The Attorney General of Texas 

March 11, 1981 

Honorable Richard G. Morales, Sr. 

Webb County Attorney 

1810 San Bernard0 

Laredo, Texas 78040 

Dear Mr. Morales: 

Opinion No. MW-301 

Re: Administration of article 

1066d, V.T.C.S., relating to tax 

incremental districts 

You have requested our opinion regarding the construction end 

administration of Senate Bill 12ll, Acts 1979, 66th Legislature, chapter 695, 

at 1661 (article lO66d, V.T.C.S.), which authorizes the creation of tax 

incremental districts by cities to undertake and finance certain municipal 

public works or improvements in areas in need of rehabilitation. A tax 

incremental district is an area within the city defined and created by 

municipal ordinance in accordance with article 1066d, V.T.C.S. Sec. l(7). 

You have not raised and we do not address any questions regarding the 

constitutionality of the statute. 

Your first question relates to section 4(a) of the act, which provides: 

A tax incremental district -may not be created if 

before redevelopment under 

percent of the real property in the distict, excl 

that dedicated to public use, is used for residential 

purposes. (Emphasis added). ~ 

You inquire “whether the 10% of residential real property in the 

district should be determined by a percentage of assessed values or by 10% 

of the total area involved in the tax increment dmtrict?” 

Section 4(a) imposes a qualification for the creation of a tax 

incremental district relating to the use to which the real property within the 

proposed district has been put. Section 3(a)(2)(E)(i) of the act provides that 

“not les than 25 percent by area of the real property within the district is a 

blighted area,” and section 3(a)(2)(B)(iii) provides that “the aggregate 

assessed value of taxable property in the district according to the city’s 

assessment plus all existing districts does not exceed 15 percent of the total 

assessed value of taxable property within the city according to the city’s 

assessment roll.” 

p. 960 
Honorable Richard G. Morales, Sr. - Page Two (MW-301) 

In determining the qualifications and disqualifications for a designated area 

proposed to constitute a tax incremental district, the act speaks in terms of the nature 

of or various uses to which the real property is put. Only when discussing the total 

area proposed to comprise the district is assessed value mentioned, and then to 

determine the relativity of assessed value of all property within the district to all of 

that within the entire city. Section l(6) of the act defines “the total assessed value of 

the property located within a tax incremental district” as the “[t] ax incremental base.” 

Section l(7) defines “[tl ax incremental district” as “a contiguous geographic area 

within a city.” 

There is no suggestion by context or otherwise in the act that “assessed value,” 

rather than “area” should be used in determining the criteria for a district under 

section 4(a). Section 4(a) should be construed as stating the use to which the defined 

area must be put in order to be encompassed in a tax incremental district. 

Your second question is as follows: 

When property is used for both residential and commercial 

purposes, how is the percentage of residential property determined? 

In such cases, the percentage of residential property should be determined by the 

actual area set aside or occupied for residential purposes. 

Your third question is as follows: 

Section ll(c) appears to be inconsistent with section 8(a) in 

that section llfc) authorizes bond and note securities with a 

maximum maturity up to 20 years, while 8(a) authorizes 

payments of not to exceed 15 years. The question involved is: 

Which of the two provisions is controlling in so far as the 

issuance of bonded indebtedness is concerned? 

This question suggests an apparent conflict between sections 8(a) and l&z) of the 

act. Section 8(a) relates to the allocation of “IpI ositive tax increments” and provides 

that such allocations are made “to the applicable tax increment fund each year from 

the date when the district is created until the earlier of: 

(1) that time, after the completion of all public improvements specified in the plan or amendments, when the city has 

received aggregate tax increments of the district in an ~amount 

equal to the sggregate of all expenditures previously made or 

monetary obligations previously incurred for project costs for 

the district; or (2) 15 years after the last expenditure 

identified in the plan is made. 

Section 8(b) provides that “[a] 11 tax increments received in a tax incremental district 

shall be deposited in a special fund for the district.” 

p. 961 
Honorable Richard G. Morales, Sr. - Page Three (~~-301) 

Section 8(a) effectively statas that the city may allocate positive tax increment 

revenues into the designated improvement fund for a period not to exceed that time 

after corn-ion of the project when it has received sufficient funds to meet its total 

financial obligations for the project (including financing costs), or 15 years after the 

last expanditure is made on completion of the project itself, whichever is earlier. This 

section refers to the allotted period of time for the accumulation of funds to meet all 

of the financial obligations of the district, including funds for the retirement of bonds 

and notes. 

Section R(c) relates to “(tl ax incremental bonds or notes” and provides in 

pertinent part that: 

Tax incremental bonds or notes may not be issued in an amount 

exceeding the aggregate project costs. The bonds or notes shall 

mature over a period not exceeding 20 years from the date 

thereof. 

Section 11(d) further provides that “[t) ax incremental bonds or notes are payable 

only out of the special fund created under Subsection (b) of Section 8 of this Act.” 

(Empmdded). 

Sections 8(a) and (b) refer to the creation of a special fund ahd limit the time 

after completion of the project, or the last expenditures for completionof the project, 

in which positive tax increments may be deposited into the fund. Sections 11(c) and (d) 

refer to the time limit for maturity of bonds or notesued to finance the costs of the 

project and the requirement that these be retired only out of the special fund. 

These sections du not conflict, but have separate and distinct purposes - one 

relating to the limits for certain deposits into the special fund, the other relating to 

time limits for certain payments out of the=d. 

SUMMARY 

In determining the 10 percent limitation imposed by section 

?(a) of article lO66d, V.T.C.S., the calculation should be based 

on the actual geographic area used for residential purposes 

within the proposed tax incremental district. When property is 

used for both residential and commercial purposes, the percentage of residential property should ba determined by the actual 

area used for residential purposes. There is no inconsistency 

between sections 8(a) and 11(c) of the act. Section 8(a) relates 

to time limitations for certain deposits into the special fund 

provided for in section 8(b). Section 11(c) relates to time 

limitations for the maturity of bonds and notes which are to ba 

retired with funds paid out of the special fund provided for in 

section 8(b). 

P. 962 
Honorable Richard G. Morales, Sr. - Page Four (MW-301) 

MARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by Bob Gammage 

Assistant Attorney General 

APPROVED: 

OPINION COMMlTTEE 

Susan L. Garrison, Chairman 

David B. Brooks 

Bob Gammage 

Ride Gilpin :,, 

C. Robert Heath 

Robert T. Lewis 

William G Reid 

Bruce Youngblood 

P- 963