Jl*I

Blxrrox July 22, 1988

*TroRNan-OEXEIIAL

Honorable Terra1 R. Smith Opinion No. JW-938. Chairman Natural Resources Committee Re: Whether a city and a Texas House of Representatives utility districtmay impose P.O. Box 2910 taxes for overlapping serAustin, Texas 78769 vices (RQ-1307).

Dear Representative Smith:

You ask whether a recent amendment to the Municipal Annexation Act has the effect of subjecting residents of a special district, such as amunicipal utility district, to the unconstitutional burden of double taxation when the district is annexed to a citybut has not been dissolved. We conclude that the amendmentdoes not expose the residents

P of an annexed political subdivisionto the threat of double

taxation by the city and the political subdivision. It does, hovever, create a conflictwith section 43.075 of the Local Government Code, which governs the annexation of certain special districts.

The legislation thatprompted your request is section 8 of Acts 1987, 70th Deg., ch. 1077, at 7397 (SenateBill No. 962). The bill amends section 8 of formerV.T.C.S. article 970a, the MunicipalAnnexationAct. Section 8, however, was repealed and codifiedas sections 42.041 and 42.042 of the Local Government Code during the regular session of the 70th Legislature. Section 311.031(c) of the Government Code provides that the repeal of a statuteby a code does not affect an amendment of the statuteby the same legislature which enacted the code and that an amendment is preserved and given effect as part of the code.

The specificportion of Senate Bill No. 962which draws your concern adds subsectionF to section 8:

F. Subject to the provisions of this Subsection, a city **may** annex a political subdivision for full or limited purposes and the political subdivision, its taxing

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authority, and its **board** of directors may continue to exist fora period not to exceed ten (10)year8 from the date of such annexation;provided that at the time of such annexation at least ninetypercent (902) of thewater, wastewater, roads, and drainage improvements forwhich districtbonds are to be issued have been installed and are complete in accordancewith the plans of such political subdivision to serve all of the
areawithin itsboundaries.

Acts 1987, Suorg, at 7399-7400. For convenience,we shall refer to this provision as subsection F. Your concern is that subsection F authorizes cities to annex political subdivisions such as municipalutility districts without abolishing the districts and assuming their bonded indebtedness. The residents of the annexed areawould thus become subject to the taxing authority of both the city and the annexedpolitical subdivisionwithout an increase in the level of services provided to the area. You ask whether the residentswould therebybe subjectedto the unconstitutionalburden of double taxation.

We note at this point that section 7(c) of article 97Oc,V.T.C.S., prohibits a city from imposing taxes on theproperty or residents of an area annexed for limited purposes on or after September 1, 1987. Article 97Oc was enacted **as** part of Senate Bill No. 962. m **Acts** 1987, sluxar at 7396. We **also** note that your guestion ispreceded by a **reference** to a municipalutility district that lies wholly within the extraterritorial jurisdiction of a home rule city. **We**will therefore assume that your question

concerns the "fullpurposeM annexationof the entire area of

amunicipal utility district. a Local Gov*t Code S 43.071 (citymust annex entire area of district created under Tex. Const. art. XVI, 0 59, outsidecity'sboundaries if no part of district is within extraterritorial jurisdiction of another city):Water Code 2 54.011 (municipalutility districtmay be created under art.XVI, 6 59).

The constitution of this state does not expressly condemndouble taxation. ArticleVIII, section 1, of the constitution,however, commands that taxationbe "equal and uniform.* It is this constitutional principle that is invoked in cases concerning claims of double taxation. Under this provision, the courtshave held that property lyingwithin the boundaries of both a city and a special

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**district** and subject to taxationby both for the same kinds of services does not constitute unconstitutional double taxation or taxation that isnot equal and uniform. w

is m Water -01 rove wt No. 2, 198 S.W.Zd 450 (Tex. 1946ev. z 449 S.W.Zd 508 (Tex.Civ.App. - Corpus ref'd n.r.e.): Q, 51 S.W.ld 784 (Tex. APP. - Galveston 1932, writ refed). See alsg Attorne; General Opinions JW-626 (1987); JM-400 (1985). The courts applied this rule where the taxing entitieswere created as separate entities under separateprovisions of the constitution, and both were delegatedthe power to assess and collect taxes to accomplish their respectivepurposes. It also appears that the courtswere persuadedby the fact that while both entities had the authority to provide the same services to the same area, only one of the entities could actuallyprovide such services. at 454. s.eaCitvof -I

Though **this rule**  **bears** potentiallyharsh consequences for the residents of an annexedpolitical subdivision, it is

a rule that finds acceptance in a number of other states. ze;6$eEi;len, &&&Dal Corooratk f 44.23 and cases

. SubsectionF of section 8 imposesno greater
aburden on these taxpayersthan the courtshave sanctioned. Subsection F does not requirethe annexing city to assume either the liabilities or duties of the political subdivision, nor does itdivest the political subdivision of its lawfulauthority for followingthe annexation.1 a period not to exceed ten If the legislaturehad req%ii the city to immediatelyassumethe duties and liabilities of the political subdivision,yet allowed the subdivision to retain its taxing authority, then a clear threat of double taxation would exist. m Wheelerv. Citv of Brownsva, 220 S.W.Zd 457 (Tex.1949) (statute requiring city to assume indebtednessattributable to part of water district annexed **by** city did not violate article VIII,

1. The ten-year limitation may be intended to allow the political subdivision to phase out its operations, retire itsbonded indebtedness,and delay the city's assumption of the duties of the district. The legislativehistory of thisprovision, however,provides little insight into the factorsmotivating the adoptionof the ten-year limitation.

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section 1, of the Texas Constitution, where district continued to operate over and assess taxes on the annexed area)

.
The possibility that the residents of the annexed political subdivisionwill not receive a reciprocal amount of services from the cityupon annexation does not render unconstitutional the statute authorizing the annexation of the political subdivision. The principle of equality and uniformity in taxationdoes not require that each person derive the same benefit as others from the expenditure of funds raisedby taxation. Wheeler v. Citv of Broe 220 S.W.Zd 457 (Tex.1949). Thismay operate harshly 0;

even unjustly against some taxpayers:however, this result does not offend the "equaland uniform*provision of article VIII, section 1, of the constitution. mris v. Citv of
m, 57 Tex. 635 (1882).
Thoughwe do notbelieve that subsection F imposes an unconstitutionalburden of double taxation on the residents of a political subdivisionannexedby a city pursuant to its provisions, we believe it creates a conflict with another statute affecting the authority of a city to annex the territorywithin certainkinds of specialdistricts. In the years followingthe Citv of Pelly andm cases, the legislature sought to spread the burden of retiring the indebtednessof certain kinds of special districts to the taxpayers ofhome rule cities that annexed such districts. In 1947 it enacted article 1182c-1, V.T.C.S., codified in pa* as section 43.075 of the Local Government Code. Section 43.075 applies to amunicipality that annexes all or part of the area of a water control and improvement district, a freshwater supply district, or a municipal utility district if the district does not include any area located in another municipality. Local Gov't Code 5 43.075(a)(l), (b). It applies also tomunicipalities that incorporate over all orpart of the area of such districts and adopt an ordinance making section 43.075 applicable to the municipality. & 9 43.075(a)(Z).&g Attorney General Opinion JW-565 (1986).If all the area of the district is annexed, themunicipality is required to take over all the property and other assets of the district, assume all debts, liabilities,and obligations of the district, and perform all functionsof the district, including the provision of services. & 5 43.075(d). This transfer of duties and obligationsmust takeplace by ordinance of themunicipality within 90 days after the date the areabecomes part of the municipality, or on the 91st day by operation of law. &

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*Honorable Terra1 Smith - Page 5 (JM-930)

5 43.075(e). The district is abolished once this transfer

occurs. & The remainder of the statute details the conditions under which and the methods **whereby the**  municipelity discharges the obligations of the district and acquires its assets and faoilities.

Section 43.075 reflects a longstandingand consistent public policy of requiring cities to assume the bonded indebtedness of the annexed portions of water-related specialpurpose districts. Thispolicy is carried forth in

a number of provisions relating to the annexation of water control and improvement districts, districts, municipal fresh water supply utility districts, irrigation districts, and conservation and reclamation districts. m Local Gov't Code 55 43.022(d); 43.074(d); 43.076(b); 43.077(b). The courtshave determined that the purpose of section 43.075was to avoid the duplication of functions by

a city and an annexed district. 270 S.W.ld 235, 239 (Tex. ref'd n.r.e.) (construingformerarticle 1182c-1,V.T:C.S.). But these provisions also appear to be inspiredby a desire to equitably adjust the taxburdens of the lesser and greater areas. Ford v. Town of ConoelJ

r S.W.Zd 304 (Texm - Dallas 1966, writ 're",$

n.r.e.). Section 43.075, then, addresses the described inyour letterrequestingthis opinion. problem

Subsection F creates an apparent conflictwith section 43.075. Subsection **F** dealswith the annexation of territory of anypolitical subdivisionby a city,while section 43.075 dealswith the annexation of enumerated special districts, includingmunicipal utilitydistricts, the focus of your inquiry. Because section 43.075 is the **more** specific but earlier enactment,we must determine whether subsection F governs the annexation of the specialdistricts enumerated in section 43.075.

Section 311.026of the GovernmentCode provides that in the event a generalprovision in a code conflictswith a specialprovision, the two shallbe construed, if possible,

so that both may be given effect. If the conflict is irreconcilable,the specialprovisionprevails as an exception to the general, "unlessthe generalprovision is the later enactment provision orevu? th manifest (knphasisaddyd.)

ent is that the aeneral

Although both articles 970a and 1182c-1were repealed and codified simultaneously,the amendment to article 970a

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was approved nearly one month aZter the approval of the Local Government Code. **m Acts**  **1987, 70th**  **Leg., ch.**  149, at 2548 (approvedWay 21, 1987),l&th Acts 1987, **70th** Leg., ch. 1077, at 7403 (approvedJune 20,1987). It happens that the more general provision is the later enactment, but

our review of the legislativehistory of Senate Bill No. 962 reveals no intentionto override themore specific provision governing the annexation ofwater districts. Indeed, in the tape recordings of the legislativehearings that were made available to this office in the preparation of this opinion,

nomention was **made**of **section** 43.075or its predecessor, article 1182c-1.

The legislativehistory of Senate BillNo. 962 suggests that it was a compromisebill designed to accommodate a variety of competing interests. **As** originally introduced, the bill gave cities the authority to engage in limited purpose annexation. At approximately the same time, the House of Representatives adoptedHouse BillNo. 1193, which sought to circumscribe the authority **of** cities to annex territory for limited purposes. H.J. of Tex., 70th Deg., Reg. Sess. 497 (1987). The engrossedversions of both bills containedvirtually identical versions of article 97Oc. L; S.J. of Tex., 70th Leg., Reg. Sess. 1739 (1987). Neither, however, contained subsectionF. The latter was added as a floor amendment to Senate BillNo. 962 in the House of Representatives. &g H.J. ofTex., 70th Leg., Reg. Sess. 3907 (1987).

House BillNo. 1193was tabled in the Senate, but the substance of the bill was incorporated intoSenate Bill No. 962. The senatebill thus appears to be the product of legislative compromise. We think that the floor amendment adding subsection F to the bill may also reflect an attempt to strike ahappy medium between the interested parties. &S Debate on Tex. S.B. 962 on the Floor of the House of Representatives, 70th Leg. Way 29, 1987) (tape recording available fromHouse Staff Services). Still, there is no indication in the available legislativehistory that the legislature considered section 43.075. Thus, we cannot conclude that the wmanifest intent"of the legislature was that the general provisions of subsection **F** govern a city's annexation of all or part of the area of a water control and improvement district, fresh water supply district, municipal utility district. Accordingly,we conclude thit section 43.075 of the Local GovernmentCode governs the annexation of such specialdistrictsby a city. Gov't Code 5 311.026(b).

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Section 8 of **Acts** 1987, 70th Leg., ch. 1077, at 7397 (amending section 8 of **former** article 970a,V.T.C.S.) **does** not impose the burden of double taxation on residents of a political subdivision annexed by a city pursuant to its provisions. This provision does not govern the annexation of the kinds of special districts described in section 43.075 of the Local Government Code.

JIM MATTOX Attorney General of Texas

MARYKELLER FirstAssistantAttorney General

Lou MccREARY F ExecutiveAssistant Attorney General

JUDGE ZOLLIE STEAKLEY SpecialAssistant Attorney General

RICK GILPIN Chairman,Opinion Committee

Preparedby SteveAragon AssistantAttorney General

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