DAN MORALES 

ATTORSEY CWERAL 

QBffice of tip S!Utornep @eneral 

&ate of ?Il;exas 

December lo,1992 

Honorable Dale W. Elliott 

Potter County Attorney 

303 Courthouse 

Amarillo, Texas 79101 

Opinion No. DM-188 

Re: Tax exemptions for public property 

leased to private entities (RQ-18) 

Dear Mr. Elliott: 

On behalf of the Potter-Randall County Appraisal District, you ask whether 

real property owned by three governmental bodies in Potter County is exempt from 

ad valorem taxation under the circumstances you describe. Your letter stipulates 

certain facts, and the governmental entities in separate briefs supply additional 

facts. We will address your questions in light of all the information provided. 

However, because tbe answers to your questions depend on the resolution of fact 

issues, a function that this office cannot perform in the opinion process, our 

responses are necessarily subject to the facts in a given case. Before addressing the 

specific scenarios, we will briefly describe the source, nature, and limits of property 

tax exemptions for government-owned property. ’ 

A. Tawzmpt statu ofpubIic&owdprv~. 

Article VIII, section 1 of the Texas Constitution declares in relevant part that 

[a]ll real property and tangible personal property in tbis State, 

unless exempt as required or permitted by this Constitution, 

whether owned by natural persons or corporations, other than 

municipal, shah be taxed in proportion to its value, which shall 

be ascertained as may be provided by law. 

Tex. Const. art. VIII, 5 l(b). Article XI, section 9 of the Texas Constitution declares 

in part that 

property of counties, cities, and towns, owned and held only for 

public purposes, . . . and all other property devoted exclusively to 

p. 985 
Honorable Dale W. Elliott - Page 2 (k-188) 

the use and benefit of the public shall be exempt from forced 

saleandfromtaxation.... 

This provision is self-executing and requires no enacting legislation A & M Consol. 

h&p. Sch. Dirt. v. Ci& ofBryan, 184 S.W.2d 914 (Tex. 1945). Prior decisions of the 

courts held that despite the specific reference to counties, cities and towns, this 

provision applied to all political subdivisions. See, es., Lower Colomdo River Auth. 

v. Chemical Bunk & Tnut Co., 190 S.W.2d 48 (Tex. 1945). However, more recent 

decisions have clarified that the provision applies solely to the enumerated 

gwernmental entities. State v. Houston Lighting & Power Co., 609 S.W2d 263,266 

(Tex Civ. App.-Corpus Christi 1980, writ refd n.r.e.) (citing L.eunder Indep. Sch. 

Dirt. v. Cedar Park Water Supply Corp., 479 S.W.2d 908 (Tex. 1972)); see also 

Satterlee v. Gulf Cocat W&e DisposalAuth., 576 S.W.2d 773,778-79(Tex. 1978). 

Article VIII, section 2(a) of the Texas Constitution provides in part that the 

“legislature may, by general laws, exempt from taxation public property used for 

public purposes.” Pursuant to the latter provision, the legislature has enacted 

section 11.11 of the Tax Code, which provides the following in pertinent part: 

(a) Except as provided by Subsections (b) and (c) of this 

section, property owned by this state or a political subdivision of 

this state is exempt from taxation if the property is used for 

public purposes. 

Subsections (b) and (c), which provide for the limited taxation of land owned by the 

Permanent University Fund and counties, are not relevant to your questions. 

Section 11.11 supplies other qualifications to the general exemption described in 

subsection (a), which we w-ill address as appropriate in this opinion. 

You ask initially whether the phrase “other than municipal” in article WI, 

section l(b) of the Texas Constitution creates an implied exemption for municipal 

property. You conclude that it does not. We agree. 

As you note in your brief, the supreme court has held that article WI, 

section 1 merely specifies the types of property the legislature is required to tax. Ci@ 

of Beuumonr v. Fertina, 415 S.W.2d 902 (T’ex. 1967). Article VIII, section 17 states 

that the specification of the objects and subjects of taxation in the constitution does 

not deprive the legislature of the power to require other objects or subjects to be 

taxed consistently with other provisions of the constitution. The phrase “other than 

p. 986 
Honorable Dale W. Elliott - Page 3 C&55188) 

municipal” in article VIII, section 1 thus means the legislature is not required to tax 

municipal property, but may provide for such unless the property is othenvise 

exempted from taxation, Section 11.01 of the Tax Code states in part that all real 

property that the state has jurisdiction to tax (Le., any real property located in the 

state) is taxable unless exempt by law. Tax Code 0 11.01(a), (b). Article XI, section 

9 exempts from taxation municipal property owned and held for public purposes 

and section 11.11 of the Tax Code exempts property owned by political subdivisions 

that is used for public purposes. Thus, the legislature has, consistent with the 

constitution, provided for the taxation of municipal property. 

The essential substantive inquiry under the constitutional and statutory 

provisions cited above is whether the public property in question is being used for a 

public purpose. The courts instruct that the test for public purpose is whether the 

public property is used primarily for the health, comfort, and welfare of the public. 

A & M Consolidated Independent School Dism’ct, 184 S.W.2d 914; Houston Lighting & 

Power Cornpuny, 609 S.W2d at 266. In addition, it must be shown that the property 

is held only for public purposes and is devoted tzc&veIy to the use and benefit of 

the public. Satterlee, 576 S.W.2d at 778-79. Consequently, public property that is 

acquired and held with the intention that it not be used primarily for the health, 

comfort, and welfare of the public is not entitled to a tax exemption under these 

provisions. See Grand Prairie Hosp. Auth. v. @llas County Appraisal Disk, 730 

S.W2d 849 (Tex. App.-Dallas 1987, writ refd n.r.e); Grand Prairie Hosp. Auth. v. 

Tarant Appraisal Dirt., 707 S.W.2d 281 (Tex. App.-Fort Worth 1986, writ refd 

n.r.e.). 

Each of the scenarios you describe involves public property that is leased to 

private individuals or other political subdivisions. Property of a political subdivision 

will not lose its tax exemption if a charge is made for the property or a profit is 

generated thereby, provided the charges are incidental to its use by the public and 

the proceeds inure to the benefit of tbe political subdivision. Lower Colorado River 

Authority, 190 S.W.2d 48; A & M Consolidated Independent School Dism’ct, 184 

S.W2d 914. However, where a political subdivision specifically intends its public 

property to be put to private commercial uses, it is not used exclusively for the use 

and benefit of the public within the meaning of these provisions and, thus, is not 

entitled to tax-exempt status. GrMd Prairie Hospital Authority, 730 S.W.2d 84% 

Tanant Appraisal District, 707 S.W.2d 281; Attorney General Opinions JhMOS 

(1985); MW-430 (1982). 

p. 987 
Honorable Dale W. Elliott - Page 4 (G-188) 

B. Tax-aemptstamofpm#owdbycityofAmado. 

I. Ailpthangar. 

You advise that the City of Amarillo is constructing an airport hangar at the 

city-owned Amarillo International Airport which will be leased to a private entity as 

a facility for the repair, maintenance, and storage of aircraft You ask whether this 

property, owned by the municipality but dedicated to an allegedly private use, is 

exempt from ad valorem taxation. If it is exempt, you ask whether the leasehold is 

exempt from taxation to the lessee pursuant to section 25.07 of the Tax Code. 

In a brief to this office, the City of Amarillo indicates that the airport 

property is being developed pursuant to the Municipal Airports Act, V.T.C.S. 

articles 46d-1 through 46d-22. Article 46d-15 in pertinent part broadly declares that 

the acquisition of any land or interests in land pursuant to the act, and the 

development, maintenance, construction, equipment, and operation of airports and 

air navigation facilities are public, governmental, and municipal purposes. Attorney 

General Opinion JM-464 (1986) in similar fashion concluded that 

as a matter of law.. . [a] city’s airport and airport facilities, 

including those leased to a private individual, are impressed with 

a public purpose sufficient to meet Texas constitutional and 

statutory tests regarding ad valorem taxes. 

Attorney General Opinion JM-464 at 3. In In& Indep. Sch. Dist, v. Delta Aidines, 

Inc., 534 S.W.2d 365 (Tex. Civ. App.-Texarkana 1976, writ refd n.r.e.), the court 

ruled that a maintenance hangar is necessary to the operation of an airport under 

the Municipal Airports Act, and thus was entitled to a tax exemption under the 

statutory predecessor to section 25.07 of the Tax Code.1 The case did not concern 

the tax-exempt status of the underlying real property, but the case is instructive 

because it acknowledges that under usual circumstances aircraft maintenance 

facilities are necessary to the safe and efficient operation of a municipal airport On 

the basis of the factual similarity of the city’s intended use of the airport hangar to 

the uses considered in these authorities, the city argues that the hangar is entitled to 

tax exempt status. 

%ection 25.07 is &rived from V.T.C.S. arti& 7173. It will be discwed in greater detail 

beknv. 

p. 988 
Honorable Dale W. Elliott - Page 5 D+l88) 

At issue in Attorney General Opinion M-464 was the tax status of property 

owned by a municipality and operated as an airport A portion of the airport proper 

was leased to an individual who operated an aircraft fueling facility, and another 

portion was operated by the United States Government as a weather station and air 

traffic control facility. Land surrounding the airport was leased to private persons 

and corporations for private commercial and agricultural purposes. The opinion 

concluded that the airport facility itself was exempt from ad valorem taxation, but 

the surrounding land was not exempted because it was not put to fan actual, 

exclusive public use as required by the constitution and Tax Code. 

Under the facts presented in the opinion, it is apparent that the use of the 

airport property by the fueling facility lessee and the federal government was in 

direct support of the city3 operation of the airport.2 In cotmasS the private use of 

the surrounding airport property extinguished the city’s tax exemption precisely 

because the use bore no relationship to the city’s operation of the airport. We thus 

construe Attorney General Opinion JM-464 to requires a showing that the use of 

municipal airport property is in direct support of the city3 operation of the airport. 

In the absence of such a showing, the mere use of airport property for aircraftrelated maintenance is insufficient to protect the city from liability for ad valorem 

taxes. 

The City of Amarillo contends that the airport hangar in question will be 

used to support the city’s safe and efficient operation of the airport. If this is the 

case, then we agree that the private commercial use of the facility will not 

jeopardize the property’s tax-exempt status. However, you contend that most of the 

aircraft stored and serviced at the city-owned hangar will be brought there solely for 

purposes of maintenance and storage and will not be engaged in the transport of 

passengers and cargo to and from the airport. If this representation is correct, the 

facility would not be used exclusively in support of the city’s operation of the airport, 

but would instead be used to serve the private commercial interests of the lessee. 

The property under these circumstances would not be entitled to a tax exemption 

because it is not used exclusively for public purposes and therefore does not satisfy 

constitutional and statutory criteria. See Grand Prairie Hospital Authorify, 730 

*under the Iease agreemcn~ the operation of the fueling facility, though admittedly for private 

commercid gain, was subject to the direction and control of the city. The weather station and air 

traffic coatr01 facility were obviously necessary to the operation of the airport. 

p. 989 
Honorable Dale W. Elliott - Page 6 K&%188) 

S.W2d 849; Tamnt Appraisal Dktrict, 707 S.W.2d 281; Attorney General Opinions 

JM-405; MW-430. 

As noted, this office cannot resolve disputed questions of fact in the opinion 

process. Because the city offers facts that conflict with the information supplied by 

your office, we cannot resolve your first question as a matter of law. Rather, the 

resolution of this issue must await the development of facts in an appropriate 

administrative or judicial forum. 

The same must be said with respect to your next question-whether the 

leasehold interest in the hangar is exempted from taxation to the lessee. Leasehold 

interests generally are not taxable to a lessee. See Cherokee Water Co. v. Gregg 

County Appraiwl Dist., 801 S.W.2d 872 (Tex. 1990). Rather, the lessor is 

traditionally held responsible for taxes on the full value of the property. Id. 

Consequently, if the airport property is determined not to be tax exempt, the city 

rather than the lessee would be liable for ad valorem taxes on the property.3 If, on 

the other hand, the underlying real property is determined to be tax-exempt, it will 

become necessary to determine the tax status of the leasehold interest in the hangar. 

Section 23.13 of the Tax Code requires appraisal at market value of a 

“taxable leasehold or other possessory interest” in, real property that is exempt from 

taxation to the owner. Section 25.07, meanwhile, requires certain leaseholds and 

other possessory interests in real property that is exempt from taxation to the owner 

to be listed on the appraisal rolls in the name of the owner of the possessoty interest 

if the interest is at least one year in duration.4 Tax Code 925.07(a). These 

provisions have consistently been interpreted to require taxation of leasehold 

interests in tax-exempt real property, including property owned by political 

subdivisions. See Tamnt Appraisal Dirt. v. AmericM Abfhes, Inc., 826 S.W.2d 767 

(Tex. App.-Fort Worth 1992, writ denied); Delta Airline-s, 534 S.W.2d 365; Attorney 

General Opinion JM-1049 (1989). 

3Partiu to a lease typically take into account the Icssar’s property tax liabiity when negotiating 

the terms of the lease, either by wntrachully providing for a pass through of taxs to the lessee. or 

setting rentals in an amount that reflects the estimated tax liabiity. Chemke W&r Company, 801 

S.W.Zd at 875 d3 (Tex. 1990). 

4We assume for purposes of this opinion that the lease of the city’s airport hangar is for a term 

of at least one year. 

p. 990 
Honorable Dale W. Elliott - Page 7 (15~488) 

Section 25.07 excepts certain leasehold and possessory interests from its 

listing requirements. A leasehold interest that is excepted from the listing 

requirement of section 25.07 is itself exempt from taxation to the lessee. Delta 

Akfines, 534 S.W2d 365. Among the exceptions is one for a “public transportation 

facility owned by an incorporated city or town” Tax Code 5 2507(b)(3). In addition 

to constituting a public transportation facility, the property in which the leasehold or 

other possessory interest lies must satisfy one of several alternative requirements. 

One such alternative is that the property be used as 

an airport passenger terminal building or a building rued 

prima+ for maint-e of aircrafl or other airaaft services, for 

aircraft equipment storage, or for air cargo. 

Tax Code 5 25.07(b)(3)(A) (emphasis added). 

Aircraft maintenance facilities, including maintenance hangars, which are 

intended for use in the safe and efficient operation of a municipal airport are public 

transportation facilities for purposes of section 25.07. Delta Airlines, 534 S.W.2d 

365. The city in its brief contends that the airport hangar in question will be 

devoted to similar uses. If the city’s representations are correct, the leasehold 

interest in the city-owned airport maintenance hangar is exempt from taxation to the 

lessee so long as the facility is used to support thesafe and efficient operation of the 

airport by the city? 

SThe city alludes to other lwchold interwts at the airport, e.g., restaurant, lounge, and airline 

leases, and argues that these interests are also exempted from taxation to the lessees because they 

support the general public purpose of air transportation at the airport. A recent case indicates that the 

mere operation of a facility in support of airliae operations may not be sufficieat to confer tax-exempt 

stahu on a leasehold interest in airport property. Tamm Appnaid Din. Y. Amvicon Aides, 826 

S.WJd 767 (Tex App.-Fort Worth 1992, tit denied) conuxns the proper method for valuation of an 

airline’s leasehold interest in tax-exempt airport property. American Airlines leased MO acres of land 

aud improvements from the DFW Regional Airport Board. Neither the nature nor the purpose of the 

Ieased property were descriid in the opinion. Tbe court did not examine in detail the tax-exempt 

status of the lwehold interest under section 25.07 of the Tax Code. Rather, the court concluded that 

the lease “resuhs in a taxable leasehold estate to American because the DFW Board is 811 exempt 

owner.’ 826 S.W.2d at 768. Furthermore, section 25.07 attaches several comiitions to the exemption of 

leasehold interests in public transportation facilities, most of wbkh relate either to uircm~? services or 

foreign trade zone status. Thus, it should not be assumed that any leasehold interest in airport 

property is entitled to tax-exempt statusperse. See ulro Attorney General Opinion JM-464. Whether 

such property is used by a lessee for a public purpose will depend OII the facts of each case. 

p. 991 
Honorable Dale W. Elliott - Page 8 (m-188) 

2 Bui&grleadtopktebu&em 

You also state that the City of Amarillo owns several buildings which 

currently are not used by the city but are instead leased to private businesses. You 

do not describe the conditions under which the city holds and leases such property 

or the particular uses put to the property. The city does not contest your 

representation of the facts. You ask whether these buildings are exempt from ad 

valorem taxation; you conclude they are not. 

Prior opinions of this office conclude that public property put to a private use 

will remain tax-exempt where the private use can either be characterized as a public 

purpose or is in direct support of a public purpose of the political subdivision. See 

Attorney General Opinions JM-1049 (lease of real property comprising permanent 

school fund to private commercial interests is a public purpose where proceeds 

deposited in permanent school fund); JM-464. However, the leasing of public 

property purely for private commercial uses removes the tax exemption for the 

property under both constitutional and statutory standards. See Gmnd Pr&ie 

Hospital Authority, 730 S.W.2d 849; Tammt Appraisal Distnkt, 707 S.W.2d 281; 

Attorney General Opinions JM-405; MW-430 and authorities cited therein. If the 

buildings in question are owned by the city purely for the purpose of leasing them to 

private commercial interests, the property would not, in our opinion, be tax-exempt. 

Whether the private use constitutes or supports a public purpose of the city must be 

determined on the basis of the facts of the case abd the terms of any constitutional 

or statutory provisions authorizing the city’s acquisition and use of the property. See 

Attorney General Opinions JM-1049; JM-464.. 

C. O@ecomp~ownedbyaschool~. 

You state that the Amarillo Independent School District (AISD) recently 

purchased an office complex consisting of six separate buildings-five office 

buildings and a restaurant facility. One of the office buildings serves as the 

administrative office of the district and is the sole structure used or occupied by the 

district at this time. Portions of the other office structures are leased to private and 

governmental entities. The remaining office space and the restaurant facility are 

vacant 

The school district in its brief states that the office complex, known as 

Security Park, was purchased in its entirety for economic reasons. It asserts that the 

school board’s intention at the time of purchase was to sell all of the complex except 

p. 992 
Honorable Dale W. Elliott - Page 9 (m-188) 

the district’s administrative office, and it describes some of the steps it has taken to 

sell the property. As of tbe date of its brief, the surplus property had not been sold, 

and the AISD resorted to leasing some of the property and depositing the rentals in 

its treasury. The AISD concedes that at the time the property was acquired it did 

not anticipate using all of the facility itself, but it reserves the option of retaining any 

of the property that may be required for the district’s operations. 

The AISD argues that the Security Park complex is exempt from ad valorem 

taxation because it was acquired in the pursuit of the school district’s legitimate 

functions and is held for tbe purpose of resale.6 It directs us to cases which conclude 

that a political subdivision’s ownership of land under such circumstances is a public 

purpose for purposes of the constitution and section 11.11 of the Tax Code and the 

land therefore is tax-exempt to the political subdivision. See State v. City of San 

Antonio, 209 S.W.2d 756 (Tex. 1948); City of Austin v. Sheppard, 190 S.W.2d 486 

(Tex. 1945); Lubbock Indep. Sch. Dirt. v. Owens, 217 S.W.2d 186 (Tex. Civ. 

App.-Amarillo 1948, writ refd); Stare v. C&v of Houston, 140 S.W.2d 277 (Tex. Civ. 

App.-Galveston 1940, writ refd); see also Stare v. Moak, 207 S.W.2d 894 (Tex. 

1948); Eason v. David, 232 S.W.2d 427 (Tex. Civ. App.-Beaumont 1950, writ refd 

n.r.e.). However, with a single exception, each of the cases cited involved the 

acquisition of land by a taxing unit for purposes of collecting taxes (either through 

enforcement of a tax lien or purchase at a tax sale) and the holding of such property 

for resale. Taxing units are expressly authorized to acquire and dispose of property 

in satisfaction of taxes due on the property. Tax Code 03 34.01(c), 34.05. None of 

the tax cases involved the temporary leasing of the property pending the resale. We 

therefore do not find these cases dispositive of the AISD’s tax liability on the 

Security Park complex. 

The single exception among the cited cases is State v. City of Houston, 140 

S.W2d 277. There the city purchased a tract of land, a portion of which it intended 

to develop as a public street. The city intended to sell the surplus property if it 

%e board of trustees of an independent school district is vested with the exclosive power to 

“manage and govern the public free schools of the district” and may, in the name of the school district, 

aquirc and hold real and personal property. Edu~ Code 5 2326(a), (b). The board of trustees of a 

school district may seIl real property of the district if the proceeds of the sale are used for the pu.rchase 

of ‘more convenient and more d&able school property,’ the construction or repair of school 

buildings, or arc deposited in the local maintenance fund of the district. Id. 5 7330(a), (c). In addition, 

the property must no longer be needed for school purposes. Attorney General Opioioos JM-X00 

(1988); O-1570 (1939). 

p. 993 
Honorable Dale W. Elliott - Page 10 CN-188) 

received a fair offer. Pending the sale of the property, the city rented houses on the 

unused portion of the tract to private parties. The state and Harris County sought 

to collect back taxes on the property that were levied after the city acquired the 

tract The court of civil appeals concluded that the property was tax-exempt 

because the record reflected that the city’s motive in acquiring the entire tract was 

to conserve city road funds. The city chose to buy the entire tract because it 

received a much better bargain than it would have had it purchased only the portion 

necessary for the road. The renting of tbe property pending its sale did not, in the 

view of the court, change the character of the city’s interest in the property or the 

essential public purpose of the city3 use of the property. The property therefore 

remained tax-exempt. 

The AISD states that its acquisition of the Security Park complex was 

motivated by economic interests similar to those of the city in Cr?y of Houston, 140 

S.W.2d 277. It explains that the former owner of the property initially indicated a 

willingness to sell the AISD only that portion of the complex that the district sought 

for its administrative offices, but later decided to offer only the entire complex for 

sale. After considering other alternatives, the board of trustees concluded that 

purchase of the entire Security Park complex was the most economical alternative. 

Once again we emphasize that we cannot resolve the fact issues that are at 

the center of your inquiry. However, the facts portrayed by the AISD tend to 

support a tax exemption for the Security Park complex under section 11.11 of the 

Tax Code. The court in C& of Houston, 140 S.W.2d 277, concluded that public 

acquisition of land in excess of actual need constitutes a public purpose if the 

acquisition was intended to conserve the fund that made the public work possible. 

The public purpose is not lost if the political subdivision puts the property to 

productive use pending its disposal and the proceeds of this use are deposited to the 

credit of the public fund used to purchase the tract.7 The private use in these 

circumstances further conserves the public fund, serving yet an additional public 

purpose. Accordingly, if it is determined that the Security Park complex was 

acquired and is used in similar fashion, we believe that property would be taxexempt to the district 

?he funds used to purchase the tract were bond funds dedicated to road improvements. It is 

not dear whether the court would have required deposit of rentals to the credit of the original funding 

sowx if the bond funds had not been so dedicated. We are not ad&cd as to the SOUTCS. of the funds 

used by AISD to purchase the Security Park complex 

p. 994 
Honorable Dale W. Elliott - Page 11 (1~1-188) 

You also inform us that the Amarillo Junior College District has purchased 

real property adjoining the campus of knarillo College for purposes of future 

expansion. It has leased some of the property to private individuals pending the 

expansion. The district explains that it acquired 29 parcels of property, many with 

improvements., pursuant to a long-range expansion plan adopted by its board of 

regents in 1983. Four residences on the properties are currently leased to students 

or employees of &narillo College; eleven others evidently are leased to persons 

who are not students or employees of the college. Two units of an eight-unit storage 

garage facility are rented to persons who are not students or employees of the junior 

college. The remaining 20 structures were razed or moved or are currently used by 

the district. The district deposits rental income in its building fund. 

The district advises that the lease of these properties is temporary, pending 

implementation of the long-range expansion plan. It advances arguments and 

authorities similar to the AISD. In particular, it cites City of Abilene v. State, 113 

S.W.2d 631 (Tex. Civ. App.-Eastland 1937, writ dism’d w.o.j.) which involved the 

lease of city property acquired for construction of a reservoir. The property 

involved in the dispute constituted only a portion of the property that was required 

for the project; the city was unable at the time to acquire all of the property 

required for tbe project. Pending the acquisition bf the remaining property, the city 

leased the land acquired to that point. The court concluded that the temporary 

rental of the property would not remove its tax exemption because the purpose for 

which the property was originally acquired - construction of a reservoir -- was a 

public purpose, a purpose which the city had not abandoned when it leased the 

property for private use.s 

Tbe junior college district stipulates facts which, if true, would conform to the 

uses of public property approved in Ciiy of Abilene, 113 S.W2d 631. However, we 

tie City ofAbi.he case was disapproved ia City of Beaumont Y. Fe&a, 4l5 S.W.2d 902 (Tcx 

1967). because the wurt of civil appeals wrongly assumed that mrmicipal properly was within the. 

legislature’s authority to tax and that article VIII, sectlou 2 applied to municipal property. The 

supreme court in Fetiaa ruled that municipal property was not subjecr to taxation under the 

constitution. The supreme court has sincz retreated horn this holding, though it has not expressly 

overruled F&a@. See Saaedee, 576 S.W.Zd ?E$ Leader Independent School Disbkt, 479 S.WZd 908. 

And as noted earlier in this opinion, the legislahrre has provided for the taxation of municipal property 

consistent with the constitution. 

p. 995 
Honorable Dale W. Elliott - Page 12 (~~-188) 

believe this case governs only the renting of the storage garage units. This use of 

public property pending its ultimate public use does not destroy its tax-exempt 

status. The tax status of the residences owned by an institution of higher education 

and rented for housing purposes is governed by section 11.11 of the Tax Code. 

As previously noted section 11.11 of the Tax Code contains a number of 

qualifications to the general tax exemption provided public property under subsection (a). One such qualification is subsection (e), which provides the following in 

pertinent part: 

It is provided, however, that property that is held or 

dedicated for the support, maintenance, or benefit of an 

institution of higher education as defined in Chapter 61, ‘Texas 

Education Code, but is not rented or leased for compensation to 

a private business enterprise to be used by it for a purpose not 

related to the performance of the duties and functions of the 

state or institution or is not rented or leased to provide private 

residential housing to members of the public other than students 

and employees of the state or imtitution is not taxable. . . . 

The language of subsection (e) plainly implies that property of an institution 

of higher education dedicated to the support,’ maintenance, or benefit of the 

institution that is leased or rented to employeesor students of tbe institution for 

private residential housing is tax-exempt. Chapter 61 of the Education Code defines 

“institution of higher education” to include, inter u&r, a public junior college. Educ. 

Code g 61.003(g). A public junior college is any junior college certitied by the 

Coordinating Board of the Texas College and University System. Id. I) 61.003(2). 

We are informed that Amarillo Junior College is so certified. It is also apparent 

from the description of the facts that the parcels of property on which the houses sit 

are dedicated to the benefit of the junior college. Accordingly, the property of the 

junior college that is rented or leased to employees and students for residential 

housing is not taxable. On the other hand, property that is rented~ or leased to 

provide private residential housing to individuals who are not employees or students 

of the junior college is not tax-exempt. The property containing the storage garage 

units remains tax-exempt since its use conforms to the uses approved in City of 

Abilene, 113 S.W.2d 631. 

p. 996 
Honorable Dale W. Elliott - Page 13 D+l88) 

SUMMARY 

Property owned by the City of Amarillo consisting of an 

airport maintenance hangar that is leased to a private party for 

operation as such is exempt from ad valorem taxation if the 

property is used in direct support of the operation of the airport 

by the city. Buildings that are owned by the city are not taxexempt if they are owned purely for the purpose of renting them 

to private commercial interests. An office complex owned by 

the Amarillo Independent School District and partially leased to 

private parties and other political subdivisions remains taxexempt if the facility was acquired in its entirety for the purpose 

of conserving school district funds. Property acquired by the 

Amarillo Junior College District for purposes of future 

expansion and temporarily leased to private persons as storage 

units is tax-exempt. Property rented to students and employees 

of the junior college for residentisl housing also remains taxexempt, but property rented for these purposes to persons who 

are not students or employees is subject to taxation. 

DAN MORALES 

Attorney General of Texas 

p. 997 
Honorable Dale W. Elliott - Page 14 M-188) 

WILL PRYOR 

First Assistant Attorney General 

MARYKELLER 

Deputy Assistant Attorney General 

RENEAHICKS 

Special Assistant Attorney General 

MADELEINE B. JOHNSON 

Chair, Opinion Committee 

Prepared by Steve Arag& 

Assistant Attorney General 

p. 998