MEMORANDUM OPINION AND ORDER
This lawsuit challenging the Texas Department of Housing and Community Affairs’ (“TDHCA’s”) allocation of Low Income Housing Tax Credits (“LIHTC”) in the Dallas metropolitan area requires the court to decide whether plaintiff has proved that TDHCA intentionally discriminated based on race, in violation of the Equal Protection Clause of the Fourteenth Amendment and 42 U.S.C. § 1982, or that TDHCA’s allocation decisions had a disparate racial impact, in violation of
I
A
This is an action by plaintiff The Inclusive Communities Project, Inc. (“ICP”) against defendants TDHCA and its Executive Director and board members in their official capacities under the FHA, the Fourteenth Amendment (actionable under 42 U.S.C. § 1983), and 42 U.S.C. § 1982. ICP is a non-profit organization that seeks racial and socioeconomic integration in the Dallas metropolitan area. In particular, ICP assists low-income, predominately African-American families who are eligible for the Dallas Housing Authority’s Section 8 Housing Choice Voucher program (“Section 8”) in finding affordable housing in predominately Caucasian,
This lawsuit arises from TDHCA’s allocation of LIHTC in the Dallas metropolitan area. Under § 42 of the Internal Revenue Code (“I.R.C.”), the government provides tax credits that a state distributes to developers through a designated state agency. See id. TDHCA is the agency designated by the Texas Legislature to administer the program in Texas. See Tex. Gov’t Code Ann. § 2306.053(b)(10) (West 2008) (“The department may ... administer federal housing, community affairs, or community development programs, including the low income housing tax credit program.”). Developers apply to TDHCA for tax credits, which can be sold to finance construction of a housing project.
TDHCA issues two types of LIHTC: 4% tax credits
The 4% tax credit, on the other hand, is a non-competitive program, available to applicants on a year-round basis. See P. Ex. 1 at 19, 46. The federal government provides states private activity bonds, see I.R.C. §§ 42 and 142, that are distributed in Texas by several issuers, including TDHCA. Developers can apply to TDHCA for a 4% tax credit to be allocated in addition to a bond, particularly the multifamily housing bond. In awarding the tax credit, TDHCA “reviews the application for threshold, eligibility and then the development is underwritten.” P.Ex. 1 at 20; see also Tex. Gov’t Code Ann. § 2306.67021 (West 2001) (providing that, with the exception of § 2306.6703 regarding eligibility, subchapter 2306 DD (i.e., from § 2306.6701-6723) “does not apply to the allocation of housing tax credits to developments financed through the private activity bond program”). In particular, applications for the 4% tax credit are not subject to scoring under the selection criteria. See P.Ex. 125 at 64 (the 2008 QAP, for example, relieves 4% tax credit applications or “Tax-Exempt Bond Developments” from certain sections of the QAP, including § 50.9(1) regarding “Selection Criteria.”); see-also Tr. 4:12 (“[4% applications] do[][not] go through a competitive scoring model where the Board makes a decision on a particular group of projects at any given time.”) If a developer seeks a multifamily bond allocation from TDHCA, it applies to TDHCA, which re
B
ICP alleges that, despite federal and state laws governing the QAP, TDHCA is permitted under Texas law to exercise discretion in making final decisions regarding the allocation of both 4% and 9% tax credits. It maintains that TDHCA uses this discretion to make housing and financial assistance for housing construction unavailable because of race, in violation of §§ 3604(a) and 3605(a) of the FHA. ICP also alleges that TDHCA has used race as a factor in allocating tax credits under the LIHTC program, in violation of the Fourteenth Amendment and of § 1982, which requires that defendants give all United States citizens the same right to lease property as Caucasian citizens.
In a prior opinion in this case, the court addressed the parties’ cross-motions for summary judgment. See Inclusive Cmtys. Project, Inc. v. Tex. Dep’t of Hous. & Cmty. Affairs,
Because ICP had met this burden, defendants were obligated with respect to ICP’s FHA claim (which was limited to a disparate impact claim, id. at 498 n. 10) to prove that TDHCA’s actions were in furtherance of a compelling government interest that was bona fide and legitimate, and that there were no less discriminatory alternatives. Id. at 503. The court held that defendants had not met their summary judgment burden of establishing that TDHCA’s actions furthered a compelling government interest. In particular, they did not establish that TDHCA could not comply with both I.R.C. § 42 and the FHA. Id. at 504.
Concerning ICP’s intentional discrimination claims under § 1982 and the Fourteenth Amendment (§ 1983), the court held that defendants had met their burden of producing evidence of a nondiscriminatory reason for their actions, id. at 506, but that ICP had “presented sufficient evidence that defendants’ proffered reason is pretextual to require a trial.” Id.
The parties presented this case in a bench trial that commenced on August 29, 2011 and concluded on September 1, 2011. The court granted the parties’ requests that they present their closing arguments by written submissions. The final submissions were filed on December 21, 2011.
The court considers together ICP’s claims for intentional discrimination under the Equal Protection Clause of the Fourteenth Amendment (actionable under § 1983) and § 1982.
A
The Equal Protection Clause of the Fourteenth Amendment “prohibits intentional racial segregation in government-assisted housing.” ICP II,
ICP has not introduced direct evidence of intentional discrimination. Discriminatory intent can be proved, however, by circumstantial evidence. See Vill. of Arlington Heights v. Metro. Hous. Dev.,
B
ICP alleges that TDHCA intentionally discriminates based on race by disproportionately approving LIHTC in predominantly minority neighborhoods and disproportionately denying LIHTC in predominantly Caucasian neighborhoods. As noted, ICP has not offered direct evidence of discriminatory intent; instead, it relies on circumstantial proof, including evidence that TDHCA’s justifications for the discriminatory impact of its LIHTC decisions are pretextual.
ICP failed to prove by a preponderance of the evidence that TDHCA intentionally discriminates based on race in its LIHTC decisions. Without discussing the trial evidence in punctilious detail, see supra note I, the court finds that TDHCA offered evidence of its obligation to create the selection criteria of each QAP in aecordance with governing federal and state law. TDHCA also introduced proof that its staff are responsible for initially scoring applications according to the QAP and presenting recommendations for TDHCA’s approval or denial. Multiple witnesses credibly testified that, in making decisions, TDHCA does not act with intent to discriminate.
Moreover, ICP did not prove that TDHCA intentionally discriminates when exercising its limited discretion. ICP asserts that TDHCA can in its discretion ignore the selection criteria made mandatory by the Texas Legislature by issuing forward commitments to 9% tax credit applications and by approving 4% tax credit applications, and that this discretion is used to intentionally discriminate. The court finds that TDHCA offered credible evidence of nondiscriminatory reasons for approving or denying every application that ICP alleges was improperly approved or denied.
Moreover, TDHCA independently took steps to deconcentrate LIHTC projects in high-minority areas. After ICP’s President testified before TDHCA in 2004 and requested that, as part of the selection criteria, TDHCA give four additional points to projects that further fair housing goals, TDHCA changed the 2005 QAP to include the granting of points to projects in “high opportunity areas,” and it increased from four to seven the requested points for certain “high opportunity area” categories.
ICP has failed to prove that TDHCA used the inclusive capture rate
Finally, ICP failed to prove that TDHCA’s justifications for the prima facie showing of disparate impact are pretextual. Again, the court need not explain its reasoning for rejecting each of ICP’s arguments. See swpra note 1. These two are illustrative.
ICP posits that one of TDHCA’s asserted justifications for the disparate impact— that TDHCA does not control the locations of LIHTC projects because developers choose them — is pretextual because TDHCA, through the use of the inclusive capture rate, steers developers to propose projects in high-minority neighborhoods. According to ICP, the inclusive capture rate has this effect because the rate TDHCA requires for a project to pass the underwriting analysis effectively dictates that a high number of low-income tenants must live in the area of the proposed development. As the court has already discussed, however, TDHCA uses the inclusive capture rate during the underwriting process as a measurement of a project’s financial feasibility. ICP has therefore failed to prove that TDHCA’s justification that developers choose the LIHTC sites is pretextual.
ICP also maintains that TDHCA’s justification that developers choose project sites is pretextual because TDHCA uses a less demanding inclusive capture rate for elderly projects, which typically have fewer minority residents, than for non-elderly projects, which typically have more minority residents. ICP contends that this results in steering only non-elderly projects into high-minority areas. The court finds from the credible evidence, however, that TDHCA used different rates because, inter alia, the turnover rate in elderly units is much lower than in non-elderly units, thus requiring a lower inclusive capture rate to ensure the financial feasibility of the project. Accordingly, the court finds that TDHCA’s justification that developers choose project sites is not pretextual.
Because ICP has failed to prove by a preponderance of the evidence that TDHCA intentionally discriminates on the basis of race when allocating LIHTC, the court finds that it has failed to prove its intentional discrimination claims under the Fourteenth Amendment (actionable under § 1983) and § 1982.
ICP also alleges that defendants are liable under §§ 3604(a) and 3605(a) of the FHA based on a claim for disparate impact.
A
“The [FHA] prohibits discrimination in the provision of housing.” Artisan/Am. Corp. v. City of Alvin, Tex.,
In ICP II the court held that ICP was entitled to summary judgment establishing that it had made a prima facie showing of disparate impact. See ICP II,
B
1
Defendants assert that they acted in furtherance of a compelling, or at least legitimate, governmental interest: the awarding of tax credits in an objective, transparent, predictable, and race-neutral manner, in accordance with federal and state law.
Defendants also maintain that, because of the strict requirements of federal and state law, TDHCA has only limited discretion, found in its ability (1) to modify strictly the below-the-line criteria, and not the statutory above-the-line criteria, and (2) to “forward commit” by awarding tax credits from the following year’s allocation of tax credits to a 9% tax credit application that would not otherwise succeed due to its low score under the selection criteria.
Defendants also note TDHCA’s actions in response to the Housing and Economic Recovery Act of 2008 (“HERA”). Before the enactment of HERA, states were limited to awarding 30% basis boosts only to developments located in qualified census tracts or difficult development areas. But after HERA, states were permitted to choose the developments to receive the boost. TDHCA exercised this authority in the 2009 QAP to target developments in “high opportunity areas.” A “high opportunity area” is defined as:
an area that includes:
(A) existing major bus transfer centers and/or regional or local commuter rail transportation stations that are accessible to all residents including Persons with Disabilities; or
(B) a census tract which has an [Area Median Gross Income (“AMGI”) ] that is higher than the AMGI of the county or place in which the census tract is located; or
(C) a school attendance zone that has an academic rating of “Exemplary” or “Recognized” rating (as determined by the Texas Education Agency) as of the first day of the Application Submission Acceptance Period; or
(D) a census tract that has no greater than 10% poverty population according to the most recent census data (these census tracts are designated in the 2010 Housing Tax Credit Site Demographic Characteristics Report).
P. Ex. 127 at 6-7. Defendants suggest that this change “is likely to have a positive effect in increasing the number of LIHTC developments in [high opportunity areas].” See Ds. Dec. 21, 2011 Reply Br. 3.
In addressing the second prong — which requires proof of no less discriminatory alternatives — defendants assert that “[t]here is no alternative that would serve the interests] with less discriminatory effect than the racially-neutral objective scoring system that is now in effect (and has been since 2003).” Ds. Dec. 21, 2011 Reply Br. 6. They criticize ICP’s requested relief of establishing a set-aside for projects in high opportunity areas, suggesting that this remedy cannot qualify as a less discriminatory alternative because it would conflict with governing law and contravene Regents of University of California v. Bakke,
Defendants next compare the justification against the resulting harm. They assert that ICP’s claim of injury is diminished by evidence that over 5,600 affordable, Section 8 housing units, although not necessarily LIHTC units, are available; a significant number of LIHTC units are located in Walker Target Area Tracts;
2
ICP contends that defendants are presenting only interests that are furthered by the application of the Texas Legislature’s mandatory statutory requirements, in particular the selection criteria that apply only to the 9% tax credits. It asserts that the action that must be justified is the disproportionate approval of tax credits for non-elderly developments in minority neighborhoods, the issue giving rise to the
C
The court will assume that defendants’ proffered interests are bona fide and legitimate. See Huntington Branch,
Defendants have not presented arguments regarding the second element. Instead, they rely on the conclusory assertion that “[tjhere is no alternative that would serve the interest[s] with less discriminatory effect.” Ds. Dec. 21, 2011 Reply Br. 6. They then criticize ICP’s requested set-aside remedy. But even assuming that defendants’ .criticism of this remedy is correct, the fact that one possible alternative course of action is not viable does not prove that there are no other less discriminatory alternatives that could be adopted that would enable the interest to be served with less discriminatory impact.
Defendants have also failed to prove by a preponderance of the evidence that allocating tax credits in a nondiscriminatory and nonsegregative manner would impair any of the asserted interests. Cf. Huntington Branch,
TDHCA also retains certain limited types of discretion that can be relied on to address the discriminatory impact. Defendants have not proved that, in using this discretion, TDHCA has adopted the least discriminatory alternative to further the legitimate governmental interest. Regarding the selection criteria of each QAP, which applies only to the 9% tax credits, defendants maintain that TDHCA has discretion only in modifying below-the-line criteria. They posit that this discretion is
Moreover, although defendants maintain that TDHCA’s discretion in creating the selection criteria is limited to adopting below-the-line criteria, it appears that this discretion is actually broader. It appears to extend to the authority to choose the number of points to be accorded each above-and below-the-line criterion, so long as the priority of statutory above-the-line criteria is maintained and the Governor approves. This suggests that TDHCA can accord more points to below-the-line criteria that reduce the discriminatory impact, as long as the points do not exceed the lowest above-the-line criterion, while still furthering TDHCA’s interests. For example, given that the lowest above-the-line criterion, “Declared Disaster Areas,” was worth seven points in the 2010 QAP, below-the-line criteria that assisted in reducing the discriminatory impact could have been allotted six points while respecting the priority of the statutory above-the-line criteria. A proposed development that falls within the guidelines of one of the “Development Location[s]” that could reduce the discriminatory impact is worth only four points. See P.Ex. 127 at 52-53. In comparison, the “Community Revitalization” below-the-line criterion awards six points. See id. at 51. To satisfy the “Community Revitalization” criterion, the proposed development must “use ... an Existing Residential Development” and
Defendants have also failed to prove that forward commitments could not have been used in a less discriminatory manner while still advancing TDHCA’s legitimate governmental interests.
Although TDHCA selected “high opportunity areas” to be the recipient of the 30% basis boost, the definition of “high opportunity areas” suggests that further steps can be taken to reduce the discriminatory impact while still promoting TDHCA’s legitimate governmental interests. A high opportunity area includes an area that has a major bus or rail station, a census tract with a higher AMGI than the tract’s county or place, a school attendance zone with an academic rating of “Exemplary” or “Recognized,” or a census tract with no greater than 10% poverty rate. See P.Ex. 127 at 6-7. As an example, were TDHCA to require an applicant to meet all four
TDHCA also has discretion under at least one QAP that can be used to reduce the discriminatory impact of LIHTC. Section 50.10(a)(2) of the 2008 QAP authorized TDHCA, in considering staff recommendations for both 4% and 9% tax credits, to “not rely solely on the number of points scored by an Application” under the QAP and to “take into account, as it deem[ed] appropriate,” certain listed discretionary factors, including location, proximity to other low-income housing developments, and other good causes as determined by TDHCA.
IV
The court considers next defendants’ contention that ICP’s FHA claim is barred by the statute of limitations.
A complaint under the FHA is timely when it is filed within two years after the occurrence or termination of an alleged discriminatory housing practice. See 42 U.S.C. § 3613(a)(1)(A). If a plaintiff challenges “an unlawful practice that continues into the limitations period, the complaint is timely if filed within [two years] of the last asserted occurrence of that practice.” Havens Realty Corp. v. Coleman,
ICP’s FHA claim is founded on an unlawful practice: TDHCA’s disproportionate approval of tax credits for non-elderly developments in minority neighborhoods, and, conversely, its disproportionate denial of tax credits for non-elderly housing in predominantly Caucasian neighborhoods. ICP has presented evidence from 1999 to 2008 to support this unlawful practice. Thus even assuming that the violation terminated in 2008, it is clear that ICP’s lawsuit was timely filed on March 28, 2008. Defendants have failed to prove their limitations defense by a preponderance of the evidence.
V
Finally, TDHCA relies on the affirmative defense of Eleventh Amendment immunity. TDHCA asserts that it is an arm of the State of Texas and is therefore entitled to Eleventh Amendment immunity.
TDHCA bears the burden of proving that it is entitled to Eleventh Amendment immunity. See Skelton v. Camp,
(1) whether state statutes and case law characterize the agency as an arm of the state; (2) the source of funds for the entity; (3) the degree of local autonomy the entity enjoys; (4) whether the entity is concerned primarily with local, as opposed to statewide, problems; (5) whether the entity has authority to sue and be sued in its own name; and (6) whether the entity has the right to hold and use property.
Vogt v. Bd. of Comm’rs Orleans Levee Dist.,
The Fifth Circuit has previously held that a predecessor agency of TDHCA — the Texas Housing Agency — is not an arm of the state. See Tex. Dep’t of
VI
As ICP recognizes in the Pretrial Order, it is appropriate to afford TDHCA an opportunity to present a plan to remedy its violation of the FHA. Accordingly, TDHCA must submit a remedial plan that sets out how it will bring its allocation decisions into compliance with the FHA. This remedial plan need be no “more intrusive than is necessary to remedy proved [FHA] violations.” Rizzo,
For the reasons explained, the court finds in favor of ICP on its disparate impact claim under the FHA and otherwise finds in favor of defendants. Within 60 days of the date this memorandum opinion and order is filed, defendants must file their remedial plan. ICP may submit objections within 30 days after the remedial plan is filed. If objections are filed, the court will establish any necessary additional procedures by separate order.
SO ORDERED.
Notes
. The court sets out in this memorandum opinion and order its findings of fact and conclusions of law. See Fed.R.Civ.P. 52(a)(1). Although the court has carefully considered the trial testimony and exhibits, this memorandum opinion and order has been written to comply with the level of detail required in this circuit for findings of fact and conclusions of law. See, e.g., Century Marine Inc. v. United States,
. In this memorandum opinion and order, the term "Caucasian” means white persons who are neither Hispanic nor Latino.
. It appears that the actual name of 4% tax credits is "Tax-Exempt Bond.” See Tr. 2:12 (referring to P.Ex. 125 at 60 and noting that the term “Tax-Exempt Bond Developments” is "4% tax credits.”); P.Ex. 1 at 19; P.Ex. 125 at 28. The court will use the terms “4% tax credit” and "4% tax credits” because the parties and TDHCA appear to do so. See P.Ex. 490 at 17 ("[T]he non-competitive, or the 4 percent credits, as you'll normally hear us refer to them in the Board meetings ... [are] allocated with private activity bonds.”); see also, e.g., Tr. 4:11-15.
. ICP also calls the selection criteria the 9% point scoring and ranking system. This may result from the fact that Texas law obligates TDHCA to score and rank applications against selection criteria that prioritize certain criteria. See Tex. Gov’t Code Ann. § 2306.6710(b) (West 2001).
. I.R.C. § 42(m)(l)(C) provides, in relevant part:
The selection criteria set forth in a qualified allocation plan must include—
(i) project location,
(ii) housing needs characteristics,
(iii) project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan,
(iv) sponsor characteristics,
(v) tenant populations with special housing needs,
(vi) public housing waiting lists,
(vii) tenant populations of individuals with children,
(viii) projects intended for eventual tenant ownership,
(ix) the energy efficiency of the project, and
(x) the historic nature of the project. Id.
. I.R.C. § 42(m)(l)(B) provides, in relevant part:
[T]he term "qualified allocation plan” means any plan — ... which ... gives preference in allocating housing credit dollar amounts among selected projects to—
(I) projects serving the lowest income tenants,
(II) projects obligated to serve qualified tenants for the longest periods, and
fill) projects which are located in qualified census tracts (as defined in subsection (d)(5)(C)) and the development of which contributes to a concerted community revitalization plan[.]
Id.
. Section 2306.67022 was amended in 2011. It now requires TDHCA to adopt a QAP and corresponding manual only biennially, with the discretion to do so annually. See Tex. Gov't Code Ann. § 2306.67022 (West 2011). The court refers to the 2001 version, instead of the 2011 amended version, because the parties rely on the 2001 version. And the court is primarily relying on the statute to provide a basic understanding of the Texas LIHTC program during the period that preceded the filing of this lawsuit. As of the date of this memorandum opinion and order, it appears that it is still the TDHCA’s practice to adopt a QAP annually. See Ds. Dec. 7, 2011 Br. 13 ("The TDHCA administers its LIHTC program through a unique, legislatively-mandated QAP re-written each year.”).
. The ten statutory criteria are:
(A) financial feasibility of the development based on the supporting financial data required in the application that will include a project underwriting pro forma from the permanent or construction lender;
(B) quantifiable community participation with respect to the development, evaluated on the basis of written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site;
(C) the income levels of tenants of the development;
(D) the size and quality of the units;
(E) the commitment of development funding by local political subdivisions;
(F) the level of community support for the application, evaluated on the basis of written statements from the state representative or the state senator that represents the district containing the proposed development site;
(G) the rent levels of the units;
(H) the cost of the development by square foot;
(I) the services to be provided to tenants of the development; and
(J) whether, at the time the complete application is submitted or at any time within the two-year period preceding the date of submission, the proposed development site is located in an area declared to be a disaster under Section 418.014[.]
Tex. Gov’t Code Ann. § 2306.6710(b) (West 2007).
. The parties have lodged numerous objections to the testimony and exhibits. Many objections are immaterial because the court did not rely on the evidence in question when making its decisions on the merits, or the court relied on the evidence for a limited purpose that is unaffected by whether the objection is well taken. In a bench trial, it is permissible for the court to hear evidence that it later determines is inadmissible or immaterial to its decisions on the merits. See Harris v. Rivera,
. Although the court finds below, see infra § III(C), that TDHCA could have used its discretion to issue forward commitments in order to decrease the disparate impact of its decisions, ICP did not prove by a preponderance of the evidence that TDHCA intentionally discriminates on the basis of race when deciding whether to make a forward commitment.
. The court finds that other challenged examples were also approved or denied for nondiscriminatory reasons. For instance, the Chaparral Townhomes project was a 9% tax credit applicant that scored well enough to receive LIHTC, but TDHCA denied the application because the developer was a former TDHCA board member who had in the past received four LIHTC allocations. In response to recent criminal charges against a former TDHCA board member and pressure from the Texas Legislature to spread tax credits among developers, TDHCA determined that it should avoid the appearance of impropriety and adhere to the Legislature’s request by not awarding tax credits to a former board mem
. In response to a complaint to the Governor by Representative Robert Taitón that granting seven points for developments in certain high opportunity areas encouraged development in high-income areas rather than low-income areas where the housing was needed, the Governor rejected the 2005 QAP. After TDHCA lowered the seven point categories to four points, the Governor approved the QAP.
. TDHCA no longer uses the term "inclusive capture rate.” It renamed and simplified the formula.
. A project will not be allocated LIHTC until it passes the underwriting analysis.
. TDHCA does influence the locations of the LIHTC projects by selecting which projects are awarded LIHTC. To the extent TDHCA’s contention that developers choose the location of LIHTC projects is not in all respects precise, this inaccuracy does not belie an attempt by TDHCA to conceal discriminatory intent.
. The court relied on other evidence as well, including the “Taitón Report,” a report of the House Committee on Urban Affairs prepared for the House of Representatives, 80th Texas Legislature, and a study by the U.S. Department of Housing and Urban Development. See ICP II,
. The Fifth Circuit has not yet adopted a standard and proof regime for FHA-based disparate impact claims. The circuits that have done so have adopted at least three different standards and proof regimes. In ICP II this court essentially followed the approach of the Second Circuit in Huntington Branch,
It appeared that the Supreme Court might clarify this unsettled area of the law. After this case was tried, and while the parties were making post-trial submissions, the Court granted certiorari in Gallagher v. Magner,
Absent controlling authority of the Supreme Court or the Fifth Circuit, the court will apply the law of the case, as set out in ICP II, and allocate to defendants the burden of proof regarding ICP's disparate impact claim because ICP has satisfied its burden of establishing a prima facie case. The court will not, however, require that defendants prove a compelling governmental interest rather than a legitimate governmental interest, despite the use of the compelling standard in ICP II. See ICP II,
. Some courts balance objectives in order to determine whether a discriminatory impact violates the FHA. See, e.g., Vill. of Arlington Heights,
. As one of their asserted interests, defendants contend that they seek to award tax credits in a race-neutral manner. But a disparate impact claim does not require proof of discriminatory intent. See, e.g., Homebuilders Ass’n of Miss. v. City of Brandon, Miss.,
. To the extent defendants are arguing that their discretion is limited because they do not select the location of their projects, defendants are misconstruing the issue in this case. As the court noted in ICP II, “ICP does not complain of the distribution of low-income housing in general; ICP challenges the allegedly discriminatory actions of TDHCA in disproportionately denying tax credits to proposed developments in Caucasian neighborhoods. TDHCA does control the approval or denial of applications actually submitted.” ICP II,
. The term "Walker Target Area Tracts” is defined-in the Settlement Stipulation and Order in Walker v. U.S. Department of Housing and Urban Development, No. 3:85-CV-1210-R, at 4 (N.D.Tex. Mar. 8, 2001) (Buchmeyer, C.J.). A qualifying census tract "according to the most recent decennial census, (i) has a black population at or below the average black population of the City of Dallas, (ii) has no public housing, and (iii) has a poverty rate at or below the average for the City of Dallas.” Id.
. Similarly, at the summary judgment stage, the court held in ICP II that defendants' proffered compelling governmental interest— adherence to I.R.C. § 42 — was insufficient because "[djefendants ... failed to establish that TDHCA cannot comply with § 42 in a way that has less discriminatory impact on the community” and that "TDHCA cannot comply with both § 42 and the FHA.'.’ ICP II,
. The "Taitón Report,” a report of the House Committee on Urban Affairs prepared for the House of Representatives, 80th Texas Legislature, also concluded that TDHCA and the BRB "disproportionately allocate federal [LIHTC] funds and the tax-exempt bond funds to developments located in impacted areas (above average minority concentration and below average income levels)” and similarly recommended that TDHCA, BRB, and the legislature, among other things, "consider adding provisions to the QAP and the bond rules that give significant point scoring and/or set-aside of credits for affirmatively furthering assimilation outside of impacted areas.” P.Ex. 1 at 48-49.
. An "Economically Distressed Area” is defined as:
an Area in which:
(A) Water supply or sewer services are inadequate to meet minimal needs of residential users as defined by Texas Water Development Board rules;
(B) Financial resources are inadequate to provide water supply or sewer services that will satisfy those needs; and
(C) An established residential subdivision was located on June 1, 1989, as determined by the Texas Water Development Board.
P. Ex. 127 at 6. A "Colonia” is defined as:
A geographic Area that is located in a county some part of which is within 150 miles of the international border of this state, that consists of 11 or more dwellings that are located in close proximity to each other in an area that may be described as a community or neighborhood, and that: (§ 2306.581)
(A) Has a majority population composed of individuals and families of low-income and very low income, based on the federal Office of Management and Budget poverty index, and meets the qualifications of an economically distressed Area under § 17.921, Texas Water Code; or
(B) Has the physical and economic characteristics of a colonia, as determined by the Department.
Id. at 5. A "Difficult Development Area” is an area "specifically designated by the Secretary of HUD at the time of Application submission.” Id. at 52.
. An “Urban Core” is defined as
[a] compact and contiguous geographical area that is located in a Metropolitan Statistical Area within the city limits of a city with a population of no less than 150,000composed of adjacent block groups in which at least 90% of the land not in public ownership is zoned to accommodate a mix of medium or high density residential and commercial uses and at least 50% of such land is actually being used for such purposes based on high density residential structures and/or commercial structures already constructed.
P. Ex. 127 at 12.
. This is based on defendants’ underlying assumption that “there's a known association between race and income and poverty levels in Texas,’’ as Mary Whiteside, Ph.D. testified at trial and stated in her initial and second reports. See, e.g., Tr. 2:161; Ds. Ex. 224 at 1-4; Ds. Ex. 225 at 4. ICP raised numerous objections against the use of her testimony and reports. See, e.g., P. Nov. 9, 2011 at 20-22; Tr. 2:162. Because the court relies on her testimony and expert reports to support ICP’s disparate impact claim (i.e., to suggest that the evidence supports the existence of less discriminatory alternatives), it need not resolve ICP's objections before relying on this evidence in this context.
. To the extent defendants argue that TDHCA’s discretion in reducing the discriminatory impact is restricted by the requirement of gubernatorial approval of QAP changes, and they rely on a specific instance when the Governor in fact rejected a QAP change, there is no evidence that the Governor would decline to approve a change necessary for TDHCA to comply with a federal court order directing defendants to remedy a violation of the FHA.
. Defendants maintain that Governor Rick Perry ("Governor Perry”) modified the 2012 QAP to eliminate forward commitments. Assuming arguendo that this is true, defendants have still failed to prove that, during the time when forward commitments were available, TDHCA approved them in the least discriminatory manner, while still advancing its proffered interests.
. It is unclear whether Governor Perry eliminated this authority in the 2012 QAP. See Ds. Dec. 7, 2011 Br. 6-7 (noting that Governor Perry eliminated TDHCA's ability to "waive internal rules,” without clarifying which internal rules). Even assuming that Governor Perry eliminated this area of discretion, the court concludes, at it does supra at note 28, that defendants have failed to prove that TDHCA used this discretion, when it was available, in the least discriminatory manner, while still advancing its proffered interests.
. Section 55.10(a)(2) of the 2008 QAP provided, in relevant part:
In making a determination to allocate tax credits, the Board shall be authorized to not rely solely on the number of points scored by an Application. It shall in addition, be entitled to take into account, as it deems appropriate, the discretionary factors listed in this paragraph.... If the Board disapproves or fails to act upon an Application, the Department shall issue to the Applicant a written notice stating the reason(s) for the Board’s disapproval or failure to act. In making tax credit decisions ..., the Board, in its discretion, may evaluate, consider and apply any one or more of the following discretionary factors: ...
(A) The Developer market study;
(B) The location;
(C) The compliance history of the Developer;
(D) The financial feasibility;
(E) The appropriateness of the Development's size and configuration in relation to the housing needs of the community in which the Development is located;
(F) The Development’s proximity to other low-income housing Developments;
(G) The availability of adequate public facilities and services;
(H) The anticipated impact on local school districts;
(I) Zoning and other land use considerations;
(J) Any matter considered by the Board to be relevant to the approval decision and in furtherance of the Department’s purposes; and
(K) Other good cause as determined by the Board.
P. Ex. 125 at 60-61; Ds. Ex. 14 at 60-61.
. Although ICP contends that the allocation of 4% tax credits also results in a discriminatory impact, defendants do not address whether TDHCA has adopted the least discriminatory alternative to further its legitimate governmental interests as to the 4% tax credits. Defendants stress their limited discretion in changing the mandatory selection when the 4% tax credits are not bound to scoring under that criteria. Four percent tax credits are non-competitive and reviewed solely for "threshold, eligibility, and then ... underwriting],” P.Ex. 1 at 20. And unlike the mandatory selection criteria, it does not appear that the Texas Government Code similarly limits TDHCA's discretion in choosing the threshold criteria. Cf. Tex. Gov’t Code Ann. § 2306.6702(a)(15) (West 2003) (defining "Threshold criteria” as “criteria used to determine whether the development satisfies the minimum level of acceptability for consideration established in the department's qualified allocation plan”); id. at § 2306.6710(a)
. Although the analysis in Vogt and Verex is not identical, the Fifth Circuit relies on many of the same factors when determining whether an agency is an arm of the state for the purposes of Eleventh Amendment immunity. Compare Vogt,