s discretion. 3. Each of the Play Symbols must be present in its entirety and be fully legible; 2.2 Programmed Game Parameters. 4. Each of the Play Symbols must be printed in black ink except for A. Consecutive non-winning tickets in a pack will not have identical dual image games; play data, spot for spot. 5. The ticket shall be intact; B. The "STAR" (doubler) play symbol will only appear on intended winning tickets and only as dictated by the prize structure. 6. The Serial Number, Retailer Validation Code and Pack-Ticket Num­ ber must be present in their entirety and be fully legible; C. No more than two (2) matching non-winning prize symbols will appear on a ticket. 7. The Serial Number must correspond, using the Texas Lottery’s codes, to the Play Symbols on the ticket; D. No duplicate WINNING NUMBERS play symbols on a ticket. 8. The ticket must not have a hole punched through it, be mutilated, E. No duplicate non-winning YOUR NUMBERS play symbols on a altered, unreadable, reconstituted or tampered with in any manner; ticket. 9. The ticket must not be counterfeit in whole or in part; F. Non-winning prize symbols will never be the same as the winning prize symbol(s). 10. The ticket must have been issued by the Texas Lottery in an autho­ rized manner; G. No prize amount in a non-winning spot will correspond with the YOUR NUMBERS play symbol (i.e. 5 and $5). 11. The ticket must not have been stolen, nor appear on any list of omitted tickets or non-activated tickets on file at the Texas Lottery; H. The top prize symbol will appear on every ticket unless otherwise restricted. 12. The Play Symbols, Serial Number, Retailer Validation Code and Pack-Ticket Number must be right side up and not reversed in any man­ 2.3 Procedure for Claiming Prizes. ner; A. To claim a "VETERANS WINNINGS" Instant Game prize of $2.00, 13. The ticket must be complete and not miscut, and have exactly $4.00, $5.00, $10.00, $20.00, $50.00 or $100, a claimant shall sign 22 (twenty-two) Play Symbols under the latex overprint on the front the back of the ticket in the space designated on the ticket and present portion of the ticket, exactly one Serial Number, exactly one Retailer the winning ticket to any Texas Lottery Retailer. The Texas Lottery Validation Code, and exactly one Pack-Ticket Number on the ticket; Retailer shall verify the claim and, if valid, and upon presentation of proper identification, if appropriate, make payment of the amount due 14. The Serial Number of an apparent winning ticket shall correspond the claimant and physically void the ticket; provided that the Texas with the Texas Lottery’s Serial Numbers for winning tickets, and a Lottery Retailer may, but is not required, to pay a $50.00 or $100 ticket. ticket with that Serial Number shall not have been paid previously; In the event the Texas Lottery Retailer cannot verify the claim, the 15. The ticket must not be blank or partially blank, misregistered, de­ Texas Lottery Retailer shall provide the claimant with a claim form and fective or printed or produced in error; instruct the claimant on how to file a claim with the Texas Lottery. If the claim is validated by the Texas Lottery, a check shall be forwarded to 16. Each of the 22 (twenty-two) Play Symbols must be exactly one of the claimant in the amount due. In the event the claim is not validated, those described in Section 1.2.C of these Game Procedures; the claim shall be denied and the claimant shall be notified promptly. 17. Each of the 22 (twenty-two) Play Symbols on the ticket must be A claimant may also claim any of the above prizes under the procedure printed in the Symbol font and must correspond precisely to the artwork described in Section 2.3.B and Section 2.3.C of these Game Procedures. on file at the Texas Lottery; the ticket Serial Numbers must be printed B. To claim a "VETERANS WINNINGS" Instant Game prize of in the Serial font and must correspond precisely to the artwork on file at $1,000 or $20,000, the claimant must sign the winning ticket and the Texas Lottery; and the Pack-Ticket Number must be printed in the present it at one of the Texas Lottery’s Claim Centers. If the claim is

35 TexReg 290 January 8, 2010 Texas Register validated by the Texas Lottery, payment will be made to the bearer of 2.5 Payment of Prizes to Persons Under 18. If a person under the age the validated winning ticket for that prize upon presentation of proper of 18 years is entitled to a cash prize of less than $600 from the "VET­ identification. When paying a prize of $600 or more, the Texas Lottery ERANS WINNINGS" Instant Game, the Texas Lottery shall deliver to shall file the appropriate income reporting form with the Internal an adult member of the minor’s family or the minor’s guardian a check Revenue Service (IRS) and shall withhold federal income tax at a rate or warrant in the amount of the prize payable to the order of the minor. set by the IRS if required. In the event that the claim is not validated 2.6 If a person under the age of 18 years is entitled to a cash prize of by the Texas Lottery, the claim shall be denied and the claimant shall more than $600 from the "VETERANS WINNINGS" Instant Game, be notified promptly. the Texas Lottery shall deposit the amount of the prize in a custodial C. As an alternative method of claiming a "VETERANS WINNINGS" bank account, with an adult member of the minor’s family or the mi­ Instant Game prize, the claimant must sign the winning ticket, thor­ nor’s guardian serving as custodian for the minor. oughly complete a claim form, and mail both to: Texas Lottery Com­ 2.7 Instant Ticket Claim Period. All Instant Game prizes must be mission, Post Office Box 16600, Austin, Texas 78761-6600. The risk claimed within 180 days following the end of the Instant Game or of sending a ticket remains with the claimant. In the event that the within the applicable time period for certain eligible military person­ claim is not validated by the Texas Lottery, the claim shall be denied nel as set forth in Texas Government Code §466.408. Any prize not and the claimant shall be notified promptly. claimed within that period, and in the manner specified in these Game D. Prior to payment by the Texas Lottery of any prize, the Texas Lottery Procedures and on the back of each ticket, shall be forfeited. shalldeductasufficient amount from the winnings of a person who has 2.8 Disclaimer. The number of prizes in a game is approximate based been finally determined to be: on the number of tickets ordered. The number of actual prizes available 1. delinquent in the payment of a tax or other money collected by the in a game may vary based on number of tickets manufactured, testing, Comptroller, the Texas Workforce Commission, or Texas Alcoholic distribution, sales and number of prizes claimed. An Instant Game Beverage Commission; ticket may continue to be sold even when all the top prizes have been claimed. 2. delinquent in making child support payments administered or col­ lected by the Attorney General; 3.0 Instant Ticket Ownership. 3. delinquent in reimbursing the Texas Health and Human Services A. Until such time as a signature is placed upon the back portion of an Commission for a benefit granted in error under the food stamp pro­ Instant Game ticket in the space designated, a ticket shall be owned by gram or the program of financial assistance under Chapter 31, Human the physical possessor of said ticket. When a signature is placed on the Resources Code; back of the ticket in the space designated, the player whose signature appears in that area shall be the owner of the ticket and shall be entitled 4. in default on a loan made under Chapter 52, Education Code; or to any prize attributable thereto. Notwithstanding any name or names 5. in default on a loan guaranteed under Chapter 57, Education Code. submitted on a claim form, the Executive Director shall make payment to the player whose signature appears on the back of the ticket in the E. If a person is indebted or owes delinquent taxes to the State, other space designated. If more than one name appears on the back of the than those specified in the preceding paragraph, the winnings of a per­ ticket, the Executive Director will require that one of those players son shall be withheld until the debt or taxes are paid. whose name appears thereon be designated by such players to receive 2.4 Allowance for Delay of Payment. The Texas Lottery may delay payment. payment of the prize pending a final determination by the Executive B. The Texas Lottery shall not be responsible for lost or stolen Instant Director, under any of the following circumstances: Game tickets and shall not be required to pay on a lost or stolen Instant A. if a dispute occurs, or it appears likely that a dispute may occur, Game ticket. regarding the prize; 4.0 Number and Value of Instant Prizes. There will be approximately B. if there is any question regarding the identity of the claimant; 8,040,000 tickets in the Instant Game No. 1265. The approximate number and value of prizes in the game are as follows: C. if there is any question regarding the validity of the ticket presented for payment; or D. if the claim is subject to any deduction from the payment otherwise due, as described in Section 2.3.D of these Game Procedures. No lia­ bility for interest for any delay shall accrue to the benefit of the claimant pending payment of the claim.

IN ADDITION January 8, 2010 35 TexReg 291 A. The actual number of tickets in the game may be increased or de­ flicts of interest identified. All things being equal, the Board will give creased at the sole discretion of the Texas Lottery Commission. first consideration to firms whose principal place of business is located in Texas. 5.0 End of the Instant Game. The Executive Director may, at any time, announce a closing date (end date) for the Instant Game No. 1265 Proposals must be submitted by 5:00 p.m., CST, January 25, 2010. without advance notice, at which point no further tickets in that game TRD-200906078 may be sold. The determination of the closing date and reasons for Susan K. Durso closing the game will be made in accordance with the instant game closing procedures and the Instant Game Rules, 16 TAC §401.302(j). General Counsel TexasPublicFinance Authority 6.0 Governing Law. In purchasing an Instant Game ticket, the player Filed: December 30, 2009 agrees to comply with, and abide by, these Game Procedures for In­ stant Game No. 1265, the State Lottery Act (Texas Government Code, ♦ ♦ ♦ Chapter 466), applicable rules adopted by the Texas Lottery pursuant Public Utility Commission of Texas to the State Lottery Act and referenced in 16 TAC Chapter 401, and all final decisions of the Executive Director. Announcement of Application for Amendment to a TRD-200906029 State-Issued Certificate of Franchise Authority Kimberly L. Kiplin The Public Utility Commission of Texas received an application on General Counsel December 17, 2009, for an amendment to a state-issued certificate of Texas Lottery Commission franchise authority (CFA), pursuant to §§66.001 - 66.016 of the Public Filed: December 28, 2009 Utility Regulatory Act (PURA). ♦ ♦ ♦ Project Title and Number: Application of Etan Industries, Inc. d/b/a CMA Communications for an Amendment to a State-Issued Certifi­ Texas Public Finance Authority cate of Franchise Authority; to Add Village of Bailey’s Prairie, Project Notice of Request for Proposals Number 37789 before the Public Utility Commission of Texas. The Texas Public Finance Authority announces its Request for Pro­ The requested amendment is to expand the service area footprint to posals seeking qualified entities interested in providing financial include the city limits of Village of Bailey’s Prairie, Texas. advisory services to assist the Authority in its work as issuer of debt Information on the application may be obtained by contacting the Pub­ for the remainder of the biennium FY2010-2011, and potentially lic Utility Commission of Texas by mail at P.O. Box 13326, Austin, for the FY2012-2013 biennium. A copy of the RFP will be avail­ Texas 78711-3326, or by phone at (512) 936-7120 or toll free at (888) able on the Authority’s website on Monday, January 11, 2010, at 782-8477. Hearing and speech-impaired individuals with text tele­ www.tpfa.state.tx.us/RFP and on the Texas Electronic State Business phone (TTY) may contact the commission at (512) 936-7136 or use Daily at /esbd.cpa.state.tx.us the same day. Interested firms may also Relay Texas (toll free) (800) 735-2989. All inquiries should reference contact the agency directly by email at: [email protected]. Project Number 37789. The Board will make its selection based on demonstrated competence, TRD-200906002 experience, knowledge and qualifications, as well as the reasonable­ ness of the proposed fee and any conflicts of interest or potential con­

35 TexReg 292 January 8, 2010 Texas Register Adriana A. Gonzales Announcement of Application for an Amendment to its Rules Coordinator State-Issued Certificate of Franchise Authority Public Utility Commission of Texas The Public Utility Commission of Texas received an application on Filed: December 21, 2009 December 22, 2009, for a state-issued certificate of franchise authority ♦ ♦ ♦ (CFA), pursuant to §§66.001 - 66.016 of the Public Utility Regulatory Act (PURA). Announcement of Application for Amendment to a State-Issued Certificate of Franchise Authority Project Title and Number: Application of Time Warner Cable for an amendment to its State-Issued Certificate of Franchise Authority, The Public Utility Commission of Texas received an application on Project Number 37815 before the Public Utility Commission of Texas. December 18, 2009, for an amendment to a state-issued certificate of The requested CFA service area includes San Diego, Texas. franchise authority (CFA), pursuant to §§66.001 - 66.016 of the Public Utility Regulatory Act (PURA). Information on the application may be obtained by contacting the Pub­ lic Utility Commission of Texas by mail at P.O. Box 13326, Austin, Project Title and Number: Application of Time Warner Cable to Texas 78711-3326, or by phone at (512) 936-7120 or toll free at (888) Amend its State-Issued Certificate of Franchise Authority, Project 782-8477. Hearing and speech-impaired individuals with text tele­ Number 37793 before the Public Utility Commission of Texas. phone (TTY) may contact the commission at (512) 936-7136 or use The requested amendment is to expand the service area footprint (SAF) Relay Texas (toll free) (800) 735-2989. All inquiries should reference to include municipal boundaries of Palm Valley, Texas. Project Number 37815. Information on the application may be obtained by contacting the Pub­ TRD-200906057 lic Utility Commission of Texas by mail at P.O. Box 13326, Austin, Adriana A. Gonzales Texas 78711-3326, or by phone at (512) 936-7120 or toll free at (888) Rules Coordinator 782-8477. Hearing and speech-impaired individuals with text tele­ Public Utility Commission of Texas phone (TTY) may contact the commission at (512) 936-7136 or use Filed: December 29, 2009 Relay Texas (toll free) (800) 735-2989. All inquiries should reference Project Number 37793. ♦ ♦ ♦ TRD-200906003 Announcement of Application for an Amendment to its Adriana A. Gonzales State-Issued Certificate of Franchise Authority Rules Coordinator The Public Utility Commission of Texas received an application on Public Utility Commission of Texas December 22, 2009, for a state-issued certificate of franchise authority Filed: December 21, 2009 (CFA), pursuant to §§66.001 - 66.016 of the Public Utility Regulatory ♦ ♦ ♦ Act (PURA). Announcement of Application for an Amendment to its Project Title and Number: Application of Time Warner Cable for State-Issued Certificate of Franchise Authority an amendment to its State-Issued Certificate of Franchise Authority, Project Number 37816 before the Public Utility Commission of Texas. The Public Utility Commission of Texas received an application on The requested CFA service area includes Highland Village, Texas. December 21, 2009, for a state-issued certificate of franchise authority (CFA), pursuant to §§66.001 - 66.016 of the Public Utility Regulatory Information on the application may be obtained by contacting the Pub­ Act (PURA). lic Utility Commission of Texas by mail at P.O. Box 13326, Austin, Texas 78711-3326, or by phone at (512) 936-7120 or toll free at (888) Project Title and Number: Application of Cebridge Acquisition, LP 782-8477. Hearing and speech-impaired individuals with text tele­ d/b/a Suddenlink Communication for an Amendment to its State-Issued phone (TTY) may contact the commission at (512) 936-7136 or use Certificate of Franchise Authority, Project Number 37811 before the Relay Texas (toll free) (800) 735-2989. All inquiries should reference Public Utility Commission of Texas. Project Number 37816. The requested CFA service area includes Union Grove, Texas. TRD-200906058 Information on the application may be obtained by contacting the Pub­ Adriana A. Gonzales lic Utility Commission of Texas by mail at P.O. Box 13326, Austin, Rules Coordinator Texas 78711-3326, or by phone at (512) 936-7120 or toll free at (888) Public Utility Commission of Texas 782-8477. Hearing and speech-impaired individuals with text tele­ Filed: December 29, 2009 phone (TTY) may contact the commission at (512) 936-7136 or use Relay Texas (toll free) (800) 735-2989. All inquiries should reference ♦ ♦ ♦ Project Number 37811. Notice of Application for Approval of Accelerated TRD-200906048 Depreciation Rate Adriana A. Gonzales Notice is given to the public of the filing with the Public Utility Com­ Rules Coordinator mission of Texas of an application on December 18, 2009, for approval Public Utility Commissionof Texas of an accelerated depreciation rate pursuant to §52.252 and §53.056 of Filed: December 28, 2009 the Public Utility Regulatory Act, Texas Utility Code Annotated (Ver­ ♦ ♦ ♦ non 2007 and Supplement 2009). A summary of the application fol­ lows.

IN ADDITION January 8, 2010 35 TexReg 293 Docket Title and Number: Application of West Plains Telecommuni­ Adriana A. Gonzales cations, Inc. for Approval of Accelerated Depreciation Rate Pursuant Rules Coordinator to P.U.C. Substantive Rule §26.206(g); Docket Number 37803. Public Utility Commission of Texas The Application: West Plains Telecommunications, Inc. filedanap­ Filed: December 28, 2009 plication for approval of an accelerated depreciation rate for Account ♦ ♦ ♦ 2212.000 - COE-Soft Switch Equipment and Account 2212.100 - COE- Soft Switch Equipment Spares, effective January 1, 2009. West Plains Notice of Application for Designation as an Eligible Telecommunications, Inc.’s management found that the soft switch’s Telecommunications Carrier operational deficiencies and lack of technical support from the vendor, who has declared bankruptcy, necessitate the early retirement of the Notice is given to the public of an application filed with the Public Util­ equipment. ity Commission of Texas on December 15, 2009, for designation as an eligible telecommunications carrier (ETC) pursuant to P.U.C. Substan­ Persons who wish to intervene in the proceeding or comment upon the tive Rule §26.418. action sought should contact the Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711­ Docket Title and Number: Application of Nexus Communications, Inc. 3326, or by phone at (512) 936-7120 or toll-free at (888) 782-8477. for Designation as an Eligible Telecommunications Carrier for the Lim­ Hearing and speech-impaired individuals with text telephones (TTY) ited Purpose of Offering Lifeline and Link-Up to Qualified Households may contact the commission at (512) 936-7136. All correspondence Pursuant to 47 U.S.C. §214(e) and P.U.C. Substantive Rule §26.418. should refer to Docket Number 37803. Docket Number 37779. TRD-200906045 The Application: Nexus is a provider of Commercial Mobile Radio Adriana A. Gonzales Service (CMRS) licensed by the Federal Communications Commis­ sion, and currently provides pre-paid cellular services using the name Rules Coordinator ReachOut Wireless. Nexus seeks ETC designation solely to provide Public Utility Commission of Texas Lifeline and Link-Up service via wireless modality to qualifying Texas Filed: December 28, 2009 consumers and will not seek funds from the Federal Universal Service ♦ ♦ ♦ Fund for providing service to high cost areas. Pursuant to 47 U.S.C. §214(e), the commission, either upon its own motion or upon request, Notice of Application for Approval of Revised Depreciation shall designate qualifying common carriers as ETCs for service areas Rates, an Accelerated Amortization Rate, and Notification of set forth by the commission. Nexus seeks ETC designation in AT&T New Depreciation Rate Texas and Verizon Southwest wire centers. A list of those wire centers is included with the application as Attachment A. The company holds Notice is given to the public of the filing with the Public Utility Com­ Service Provider Certificate of Operating Authority Number 60698. mission of Texas of an application on December 18, 2009, for approval of revised depreciation rates, an accelerated amortization rate, and no­ Persons wishing to intervene or comment on the action sought should tification of new depreciation rate pursuant to §52.252 and §53.056 of contact the Public Utility Commission of Texas by mail at P.O. Box the Public Utility Regulatory Act, Texas Utility Code Annotated (Ver­ 13326, Austin, Texas 78711-3326, or by phone at (512) 936-7120 or non 2007 and Supplement 2009). A summary of the application fol­ toll-free at (888) 782-8477. The deadline for intervention in this pro­ lows. ceeding is January 21, 2010. Hearing and speech-impaired individ­ uals with text telephone (TTY) may contact the commission at (512) Docket Title and Number: Application of Nortex Communications for 936-7136 or use Relay Texas (toll-free) (800) 735-2989. All comments Approval of Revised Depreciation Rates, an Accelerated Amortization should reference Docket Number 37779. Rate, and Notification of New Depreciation Rate Pursuant to P.U.C. Substantive Rule §26.206, Docket Number 37804. TRD-200905977 Adriana A. Gonzales The Application: Nortex Communications filedanapplicationto(1) Rules Coordinator revise depreciation rates for Account 2123.080 - Official Communica­ tions Equipment, Accounts 2124.153 and 2124.154 - General Purpose Public Utility Commission of Texas Computers, Account 2212.000 - Digital Electronic Switch, Account Filed: December 18, 2009 2421.280 - Aerial Cable, and Account 2423.300 - Buried Metallic Ca­ ♦ ♦ ♦ ble; (2) adopt an accelerated amortization rate to write off digital switch equipment in Account 2212.150 - Digital Switch; and (3) adopt a new Notice of Application to Amend Certificated Service Area depreciation rate for new soft switch equipment. Nortex proposed an Boundaries effective date of January 1, 2009. Notice is given to the public of the filing with the Public Utility Com­ Persons who wish to intervene in the proceeding or comment upon the mission of Texas of an application filed on December 15, 2009, for action sought should contact the Public Utility Commission of Texas, an amendment to certificated service area boundaries within LaSalle 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711­ County, Texas. 3326, or by phone at (512) 936-7120 or toll-free at (888) 782-8477. Docket Style and Number: Joint Application of Medina Electric Co­ Hearing and speech-impaired individuals with text telephones (TTY) operative, Inc. and AEP Texas Central Company to Amend a Certifi­ may contact the commission at (512) 936-7136. All correspondence cate of Convenience and Necessity for Service Area Boundaries within should refer to Docket Number 37804. LaSalle County. Docket Number 37777. TRD-200906047 The Application: The proposed boundary change is for release of ter­ ritory from AEP Texas Central Company (TCC) to Medina Electric Cooperative, Inc. (MEC) so that MEC can provide service to two landowners. MEC’s existing facilities are better positioned to provide

35 TexReg 294 January 8, 2010 Texas Register a shorter and more desirable route. There are currently no consumers and Houston. The STIP also contains information on federally funded in the affected area of the proposed boundary change. projects in rural areas that are not included in any MPO area, and other statewide programs as listed. Persons wishing to comment on the action sought or intervene should contact the Public Utility Commission of Texas no later than January Title 23, United States Code, §134 and §135 require each designated 8, 2010 by mail at P.O. Box 13326, Austin, Texas 78711-3326, or by MPO and the state, respectively, to develop a TIP as a condition to phone at (512) 936-7120 or toll-free at 1-888-782-8477. Hearing and securing federal funds for transportation projects under Title 23 or the speech-impaired individuals with text telephone (TTY) may contact Federal Transit Act (49 USC §5301, et seq.). the commission at (512) 936-7136 or use Relay Texas (toll-free) 1-800­ Section 134(j) requires an MPO to develop its TIP in cooperation with 735-2989. All comments should reference Docket Number 37777. the state and affected transportation operators, to provide an opportu­ TRD-200905976 nity for interested parties to participate in the development of the pro­ Adriana A. Gonzales gram, and further requires the TIP to be updated at least once every four Rules Coordinator years and approved by the MPO and the Governor or Governor’s de­ Public Utility Commission of Texas signee. Section 135(g) requires the state to develop a STIP for all areas Filed: December 18, 2009 of the state in cooperation with the designated MPOs and, with respect to non-metropolitan areas, in consultation with affected local officials, ♦ ♦ ♦ and further requires an opportunity for participation by interested par­ Public Notice of Request for Comment on Strawman Rule ties as well as approval by the Governor or the Governor’s designee. In accordance with 43 TAC §15.8(d), a copy of the proposed January The staff of the Public Utility Commission of Texas (commission) re­ out of cycle 2010 Revisions to the FY 2008-2011 STIP will be avail­ quest comments regarding a strawman that would amend P.U.C. Sub­ able for review, at the time the notice of hearing is published, at each stantive Rule §25.173, relating to Goal for Renewable Energy, §25.109, of the department’s district offices, at the department’s Transportation relating to Registration of Power Generation Companies and Self-Gen­ Planning and Programming Division offices located in Building 118, erators, and §25.211, relating to Interconnection of On-Site Distributed Second Floor, 118 East Riverside Drive, Austin, Texas, and on the de­ Generation. partment’s website at: Project Number 35792, PUC Rulemaking Relating to the Goal for Re- www.txdot.gov newable Energy, has been assigned to this proceeding. Personswishingtoreviewt he January out of cycle 2010 Revisions to The commission staff strawman rule will be filed in Central Records the FY 2008-2011 STIP may do so online or contact the Transportation under Project No. 35792 by December 22, 2009. The commission re­ Planning and Programming Division at (512) 486-5033. quests interested persons file written comments on this strawman rule. Persons wishing to speak at the hearing may register in advance by Responses may be filed by submitting 16 copies to the commission’s notifying Lori Morel, Transportation Planning and Programming Di­ Filing Clerk, Public Utility Commission of Texas, 1701 North Con­ vision, at (512) 486-5033 not later than Monday, February 1, 2010, or gress Avenue, P.O. Box 13326, Austin, Texas 78711-3326 before 3:00 they may register at the hearing location beginning at 9:00 a.m. on PM CST, Friday, January 29, 2010. All responses should reference the day of the hearing. Speakers will be taken in the order registered. Project No. 35792. Any interested person may appear and offer comments or testimony, Questions concerning the comments or this notice should be referred either orally or in writing; however, questioning of witnesses will be to David Smithson, Competitive Services Division, (512)-936-7159. reserved exclusively to the presiding authority as may be necessary to Hearing and speech-impaired individuals with text telephones (TTY) ensure a complete record. While any persons with pertinent comments may contact the commission at (512) 936-7136. or testimony will be granted an opportunity to present them during the TRD-200905997 course of the hearing, the presiding authority reserves the right to re­ strict testimony in terms of time or repetitive content. Groups, orga­ Adriana A. Gonzales nizations, or associations should be represented by only one speaker. Rules Coordinator Speakers are requested to refrain from repeating previously presented Public Utility Commission of Texas testimony. Persons with disabilities who have special communication Filed: December 18, 2009 or accommodation needs or who plan to attend the hearing may contact ♦ ♦ ♦ the Government and Public Affairs Division, at 125 East 11th Street, Austin, Texas 78701-2483, (512) 463-9957. Requests should be made Texas Department of Transportation no later than three days prior to the hearing. Every reasonable effort Public Hearing Notice - Statewide Transportation Improvement will be made to accommodate the needs. Program Further information on the FY 2008-2011 STIP may be obtained from Lori Morel, Transportation Planning and Programming Division, 118 The Texas Department of Transportation (department) will hold a pub­ East Riverside Drive, Austin, Texas 78704, (512) 486-5033. Interested lic hearing on Tuesday, February 2, 2010 at 10:00 a.m. at the Texas parties who are unable to attend the hearing may submit comments Department of Transportation, 200 East Riverside Drive, Room 1A-2, to James L. Randall, P.E., Director, Transportation Planning and Pro­ Austin, Texas to receive public comments on the January out of cycle gramming Division, 118 East Riverside Drive, Austin, Texas 78704. 2010 Revisions to the Statewide Transportation Improvement Program In order to be considered, all written comments must be received at the (STIP) for FY 2008-2011. The STIP reflects the federally funded trans­ Transportation Planning and Programming office by Monday, Febru­ portation projects in the FY 2008-2011 Transportation Improvement ary 22, 2010 at 4:00 p.m. Programs (TIPs) for each Metropolitan Planning Organization (MPO) in the state. The STIP includes both state and federally funded projects TRD-200905999 for the nonattainment areas of Beaumont, Dallas-Fort Worth, El Paso,

IN ADDITION January 8, 2010 35 TexReg 295 Joanne Wright Joanne Wright Deputy General Counsel Deputy General Counsel Texas Department of Transportation Texas Department of Transportation Filed: December 21, 2009 Filed: December 22, 2009 ♦ ♦ ♦ ♦ ♦ ♦ Public Notice: Request for Comment on Draft Priorities for The University of North Texas System Authorization of the Surface Transportation Program Invitation for Consultants to Provide Proposal for Consulting On September 25, 2009, the Texas Department of Transportation (de­ Services Related to Executive Compensation Program partment) published a proposal soliciting public comments regarding Development the development of the state’s priorities pertaining to authorization of a Pursuant to the provisions of Texas Government Code, Chapter 2254, new federal surface transportation program. The department now pub­ the University of North Texas System ("UNT System") extends this in­ lishes notice that the draft priorities and principles stemming from that vitation (Invitation) to qualified and experienced consultants interested process are available for public review and comment through January in providing the consulting services described in this Invitation to the 15, 2010. University of North Texas System. In the near future, Texas will face severe funding shortfalls in address­ Scope of Work: ing the state’s existing and planned highway system. Funding to the department comes from several sources including: state motor fuels The selected consultant will assist UNT System and the Board of Re­ taxes, state motor vehicle registration fees, the issuance of bonds, and gent’s Compensation and Evaluation Committee in recommending a federal reimbursements. Federal reimbursements come to the state as long-term compensation structure to ensure that the UNT System com­ a percentage of what Texas pays in federal motor fuels taxes. Fed­ pensates senior executives at a rate that is competitive with the mar­ eral funding is apportioned to states through periodic Congressional ketplace. This recommendation will include an explicit compensation authorizations of the surface transportation program. The most re­ philosophy, a clear expression of organizational goals, a well-defined cent multi-year federal authorization program expired on September annual executive goal setting process, tools and processes to support 30, 2009, and is being continued through a series of continuing resolu­ annual performance evaluation for each position and distinct defini­ tions enacted by Congress. It is anticipated that the actual legislation tions, standards, and goals for regular compensation. Additionally, the authorizing the program will not pass until well into this next federal selected consultant will conduct a comprehensive compensation survey fiscal year. Congress will be working to identify the transportation poli­ of identified executive positions within the UNT System. The selected cies and funding levels that Texas will operate within during what will consultant will develop new tools to obtain and maintain accurate mar­ likely be the next several-year authorization period. ket compensation information and produce a compensation survey re­ port upon conclusion of the survey. If required by the Board of Re­ The department presented a draft series of priorities to the Texas Trans­ gents, the selected consultant, in consultation with an identified exec­ portation Commission at its December 16, 2009 workshop. The draft utive, will refine UNT System’s list of competitor institutions, those principles for authorization of the federal program focus on the trans­ institution’s comparable positions, and market benchmarks. portation, project delivery, and funding policies that the department, in conjunction with those who provided input during the development Request for Proposal phase of this process, believes to be an important part of authoriza­ The Request for Proposal provides a complete description of all nec­ tion of the surface transportation program. The department is seeking essary information related to this notice. The complete Request for final public comments on these draft principles and priorities. The in­ Proposal can be found on the University of North Texas website at the formation gathered through this process will assist the department in following web address: informing members of Congress on the issues of importance to Texas for authorization of a new surface transportation program. The draft http://pps.unt.edu principles and priorities may be viewed at: How to Respond; Submittal Deadline: ftp://ftp.dot.state.tx.us/pub/txdot-info/library/reports/gov/gpa/sur­ To respond to this invitation, consultants must submit the information face_circulation.pdf. requested in the formal Request for Proposal found on the University The department will accept only written comments and they should of North Texas website listed above. be addressed to Jefferson Grimes, Deputy Director, Government and Selection Criteria: Public Affairs Division, Texas Department of Transportation, 125 East 11th Street, Austin, Texas 78701. Comments also may be provided The successful offer must be submitted in response to this invitation no via e-mail at the following address: [email protected] or sent via later than the submittal deadline and will be the offer that is the most facsimile transmission to (512) 463-9389. The deadline for receipt of advantageous to UNT System at UNT System’s sole discretion. Re­ comments is 5:00 p.m., January 15, 2010. These instructions will also sponders are encouraged to propose services that offer the maximum be available on the department’s website: benefit to UNT System. Proposals should address (1) services offered to the System, (2) total overall cost of the proposal, and (3) project http://www.txdot.gov/public_involvement/public_comment/legisla­ management expertise of the individuals who will be assigned to the tive_input.htm. project. All responders should describe all educational, state, local, The department will not respond individually to comments received and any other discount that may apply to services proposed. The suc­ pursuant to this notice, however, it may contact individuals to verify or cessful consultant will be required to enter into a contract acceptable seek clarification of their comments. to UNT System. Further information is included in the formal Request TRD-200906004 for Proposal. Finding by Chancellor:

35 TexReg 296 January 8, 2010 Texas Register The Chancellor of UNT System finds that the consulting services are 2729). The contract was further amended to include evaluation of the necessary because UNT System does not have the specialized experi­ ENLACE Project beginning on August 27, 2007, and terminating on ence or the staff resources to support existing and proposed programs July 1, 2012, with a total amount not to exceed $24,950, inclusive of of UNT System and its member institutions. UNT System believes that travel and per diem, in the November 30, 2007, issue of the Texas Reg- such expert consulting services will be cost effective as they will pro­ ister (32 TexReg 8978). The contract was amended to include evalua­ vide expertise in the requirements for the development of a program tion of the project "Consortium for Excellence in Rural Teacher Prepa­ whereby executives are compensated in a cost effective manner and at ration (CERT-Prep)" beginning on October 1, 2007 and terminating on a rate that is competitive in the marketplace. September 30, 2008, with an automatic renewal of one year, pending availability of grant funding and successful completion of evaluation Questions: activities for the initial contract period. This amendment was made Questions concerning this invitation should be directed to: Carrie for a total not to exceed $17,000, exclusive of travel and per diem in Stoeckert, Assistant Director of Purchasing and Payment Services, the December 21, 2007, issue of the Texas Register (32 TexReg 9870). University of North Texas, via e-mail [email protected] or phone (940) The contract was further amended to provide additional CERT-Prep 565-3203. UNT System may in its sole discretion respond in writing services in amount not to exceed $19,000 for a contract period of Oc­ to questions concerning this invitation. Only UNT System’s responses tober 1, 2007 through September 30, 2009 in the December 5, 2008, made by formal written addenda to this invitation shall be binding. issue of the Texas Register (33 TexReg 10110). This contract was fur­ Oral or other written interpretations or clarifications shall be without ther amended to provide additional External Evaluator services for an legal effect. amount not to exceed $7,500 for an extended contract termination date TRD-200906011 of March 31, 2010 in the October 23, 2009, issue of the Texas Register (34 TexReg 7428). Notice is hereby given that this contract is further Carrie Stoeckert amended to provide additional CERT-Prep services for an amount not Director of PPS to exceed $12,000 for an extended contract termination date of Septem­ University of North Texas System ber 30, 2010. Filed: December 22, 2009 Documents, films, recording, or reports of intangible results may be ♦ ♦ ♦ presented by the outside consultant. Services will be on an as needed Stephen F. Austin State University basis. Notice of Consultant Contract Amendment All inquiries should be directed to Stephen F. Austin State University, P.O. Box 13017, SFA Station, Nacogdoches, Texas 75962; phone (936) In compliance with the provisions of Chapter 2254, Subchapter B, 468-2904. Texas Government Code, Stephen F. Austin State University furnishes TRD-200906032 this notice of amendment of the University’s contract with consul­ tant Dr. Marianne Schmudde, 1230 Wright Circle #307, Celebration, R. Yvette Clark Florida 34747. The original contract was in an amount not to exceed General Counsel $45,000, and the Notice of Award was published in the December 29, Stephen F. Austin State University 2006, issue of the Texas Register (31 TexReg 10986). The contract Filed: December 28, 2009 was amended in an amount not to exceed $13,000, excluding travel and per diem in the May 11, 2007, issue of the Texas Register (32 TexReg ♦ ♦ ♦

IN ADDITION January 8, 2010 35 TexReg 297 How to Use the Texas Register through the Internet. For website subscription information, call the Information Available: The 14 sections of the Texas Texas Register at (512) 463-5561. Register represent various facets of state government. Documents contained within them include: Texas Administrative Code Governor - Appointments, executive orders, and The Texas Administrative Code (TAC) is the compilation of proclamations. all final state agency rules published in the Texas Register. Attorney General - summaries of requests for opinions, Following its effective date, a rule is entered into the Texas opinions, and open records decisions. Administrative Code. Emergency rules, which may be adopted by Secretary of State - opinions based on the election laws. an agency on an interim basis, are not codified within the TAC. Texas Ethics Commission - summaries of requests for opinions and opinions. The TAC volumes are arranged into Titles and Parts (using Emergency Rules- sections adopted by state agencies on an Arabic numerals). The Titles are broad subject categories into emergency basis. which the agencies are grouped as a matter of convenience. Each Proposed Rules - sections proposed for adoption. Part represents an individual state agency. Withdrawn Rules - sections withdrawn by state agencies from consideration for adoption, or automatically withdrawn by The complete TAC is available through the Secretary of the Texas Register six months after the proposal publication date. State’s website at http://www.sos.state.tx.us/tac. The following Adopted Rules - sections adopted following public comment companies also provide complete copies of the TAC: Lexis-Nexis period. (800-356-6548), and West Publishing Company (800-328-9352). Texas Department of Insurance Exempt Filings - notices of actions taken by the Texas Department of Insurance pursuant to The Titles of the TAC, and their respective Title numbers are: Chapter 5, Subchapter L of the Insurance Code. 1. Administration Texas Department of Banking - opinions and exempt rules 4. Agriculture filed by the Texas Department of Banking. 7. Banking and Securities Tables and Graphics - graphic material from the proposed, 10. Community Development emergency and adopted sections. 13. Cultural Resources Transferred Rules- notice that the Legislature has 16. Economic Regulation transferred rules within the Texas Administrative Code from one 19. Education state agency to another, or directed the Secretary of State to 22. Examining Boards remove the rules of an abolished agency. 25. Health Services In Addition - miscellaneous information required to be 28. Insurance published by statute or provided as a public service. 30. Environmental Quality Review of Agency Rules - notices of state agency rules 31. Natural Resources and Conservation review. 34. Public Finance Specific explanation on the contents of each section can be 37. Public Safety and Corrections found on the beginning page of the section. The division also 40. Social Services and Assistance publishes cumulative quarterly and annual indexes to aid in 43. Transportation researching material published. How to Cite: Under the TAC scheme, each section is designated How to Cite: Material published in the Texas Register is by a TAC number. For example in the citation 1 TAC §27.15: 1 referenced by citing the volume in which the document appears, indicates the title under which the agency appears in the Texas the words “TexReg” and the beginning page number on which that Administrative Code; TAC stands for the Texas Administrative document was published. For example, a document published on Code; §27.15 is the section number of the rule (27 indicates that page 2402 of Volume 34 (2009) is cited as follows: 34 TexReg the section is under Chapter 27 of Title 1; 15 represents the 2402. individual section within the chapter).

In order that readers may cite material more easily, page numbers How to update: To find out if a rule has changed since the are now written as citations. Example: on page 2 in the lower-left publication of the current supplement to the Texas Administrative hand corner of the page, would be written “34 TexReg 2 issue Code, please look at the Index of Rules. The Index of Rules is date,” while on the opposite page, page 3, in the lower right-hand published cumulatively in the blue-cover quarterly indexes to the corner, would be written “issue date 34 TexReg 3.” Texas Register. If a rule has changed during the time period covered by the table, the rule’s TAC number will be printed with How to Research: The public is invited to research rules and the Texas Register page number and a notation indicating the type information of interest between 8 a.m. and 5 p.m. weekdays at the of filing (emergency, proposed, withdrawn, or adopted) as shown Texas Register office, Room 245, James Earl Rudder Building, in the following example. 1019 Brazos, Austin. Material can be found using Texas Register indexes, the Texas Administrative Code, section numbers, or TRD TITLE 1. ADMINISTRATION number. Part 4. Office of the Secretary of State Chapter 91. Texas Register Both the Texas Register and the Texas Administrative Code are 40 TAC §3.704...... 950 (P) available online through the Internet. The address is: http://www.sos.state.tx.us. The Register is available in an .html The Table of TAC Titles Affected is cumulative for each version as well as a .pdf (portable document format) version volume of the Texas Register (calendar year).