ATTORNEY GENERAL OF TEXAS GREG ABBOTT



### The Honorable Joseph C. 

### Pickett Chair, Committee on Defense and Veterans' Affairs Texas House of Representatives Post Office Box 2910 Austin, Texas 78768-2910
Dear Representative Pickett: December 10,2012 Opinion No. GA-0981 Re: Authority of a county to form a transportation reinvestment zone, collect an ad valorem tax increment, and pledge and assign all or part of the increment to secure bonds to pay the cost of a transportation project (RQ-1 071-GA)

You ask whether a county is authorized to form a transportation reinvestment zone ("TRZ") for a transportation project, collect an ad valorem tax increment, and pledge and assign all or part of the tax increment receipts to secure bonds to pay the cost of a transportation project. 1 

### You also seek clarification of Attorney General Opinion GA-0953. Request Letter at 1. You ask specifically about section 222.107 of the Transportation Code, which appears in chapter 222, subchapterE, concerning toll facilities. 

### See TEX. TRANSP. 

### CODE ANN. §§ 

### 222.101-.110 (West 2011 & 

### Supp. 20 12). Section 222.107 authorizes a county to create a TRZ for a pass-through toll project under section 222.104. 

### See id. § 

### 222.107(b) (county TRZs); 

### id. § 

### 222.104 (pass-through tolls). A county commissioners court may designate an area as aTRZ "after determining that an area is unproductive and underdeveloped" and that action under section 222.107 would further specified statutory purposes. 

### !d. § 

### 222.107(c); 

### see also id. § 

### 222.105(2) (statement of statutory purposes, including the "facilita[tion of] the improvement, development or redevelopment ofproperty"). The order designating a TRZ must also designate an ad valorem tax increment base year. 

### !d. § 

### 222.107(f)(2), (4)-(5). When the county collects ad valorem taxes thereafter, itmay pay an amount representing the county's TRZtax increment, less certain amounts, into an ad valorem tax increment account. 

### !d. § 

### 222.107(h)(l); 

### see also id. § 

### 222.107(a) (providing the formula for establishing a county's ad valorem tax increment for a particular year). Finally, subsection (i-1) provides that "[i]n the event a county collects a tax increment, it may issue bonds to pay all or part of the cost of a transportation project and may pledge and assign all or a specified amount of money in the tax increment account to secure those bonds." 

### !d. § 

### 222.107(i-1).

1 See Letter from Honorable Joseph C. Pickett, Chair, Comm. on Def. and Veterans'Affairs, to Honorable Greg Abbott, Tex
. Att'y Gen
. at 1-2 (July 16, 2012), http://www
.texasattorneygeneral.gov/opin ("Request Letter")
.The Honorable Joseph C. Pickett

- Page 2 (GA-0981)

Thus, section 222.1 07 sets forth a statutory scheme that, so long as it is consistent with the Texas Constitution, would allow a county to form a TRZ, collect an ad valorem tax increment, and pledge an amount of money in the tax increment account to secure bonds issued to pay a transportationproject's costs. However, because section 222.1 07(i-1) purportsto authorize a county to issue ad valorem tax increment bonds secured with a pledge of the ad valorem tax increment account, we must consider the issue we reserved in Attorney General Opinion GA-0953-the potential constitutional limitations on a county' s authority to engage in ad valorem tax increment bond financing
. See Tex. Att'y Gen. Op. No. GA-0953 (2012) at 2. 2 In Attorney General Opinion MW-337, this office determined that the Tax Increment Financing Act of 1979 (the "1979 Act"), on its face, violated the constitutional requirement that "[t]axation shall be equal and uniform." Tex. Att'y Gen. Op. No. MW-337 (1981) at 5 ; see TEX. CONST. art. VIII,§ 1(a). The opinion determined that by authorizing a taxing authority to pledge the future increase in ad valorem taxes over a set base level-the tax increment-to the payment oftax increment project costs, the 1979 Act caused an unequal distribution ofthe ad valorem tax burden. Tex. Att'y Gen. Op. No. MW-337 (1981) at 5. The opinion observedthat all ofthe value ofproperty outside of the tax increment district would be taxed to pay the general expenses of the taxing authority while only a portion ofthe value ofproperty inside the district would be taxed for those purposes. 

### !d. Consequently, the opinion determined, the 1979 Act was unconstitutional absent an enabling constitutional amendment. 

### !d. In 1981, the Legislature proposed and the voters approved an amendment to article VIII, section 1-g(b) ofthe Texas Constitution, which now provides as follows: The legislature by general law may authorize an incorporated city or town to issue bonds or notes to finance the development or redevelopment ofan unproductive, underdeveloped, orblighted area within the city ortown and to pledge for repayment ofthose bonds or notes increases in advalorem tax revenues imposed onproperty inthe area by the city or town and other political subdivisions. TEX. CONST. art. VIII, § 1-g(b) (emphasis added). The plain text ofthe amendment enabled the Legislature to grant the authority to issue tax increment bonds to incorporated cities and towns, but it did not extend the Legislature's enabling authority to counties. See Collingsworth Cnty. v. Allred,

2Your request letter suggests that, because we answered your question in Attorney General Opinion GA-0953 on statutory grounds, we implicitly determined that no constitutional authorization is necessary for a county to issue tax increment bonds. See Request Letter at I. Your suggestion is inaccurate. In GA-0953 , we determined that because a county lacks statutory authority to engage in tax increment bond financing of improvem ent under chapter 3 1I of the Tax Code, it was not necessary to consider potential constitutional impediments to the exercising ofthat authori ty. Tex. Att'y Gen. Op
. No. GA-0953 (2012) at 2. Following the practice of the courts we generally consi der "c nstitutional questions [only] when we cannotresolve issues onnonconstitutional grounds." In reB.L.D., 113 S.W.3d 340, 349 (Tex. 2003). Nothing in GA-0953 suggests that a county with statutory authority to issue ad valorem tax increment bonds may do so in the absence ofclear constitutional authority.

### The Honorable Joseph C. Pickett

- Page 3 (GA-0981)

40 S.W.2d 13, 15 (Tex. 1931 )(observingrule ofconstitutional constructionthatthe statement ofone thing implies exclusion ofothers). More recently, in 2011, the Legislature proposed a constitutional amendment that would have enabled it to enact laws authorizing counties to issue ad valorem tax increment financing bonds, butthe amendment was rejected by the voters. See 

### Tex. H.R.J. Res. 63, 82d Leg., R.S. (2011). The article VIII, section 1(a) requirement ofequal and uniform taxation applies to counties. See Parker Cnty. v. Spindletop Oil & Gas Co., 

### 628 S.W.2d 765,767 (Tex. 1982). We are not aware ofany basis for determining that a county is authorized by the Texas Constitution to issue bonds secured by a pledge of an ad valorem tax increment. Consequently, we conclude that a county's issuance of tax increment financing bonds secured by a pledge of the county's ad valorem tax increment would be subject to constitutional challenge as violating the equal and uniform taxation requirements in article VIII, section 1(a) ofthe Texas Constitution.

### The Honorable Joseph C. Pickett

- Page 4 (GA-0981)



### SUMMARY A county'sissuance oftax incrementfinancing bonds secured by a pledge of the county's ad valorem tax increment would be subjectto constitutional challenge as violating the equal and uniform taxation requirements of article VIII, section l(a) of the Texas Constitution.

DANIEL T. HODGE First Assistant Attorney General JAMES D. BLACKLOCK Deputy Attorney General for Legal Counsel JASON BOATRIGHT Chairman, Opinion Committee William A. Hill Assistant Attorney General, Opinion Committee