### DAN MORALES

ATTORNEY GENERAL 

## QlXfice

of tfie !&tornep &,tate 

## of Zltexae

’ November 7,1997 

## QiSeneral

The Honorable Steven D. Wolens Chair, State Affairs Committee Texas House of Representatives P.O. Box 2910 Austin, Texas 78768-2910 Opinion No. DM-453 Re: Whether Harris County must hold a referendum election before imposing certain taxes authorized by House Bill 92, Act of May 22,1997,75th Leg., RS., ch. 551, 1997 Tex. Sess. Law Serv. 1929, 1929 The Honorable Senfkonia Thompson Chair, Judiciary Committee Texas House of Representatives P.O. Box 2910 Austin, Texas 78768-2910 (RQ-1002)

Dear Representatives Wolens and Thompson: You have requested our opinion regarding House Bill 92, Act of May 22, 1997, 75th bg., RS., ch. 551, 1997 Tex. Sess. Law Serv. 1929, 1929. That bill authorized certain political subdivisions to create “venue districta” to “plan, acquire, establish, develop, construct, or renovate.

. . . venue projects.” Local Gov’t Code ch. 335. Pursuant to that authority, Harris County and the City of Houston established the Harris County-Houston Sports Authority (the “authority’7 as of September 1, 1997. The authority is about to begin construction of its first “‘ venue project,” the Ballpark at Union Station, a facility for major league baseball. House Bill 92 authorized municipalities and counties to impose, inter &a, a short-term rental tax on motor vehicles of Local Government Code section 334.102,’ and a special hotel occupancy tax, Local Gov’t Code 5 334.252: as a moans of financing “venue projects.” The provisions of House Bill 92 permitting these taxes were made contingent upon their approval by the voters:

A municipality or county may impose a tax under this subchapter [shortterm motor vehicle rental tax] only iE (1) an approved venue project is or is planned to be located in the municipality or county; and

‘Local Gov’tCode§ 334.103(taxnotto exceed5percent). =ld.$ 334.254 (tax notto exceed2 percent).The Honorable Steven D. Wolens - Page 2

The Honorable Sent?onia Thompson (DM-453)

(2) the tax is approved at an election held under Section 334.024.) Id. $ 334.102(c). House Bill 92 also contained a grandfather clause that obviated the need for a second election to impose these taxes in certain situations:

SECTION 7. Notwithstanding any other provision of Chapter 334 or 335, Local Govemment Code, as added by this Act, au election to approve a sports and community venue project, to approve a method of financing for the venue project, other than the imposition of a sales and use tax or a facility use tax, or to create a sports and community venue district in a specific county or municipality is not necessary if, at an election held before the effective date of this Act, the voters of that county, or of the county in which the municipality or district is primarily located, authorized the establishment and operation of new or renovated stadiums, arenas, or other facilities for professional sports teams. This section: (1) negates the necessity of an election only for the type of venue project approved at the previous election; and (2) does not negate the necessity of au election for approval of the imposition of a sales and use tax or a facility use tax to fmance a venue project. An election to which section 7 clearly refers was held in the City of Houston and Harris County on November 5,1996. A majority of the voters appmved the following ballot proposition:

Authorizing Harris County to establish and operate new or renovated stadimns, arenas, and other facilities for professional baseball and football teams, provided that no county real or personal property taxes are spent to acquire, construct or equip these facilities. You first ask whether Houston and Harris County must hold another referendum election prior to imposing the taxes authorized by House Bill 92. You suggest that, since the ballot proposition did not disclose that the special hotel occupancy tax and the short-term car rental tax would be used as a method of funding, those taxes may not be levied without a second election. In addition, you contend that, to the extent that section 7 purports to authorize such taxes without a second election, it contravenes the due process clauses of the state and federal constitutions.

‘Section334.252(b)of theLocalGovemment Codeuses identical

language withregard

to thespecialhotel occupancy

tax. p. 2538The Honorable Steven D. Wolens - Page 3

The Honorable Senfmnia Thompson (DM-453)

We note initially that, in Attorney General Letter Opinion 96-120, we approved the specific ballot proposition at issue here, tinding that it “contains a fair description of the proposition submitted such that it can be understood by those entitled to vote and submits the question authorized by section 323.0035 with such definiteness and certainty that the voters will not be misled.” Letter Opinion No. 96-120 (1996) at 4. Except for the special requirements of House Bill 92, neither hotel occupancy taxes nor car rental taxes require a referendum before they may be imposed. Section 35 1.002 of the Tax Code permits a municipality to levy a hotel occupancy tax to be used for certain purposes specified in section 35 1.101, and section 352.002 authorizes certain counties to adopt such a tsx for the purposes listed in subchapter B of chapter 352, Tax Code. A statewide car rental tax has long been imposed by section 152.026 of the Tax Code. Neither the state nor federal constitutions require an election prior to the imposition of either kind of tax. See, e.g., Kelly v. Macon-Bibb CountyBd. of Elections, 608 F. Supp. 1036 (M.D. Ga. 1985);People ex rel. Stamos v. Public Bldg. Comm ‘ n, 238 N.E.2d 390, 398 (Ill. 1968). Thus, although the legislature chose in House Bill 92 to require an election in most counties to levy the special taxes authorized thereby, it was under no obligation to do so. Nor does the imposition of a hotel occupancy or car rental tax without an election have due process implications. Taxation does not constitute a taking of property without just compensation under article I, section 17, of the Texas Constitution. State ex rel. Pun Am Products Co. v. Texas City, 303 S.W.2d 780,782 (Tex. 1957), appeaZdism ’d, 355 U.S. 603 (1958). A reasonable exercise of the power of taxation does not constitute a denial of property without due course of law under article 5 section 19, of the Texas Constitution. Phillips Chem. Co. v. Dumas Zndep.Sch. Dist., 316 S.W.2d 382,385 (Tex. 1958), rev’d on other grounds, 361 U.S. 376 (1960). You suggest that the case of City ofHouston v. Fore, 412 S.W.2d 35 (Tex. 1967), stands for the proposition that due process requirea the disclosure to referendum voters of “the method and rate of taxation.” In that case, the city failed to notify a pmperty owner of a hearing at which he could have challenged certain street paving assessments. Under the situation described in Fore, the legislature, in article 1105b, V.T.C.S., had permitted an administrative determination of the assessment rate rather than prescribing a fixed formula Thus, due process required that rmindividual pmperty owner be afforded the opportunity to contest his assessment. In House Bill 92, on the other hand, the legislature has set a fixed maximum rate for the hotel occupancy and car rental taxes imposed thereby. The taxes are of general applicability and do not vary on the basis of the benefit

‘Theballotproposition

reads: Authorizing

Harris County toestablish

andoperate

new orrenovated

stadiums, arenas, and other facilities for professional

baseball andfootball

teams, provided that no countyrealor personal propay taxesarespenttoacquire, comet, orequipthesefacilities. ?-he statute

under whichtie referendum

eledionwas held,LocalGov’tCode5 332.003,authorizes a county to “submit

in anelection

of itsqualiied voters

thequestion

of whether

it shouldexercise

thepowersconferred

by tbis subchapter..”

Section332.002 autborizm a countyto “establish,

provide, acquire, maintain, construct,

equip,operate, andsupervise

recreotionalfociliries andprograms. . . .”
p. 2539The Honorable Steven D. Wolens - Page 4

The Honorable Senfronia Thompson (DM-453)

received by the taxpayer. As the court said in Fore: ‘TA]n owner ordinarily is not entitled to notice or hearing before assessment of the cost of public improvements in accordance with an inflexible legislative formula” Id. at 37. We conclude that the imposition of the hotel occupancy and car rental taxes imposed by House Bill 92 does not, in the absence of an election, contravene the due process clauses of the United States and Texas Constitutions. You also ask whether section 7 of House Bill 92 discriminates against the voters of Harris County, in that it generally requires a referendum election prior to the imposition of the special hotel occupancy and car rental taxes, but provides that an election “is not necessaty” in counties that have previously held an election to approve a venue project. In PZylerv. Doe, 457 U.S. 202 (1982), the United States Supreme Court declared:

The Equal Protection Clause directs that “all persons similarly circumstanced shall be treated alike.“

. . The initial discretion to determine what is “different” and what is “the same” resides in the legislatures of the States. A legislature must have sub&&al latitude to establish classifications that roughly approximate the nature of the problem perceived, that accommodate competing concerns both public and private, and that account for limitations on the practical ability of the State to remedy every ill. In applymg the wual Protection Clause to most forms of state action, we thus. seek only the assurance that the classification at issue bears some fair relationship to a legitimate public purpose. Id. at 216. Furthermore,

where individuals in the group affected by a law have distinguishing characteristics relevant to interests State has the authority to implement, the courts have been very reluctant

. . . to closely scrutinize legtslative choices as to whether, how, and to what extent those interests should be pursued. In such cases, the Equal Protection Clause requirea only a rational means to serve a legitimate end. Ci@ of Clebume, Texas v. CkbumeLiting Ctr., 473 U.S. 432,441 (1985). While it may readily be acknowledged that House Bill 92 treats Harris County residents different from residents of many other counties, it is also the case that residents of Harris County, for purposes of the purposes sought to be achieved by that legislation, are not similarly situated to those of other counties. Harris County had previously held a referendum election only months before the enactment of House Bill 92. The legislature might have determined thatthe residents of Harris County were in fact adequately informed of the funding sources for the pmject6 For this reason, and because the cost of holding an

‘Although theballot proposition

didnotstate

that hoteloccupancy

andcarrental

taxesweretobe employed as a fimding

me&a&m, their

probable USC was widely reported

in themedia: Themajor

source ofpublic funding fortbeballpark

will be $180million

from three sources:(coatblued...) p. 2540The Honorable Steven D. Wolens - Page 5

The Honorable Senfronia Thompson (DM-453)

election and the need to maintain public confidence in the Snality of election results, the legislature may well have concluded that wunties that had so recently held a referendum election on a venue project did not need to repeat the procedure. We believe a court would conclude that the classification scheme of House Bill 92, by obviating the need for an election in certain counties that had recently held a referendum election, sought to accomplish a “legitimate public purpose” by a
“rational means,” and that, as a result, House Bill 92 does not unwnstitutionahy discriminate against residents of Harris County on equal protection grounds. Finally, you ask whether section 7 of House Bill 92 is a “local or special law,” in contravention of article III, section 56 of the Texas Constitution. That provision states: “The Legislature shah not, except as otherwise provided in this Constitution, pass any local or special law

. . . regulating the atfairs of counties, cities, towns, wards, or school districts

. . _.” The Texas Supreme Court has stated that “[t]he primary and ultimate test of whether a law is general or special is whether there is a reasonable basis for the classification made by the law, and whether the law operates equally on all within the class.” Maple Run at Austin Mm. Util. Dist. v. Monaghan, 931 S.W.2d 941,945 (Tex. 1996); see also, Rodriguez v. Gonzales, 227 S.W.2d 791,793.

a cm@wide mtal car

tax,a limited

downtown

parking taxandstake

salesandliquortaxes generatedin and aroundthe stadium Public dollamfor the Astrodome will be hotel occupancy

taxrevewes andstate

salesandliquor

taxdollars

generated in andaround

the dome. JohnWilliams, Astms to Keep Home Base in Houston/Backers Face Uphill Fight in Winning Vote, Poll Shows, HOUSTON CfiRONICLS,

Sept.15,1996, atAl, A19. The questionon theballotcarries somecomplicated

andvaguelanguage,

butthe issue is fairlydirect:

Shouldthepowers-that-be use a car-rental

tax, a downtownparking

tax, the hotelmomtaxandstate

salesandliqucw

taxes tofootthew~nstmction

bii? AlanBemstein, HOusmN CHRONICLE, Candidates Playbook May Include Signals an Stadium Issue, Sept. 22, 1996,atA38. Imead, theyintend

torelyon hoteloccupancy taxes,somestate

Sales andliquor

taxesand proposed taxescm rental CBIS anddowntown

parking.John

William, OnDeck/lheStadium Vote/Stadium Vote Crucial 

### to City, Advocate Says, HOUSTON CHRONICLE,

Sept. 22, 1996, &Al, A27. A finalfnancing planis notin place,butEckeLs in countingon hoteloccupancy taxes,a proposed rental car taxanda downtown

parking taxamongpublicrevenues neededforthe two proposed

projects. JohnWilliams,$20 Million in Proper@ Taxes Spent on Dome, HOUSTON

CHRONICLE,

Oct.22, 1996,atAl, A8. Bunch alsosaid be opposes

using public money--including

hotel/motel

orcar rental taxes-to funda downtownstadium. RA. Dyer, Voter’s Guide, Texas House ofRepresentativesDUbict 145, HOUSTON

CHRONICLE,

Oct.27, 1996,at 18. “Butbecausestadium

constmction

would be paidforwith other revenues that consumers have discretionever paying, such as rental-car and hotel-occupancy

taxes, no vote is needed.” John

Williams andDanFeldstein, On Declu7’heStadium Vote/Questions Abound Regarding Vote on Stidium Proposal, HOUSTON CHRONICLE,

Nov. 3, 1996,atAl, A22.

p. 2541The Honorable Steven D. Wolens - Page 6

The Honorable Sentionia Thompson (DM-453)

For purposes of article III, section 56, analysis of the reasonableness of the classification imposed by section 7 is similar to the analysis applied to section 7 for purposes of equal protection and we therefore reach the Sameconclusion. J.n addition, section 7 operates equally upon all counties within the class described, i.e., those counties which had held, or could have held, the requisite election prior to the effective date of House Bill 92. In our opinion, a court would probably conclude that section 7 is not a “local or special law” in contravention ofthe prohibition of article III, section 56 of the Texas Constitution.’ 

### SUMMARY

Hsrris County is not required to hold an election under the provisions of House Bill 92, Act of May 22, 1997, 75th Leg., RX, ch. 551, 1997 Tex. Sess. Law Serv. 1929,1929. The imposition of hotel occupancy and shortterm car rental taxes does not, in the absence of a second election, contravene the due process clauses of the federal or state constitutions. Neither does House Bill 92 unconstitutionally discriminate against residents of Harris County on equal protection grounds. Section 7 of the bill is not a “local or special law” in contravention of article III, section 56, Texas Constitution.

DAN MORALES Attorney General of Texas JORGE VEGA First Assistant Attorney General SARAH J. SHIRLEY Chair, Opinion Committee Prepared by Rick Gilpin Assistant Attorney General

‘Becausewe believethata court would find thatsection7 is not a local or speciallaw, we do not need to consider therelevance

of article III,section57 of theTexasConstih~tion. p. 2542