ATTORNEY GENERAL OFTEXAS 

GREG ABBOTT 

February 9,2007 

The Honorable Royce West 

Chair, Committee on Intergovernmental 

Relations 

Texas State Senate 

Post Office Box 12068 

Austin, Texas 7871 l-2068 

Opinion No. GA-05 14 

Re: Whether a city may designate as a reinvestment 

zone under Tax Code section 311.005(a)(5) an 

area that is not “unproductive, underdeveloped, or 

blighted” if no bonds or notes are issued to finance 

the area’s development or redevelopment 

(RQ-0442-GA) 

Dear Senator West: 

The late Senator Frank Madla, your predecessor as Chair of the Senate Committee on 

Intergovernmental Relations, asked whether a city may designate as a reinvestment zone under Tax 

Code section 3 11,005(a)(5) an area that is not “unproductive, underdeveloped, or blighted” within 

the meaning of article VIII, section l-g(b) of the Texas Constitution if no bonds or notes are issued 

to finance the area’s development or redevelopment.’ See TEX. CONST. art. VIII, 5 l-g(b); TEX. TAX 

CODE ANN. 5 3 11.005(a)(5) (Vernon Supp. 2006). 

Article VIII, section 1 -g ofthe Texas Constitution permits the Legislature to authorize taxing 

units to grant tax exemptions or tax relief and permits the Legislature to authorize cities and towns 

to finance improvements to promote development: 

(a) The legislature by general law may authorize cities, towns, and 

other taxing units to grant exemptions or other relieffrom advalorem 

taxes on property located in a reinvestment zone for the purpose of 

encouraging development or redevelopment and improvement of the 

property. 

(b) The legislature by general law may authorize an incorporated city 

or town to issue bonds or notes to Jinance the development or 

redevelopment ofan unproductive, underdeveloped, or blighted area 

within the city or town and to pledge for repayment of those bonds or 

‘See Letter from the late Honorable Frank Madla, Chair, Committee on Intergovernmental Relations, Texas 

State Senate, to Honorable Greg Abbott, Attorney General of Texas, at 1 (Feb. 6, 2006) (on file with the Opinion 

Committee, also available al http:/lwww.oag.state.tx.us) [hereinafier Request Letter]. 
The Honorable Royce West - Page 2 (GA-0514) 

notes increases in ad valorem tax revenues imposed on property in the 

area by the city or town and other political subdivisions. 

,TEx. CONST. art. VIII, 5 l-g (emphasis added), 

Tax Code chapter 311, the Tax Increment Financing Act (“chapter 31 l”), enacted pursuant 

to article VIII, section l-g, authorizes a city to designate an area meeting certain criteria as a 

reinvestment zone and to finance the improvement ~of property in the zone directly with tax 

increments or the proceeds of bonds or notes payable from the tax increments. See TEx. TAX CODE 

ANN. 5s 3 11.001 (Vernon 2002), 3 11.003, ,004, ,014 (Vernon Supp. 2006). “Tax increments” are 

generally the portion ofthe taxes derived by a taxing unit due to the difference between the appraised 

value of all taxable property in the reinvestment zone for that year less the appraised value of the 

property when the zone was established.. See id. 5 3 11.012 (Vernon 2002). In other words, they are 

the taxes attributable to the increased value of the real property in the zone due to its develbpment. 

See id. 

Your predecessor asked about a tax increment financing reinvestment zone authorized and 

established under chapter 3 11. He suggested that if no bonds or notes are issued to finance the 

development of property in a tax increment financing reinvestment zone established under section 

3 11.005(a)(S), then article VIII, section l-g(b) and its requirement that an area be unproductive, 

underdeveloped, or blighted do not apply to the zone. See Request Letter, supra note 1, at 1-2; TEX. 

TAX CODE ANN. § 3 11.005(a)(5) (Vernon Supp. 2006) (providing for petition requesting that area 

be designated as a reinvestment zone). Instead, he suggested, the designation of such an area is. 

governed by article VIII, section l-g(a) authorizingtheLegislature to grant exemptions or other relief 

from ad valorem taxes on property located in a reinvestment zone. See Request Letter, szdpra note 

1, at l-2. 

I. Legal Background 

A. Constitutional amendment required for tax increment financing 

The Tax Increment Financing Act of 1979 (the “1979 Act”); a predecessor of chapter 3 11, 

was determined to be facially unconstitutional by this office in Attorney General Opinion MW-3 37. 

See Tex. Att’y Gen. Op. No. MW-337 (1981). This office determinedthat the 1979 Actviolated the 

requirement of article VIII, section 1 (a) of the Texas Constitution that “[tlaxation shall be equal and 

uniform” by “causing an unequal distribution of the ad valorem tax burden.” Id. at 5; see TEX. 

CONST. art. VIII, 5 l(a). The 1979 Act limited the use of a part of the ad valorem tax revenues-the 

tax increments-to improving property within the tax increment district rather than for the general 

support of the city. See Tex. Att’y Gen. Op. No. MW-337 (1981) at 5. “[Tlhe earmarking of taxincrement revenue to pay for improvements within the tax increment zone meant that property within 

the zone was not contributing its fair share to the city’s general fund.” HOUSE STUDY GROUP, DAILY 

‘See Act of May 28, 1979,66th Leg., R.S., ch. 695, 1979 Tex. Gen. Laws 1661, 166147. 
The Honorable Royce West - Page 3 (GA-05 14) 

FLOORREPORT,HOUSECOMM.ONCONSTITUTIONALAMENDMENTS,BILLANALYSIS, Tex. S.J. Res. 

867th Leg., 1st C.S. (1981) (referring to 1979 Act). 

Article VIII, section l-g was adopted in 1981, and the adoption of article VIII, section l-g(b) 

ensured that the Tax Increment Financing Act of 198 1, codified at chapter 3 11 ,3 did not contravene 

the constitutional mandate that taxation be equal and uniform. See TEX. CONST. art. VIII, 5 l(a); 

City of El Paso Y. El Paso Cmty. Coil. Dist., 729 S.W.2d 296,298 (Tex. 1986) (“The reason for 

proposing the amendment [providing for participation by political subdivisions in the tax increment 

financing plan] was to provide a constitutional basis for the [Tax Increment Financing] Act.“). The 

Tax Increment Financing Act of 1981 took effect upon the voters’ approval of this amendment to 

the Texas Constitution.4 

B. Chapter 311 overview and criteria for tax increment reinvestment zone 

Under chapter 3 11, a municipal governing body may designate by ordinance “a contiguous 

geographic area in the jurisdiction of the municipality .-to be a reinvestment zone to promote 

development or redevelopment of the area if the governing body determines that development or 

redevelopment would not occur solely through private investment in the reasonably foreseeable 

future.” TEX. TAX CODE ANN. 5 311.003(a) (Vernon Supp. 2006); see also id. 5 311.003(b)+c) 

(procedures for adopting and contents of authorizing ordinance). The reinvestment zone ordinance 

must, among other things, establish a tax increment fund’ for the zone, which is used to finance 

improvements within the zone. See id. $5 3 11,004(a)(6), .014(b). The ordinance must include 

fmdings that “improvements in the zone ,will significantly enhance the value of all the taxable real 

property in the zone and will be of general benefit to the municipality” and that “the area meets the 

requirements of Section 3 11.005.” Id. § 3 11,004(a)(7)(A)-(B). 

Section 3 11.005(a) provides that in order to be designated as a reinvestment zone, an area 

must satisfy the following criteria: 

(1) substantially arrest or impair the sound growth of the 

municipality or county creating the zone, retard the provision of 

housing accommodations, or constitute an economic or social liability 

and be a menace to the public health, safety, morals, or welfare in its 

present condition and use because of the presence of: 

‘The Tax Increment Financing Act of 1981 was repealed andrecodifiedas chapter31 1 oftheTax Code in 1987. 

See Act of May 1, 1987,7Oth Leg., RX, ch. 191, $5 1 (adding title 3 to the Tax Code), 12 (repealing former article 

1066e, Revised Civil Statutes), 13 (providing that “no substantive change in the law is intended by this Act”), 1987 Tex. 

Gen.Laws 1410,1413-21,1466. 

“SeeAct ofAug. 10, 1981,67th Leg., lstC.S., ch. 4;s 4, 1981 Tex. Gen. Laws45,52 (“This Acttakes effect 

only ifthe constitutional amendment proposed by S.J.R. No. 8,67th Legislature, 1st Called Session, 1981, is adopted.“). 

‘After a reinvestment zone’s creation and for the zone’s duration, participating taxing units that tax real property 

in the reinvestment zone, with certain exceptions, must pay the tax increment into the tax increment fund. See TEX. TAX 

CODEANN. 5 311.013 (Vernon Supp. 2006). 
The Honorable Royce West - Page 4 (GA-0514) 

(A) a substantial number of substandard, slum, deteriorated, or 

deteriorating structures; 

(B) the predominance of defective or inadequate sidewalk or 

street layout; 

(C) faulty lot layout in relation to size, adequacy, accessibility, 

or usefulness; 

(D) unsanitary or unsafe conditions; 

(E) the deterioration of site or other improvements; 

(F) tax or special assessment delinquency exceeding the fair 

value of the land; 

(G) defective or unusual conditions of title; 

(H) conditions that endanger life or property by fire or other 

cause; or 

(I) structures, other than single-family residential structures, 

less than 10 percent of the square footage of which has been used for 

commercial, industrial, or residential purposes during the preceding 

12 years, if the municipality has a population of 100,000 or more; 

(2) be predominantly open and, because of obsolete platting, 

deterioration of structures or site improvements, or other factors, 

substantially impair or arrest the sound growth of the municipality or 

county; 

(3) be in a federally assisted new community located in the 

municipality or county or in an area immediately adjacent to a 

federally assisted new community; or 

(4) Deleted by Acts 1989, 71st Leg., ch. 1106, 5 27. 

(5) be an area described in a petition requesting that the area be 

designated as a reinvestment zone, if the petition is submitted to the 

governing body of the municipality .or county by the owners of 

property constituting at least 50 percent of the appraised value of the 

property in the area according to the most recent certified appraisal 

roll for the county in which the area is located. 

Id. 5 3 11.005(a). 
The Honorable Royce West - Page 5 (GA-0514) 

While subsections (a)(l), (2), and (3) of section 311.005 set out certain “unproductive, 

underdeveloped, or blighted” required conditions for land eligible to be included in a proposed 

reinvestment zone, subsection(s)(5) containsno similar requirements. Compare id. 5 3 11.005(a)(S), 

with id. 5 311.005(a)(l)-(3). But see Tex. Att’y Gen. Op. No. JC-0152 (1999) at 6 (construing 

section 3 11.005(a)(5) to permit the designation of only those areas that the city determines are 

“unproductive, underdeveloped, or blighted” within the meaning of article VIII, section l-g(b)). 

~11. Analysis ~ 

As we have already noted, your predecessor suggested that when no bonds or notes are 

issued, article VIII, section 1 -g(b) and its requirement that an area be unproductive, underdeveloped, 

or blighted do not apply to an area designated as a tax increment financing reinvestment zone under 

section 3 11.005(a)(S) because the designation of such an area Can be governed by article VIII, section 

l-g(a) instead. See Request Letter, supra note 1, at l-2. This suggestion is premised on the view 

that both subsections (a) and @) of section 1 -g authorize tax increment financing reinvestment zones 

and that subsection (b)‘s criteria apply only if the financing occurs through the issuance of bonds or 

notes. But, as our analysis will show, section l-g(a) permits the Legislature to authorize tax 

exemptions or other tax relief. Only section 1 -g(b) permits the Legislature to authorize tax increment 

financing, which does not involve tax exemption or tax relief. 

A. Literal language of section l-g(a) and (b) 

In construing article VIII, section 1 -g(a) and (b), we first consider the literal text and its plain 

meaning. See Stringer v. Cendunt Mortgage Corp., 23 S.W.3d 353, 355 (Tex. 2000) (stating that 

when interpreting the state constitution, a court looks at its literal text and gives effect to its plain 

language). Additionally, we construe its words as they are commonly understood. See Spradlin v. 

Jim Walter Homes, Inc., 34 S.W.3d 578, 580 (Tex. 2000) (stating that courts rely on the 

constitution’s literal text and construe its words as they are generally understood). 

1. Section l-g(a) 

Article VIII, section 1 -g(a) permits the Legislature to “authorize cities, towns, and other 

taxing units to grant exemptions or other relief from ad valorem taxes on property located in a 

reinvestment zone for the purpose of encouraging development.” TEX. CONST. art. VIII, 5 l-g(a). 

Subsection (a) does not mention tax increments or their use. Based on the literal language, section 

l-g(a) only authorizes tax exemption or other tax relief. See Stringer, 23 S.W.3d at 355. 

Tax exemption means that no taxes are due or paid. See William Cluirmont, Inc. v. State, 26 1 

N.W.2d 780, 784 (N.D. 1977) (stating that “the word ‘exempt’ is used to signifythat no tax is 

payable in the first instance”); BLACK’S LAW DICTIONARY 1474 (7th ed. 1999) (defining “taxexempt” as “[nlot legally subject to taxation”). No court or attorney general opinion has construed 

the term “tax relief’ as used in article VIII, section l-g(a). Based on established principles of 

statutory construction, however, we must presume that the term means something related to 

eliminating or reducing ad valorem taxes. See Spradlin, 34 S.W.3d at 580; BLACK’S LAW 
The Honorable Royce West - Page 6 (GA-0514) 

DICTIONARY 1293 (7th ed. 1999) (defining “relier’ as “[alid or assistance given to those in need, 

esp., financial aid provided by the state”). 

But tax increment financing does not involve exempting property from ad valorem taxation 

or providing other relief from such taxation. See TEX. TAX CODE ANN. $5 3 11.012 (Vernon 2002) 

(determination oftax increment amount), 3 11.014 (Vernon Supp. 2006) (use oftax increment fund). 

Under a tax increment financing scheme, a city designates a specific area as a reinvestment zone, and 

“[&]ny increase in ad valorem tax revenues from land within the zone is then committed to the 

purchase of property, improvement of approved property, or retirement of revenue bonds issued to 

provide funding for the approved projects.” City of El Paso, 729 S.W.2d at 296. Thus property in’ 

the reinvestment zone does not escape taxation or enjoy reduced taxation; rather, the tax is imposed 

on the entire value of the property, but a portion of the tax revenues derived from the property is 

dedicated to improving the reinvestment zone property rather than for the general support of the 

taxing authority. See TEX. CONST. art. VIII, 5 l-g(b) (authorizing use of “increases in ad valorem 

tax revenues imposed on property in the area by the city or town and other political subdivisions” 

to make property improvements); TEX. TAX CODE ANN. $5 3 11.012 (Vernon 2002) (determination 

of tax increment amount), 3 11 ,013 (Vernon Supp. 2006) (collection and deposit of tax increment), 

3 11.014 (use of tax increment fund) (Vernon Supp. 2006); see also Tex. Att’y Gen. LO-89-03 1, at 

.3 (stating that property in a tax increment reinvestment zone does not escape taxation; tax is imposed 

on the entire value of the property). If the reinvestment zone property were to be exempted or 

otherwise provided tax relief, there would be no or little tax increments to fund the improvements. 

2. Section l-g(b) 

Section l-g(b), on the other hand, specifically references tax increments, linking its use 

to bonds or notes: It authorizes a~“city or town to issue bonds or notes to finance the development 

of an unproductive, underdeveloped, or blighted area” and to pledge to those bonds or notes 

“increases in ad valorem tax revenues imposed on property in the area by the city or town and other 

political subdivisions,” namely, the tax increments. TEX. CONST. art. VIII, § 1 -g(b); see also HOUSE 

COMM. ON CONSTITUTIONAL AMENDMENTS, BILL ANALYSIS, Tex. S.J. Res. 8,67th Leg., 1st C.S. 

(1,981) (“‘tax increments’ (i.e.[,] increases in tax revenues due to enhancement of taxable 

property”)). The specific reference to bonds and notes is not unusual in that the issuance of such 

obligations is the common method for obtaining funds to finance the up-front develbpment of the 

area; the tax increments are available only after and as a result of the development. See BLACK’S 

LAW DICTIONARY 1474 (7th ed. 1999) (defining “tax increment financing” as “[a] technique used 

by a municipality to finance commercial developments [usually] involving issuing bonds to finance 

land acquisition and other up-front costs, and then using the additional property taxes generated from 

the new development to service the debt”); see also ANALYSES OF PROPOSED CONSTITUTIONAL 

AMENDMENTS APPEARING ON NOVEMBER 3, 198 1, BALLOT, TEX. LEG. COUNCIL, INFORMATION 

REPORT NO. 8 l-3, at 3 (Sept. 198 1) (“The increases in property taxes resulting from redevelopment 

are called tax increments and occur because of the increases in taxable values of redeveloped 

property.“). 
The Honorable Royce West - Page 7 (GA-0514) 

By its terms, section 1 -g(b) specifically permits the Legislature to authorize tax increment 

financing but only in an area that is “unproductive, underdeveloped, or blighted.” See TEX. CONST. 

art. VIII, 5 l-g(b); Stringer, 23 S.W.3d at 355; Walker Y. Baker, 196 S.W.2d 324,327 (Tex. 1946) 

(stating that when the constitution grants a power, and where the manner of exercising that power 

is prescribed, it is implied that the prescribed manner excludes all others). 

3. Financing method 

Our conclusion that only section 1 -g(b) authorizes tax increment financing means that its 

criteria apply regardless of whether the tax increment reinvestment zone property is financed with 

bond or note proceeds or by some other method. A city need not issue bonds or notes to finance 

improvements in a tax increment reinvestment zone. See TEX. TAX CODE ANN. §§ 3 11 .Ol O(b), 

.013(b), ,014 (Vernon Supp. 2006); City of El Paso, 729 S.W.2d at 296. A city may finance 

improvements in a reinvestment zone either (1) directly with tax increment revenues, or (2) indirectly 

with the proceeds of bonds or notes or other agreements secured by the tax increment revenues. See 

TEX. TAX CODE ANN. $5 3 11.010(b) (Vernon Supp. 2006) (authorizing agreements pledging tax 

increment fund revenues to pay project costs), 3 11.013(b) (requiring taxing units to deposit tax 

increments into tax increment fund), 3 11.014 (authorizing payment of bonds or project costs from 

tax increment fund); see also City of El Paso, 729 S.W.2d at 296 (“Any increase in ad valorem tax 

revenues from land within the zone is then committed to the purchase of property, improvement of 

approved property, or retirement of revenue bonds [or notes] issued to provide funding for the 

approved projects.“). Thus chapter 3 11 permits but does not require a city to issue bonds or notes 

to make or finance improvements. See TEX. TAX CODE ANN. § 3 11 ,015 (Vernon Supp. 2006) (“A 

municipality creating a reinvestment zone may issue tax increment bonds or notes, the proceeds of 

which may be used to pay project costs ., .I’) (emphasis added); Tex. Att’y Gen. Op. No. JM-758 

(1987) at 3 (stating that the act allows a city to implement project plans by a number of methods 

other than issuance of bonds, including direct expenditures of tax increment funds). 

But a city generally cannot make significant improvements in a reinvestment zone without 

undertaking some type of financing. Even if bonds or notes are not issued, it is still necessary to 

obtain~the lump sum from another source to make the improvements because the tax increments 

come into existence and are available annually only after the tax value of the reinvestment zone 

property increases as a result of making the improvements. See TEX. TAX CODE ANN. 5 311.012 

(Vernon 2002) (determination of amount of tax increment); City of El Paso, 729 S.W.2d at 296 

(describing tax increment financing). As we understand it, while no bonds or,notes will be issued 

in this instance, the improvements will nevertheless be financed over time: The developers of the 

reinvestment zone property will pay for the improvements, and the city designating the reinvestment 

zone will, pursuant to a promissory note or similar agreement; repay the developer’s loan with the 

available tax increments.6 

‘See Memorandum Brief from Michael D. Bernard, City Attorney, City of San Antonio, to Honorable Greg 

Abbott, Attorney General of Texas, at 4-5 (Apr. 10,2006) (on file with the Opinion Committee). 
The Honorable Royce West - Page 8 (GA-0514) 

Thus, based on the literal text, section l-g(a) authorizes tax exemption and tax relief, and 

section l-g(b) authorizes tax increment financing. Because the use of tax increments does not. 

involve exempting property from taxation or providing other relieffrom taxation, section 1 -g(a) does 

not authorize tax increment financing. Tax increment financing and tax increment reinvestment 

zones are authorized only by section l-g(b), and its use is limited to an area that is “unproductive, 

underdeveloped, or blighted.” 

B. Legislative history 

The amendment’s legislative history and the circumstances surrounding its adoption support 

the construction that section I-g(a)‘s tax exemption or tax relief scheme is distinct from section 

1 -g(b)‘s tax increment financing scheme. See Republican Party of Tex. v. Die&, 940 S.W.2d 86,89 

(Tex. 1997) (stating that a court construing a constitutional provision may consider, in addition to 

the literal text, “the purpose of the constitutional provision, the historical context in which it was 

written, the collective intent, if it can be ascertained, of the framers and the people who adopted it”); 

Kirby Lumber Corp. v. HardinZndep. Sch. Dist., 351 S.W.2d 310,312 (Tex. 1961) (“Constitutional 

provisions must be construed in the light of conditions existing at the time of adoption, and it does 

not lie within the power of the Legislature to change their meaning, or to enact laws in contlict~ 

therewith.“). 

The Sixty-seventh Legislature, which proposed article VIII, section l-g in Senate Joint 

Resolution 8, also adopted the Tax Increment Financing Act of 1981 and the Property 

Redevelopment and Tax Abatement Act (codified at chapter 3 12 of the Tax Code) implementing the 

constitutional amendment7 A Texas Legislative Council analysis ofthe proposed amendment states 

that the amendment “would authorize the use of tax increment financing to encourage the 

redevelopment of property in economically distressed areas” and would also authorize “the local 

adoption of exemptions from property taxation to encourage redevelopment.” ANALYSES OF 

PROPOSEDCONSTITUTIONALAMENDMENTSAPPEARINGONNOVEMBER~, ~~S~,BALLOT,TEX. LEG. 

COUNC~, INFORMATIONREPORTNO. 81-3, at 4 (Sept. 1981) (emphasis added). And the analysis 

further explains: 

Senate Bill 17, the Property Redevelopment and Tax Abatement Act, 

implements Subsection (a) of Section l-g. It would authorize 

cities or towns to exempt all or part of the value of residential, 

commercial, or industrial property in certain designated reinvestment 

zones. To qualify for the exemption, the property would have to be 

economically impaired, be predominantly open or otherwise impaired 

so as to arrest redevelopment, or be located in or adjacent to areas 

qualifying for certain federal assistance. 

‘SeeTex. S.J. Res. S, 67thLeg., 1st C.S., 1981 Tex. Gen. Laws295;ActofAug. 10, 1981,67thLeg., lstC.S., 

ch. 4, 1981 Tex. Gen. Laws 45,45-53 (Senate Bill 16); Act,ofAug. 10, 1981,67thLeg., lstC.S., ch. 5, 1981 Tex. Gen. 

Laws 53,53-57 (Senate Bill 17). 
The Honorable Royce West - Page 9 (GA-0514) 

Senate Bill 16, the Texas Tax Increment Financing Act of 

1981, will also take effect if the proposed amendment is adopted. 

This act would implement Subsection (b) ofSection l-g, authorizing 

a city or town to designate an area within its jurisdiction as a 

reinvestment zone, redevelop property in the zone, and finance the 

redevelopment by bonds or notes payable solely from tax increments 

from the reinvestment zone. 

Id. at 4-6 (emphasis added). 

Similarly, the bill analysis from the House Committee on Constitutional Amendments states 

that: 

The implementing.legislation for subsection (b) of SJR 8, SB 16, 

. would allow cities or towns to designate areas which are 

deteriorating or unproductive as “reinvestment zones” and finance 

redevelopment projects in these zones through tax increment 

financing. 

The implementing legislation for subsection (a) of SJR 8, SB 17, 

authorizes cities or towns to create reinvestment zones for the 

purpose of residential or industrial tax abatement. The city or town 

must find that the area is deteriorating or unproductive before 

designating it as a reinvesttient zone. 

HOUSECOMM.ONCONSTITUTIONALAMTNDM!ZNTS,BILLANALYSIS, Tex. S.J. Res. 8,67thLeg., 1st 

C.S. (1981) (emphasis added);see also SENATEFINANCECOMM.,BILLANALYSIS,T~~. C.S.S.J. Res. 

867th Leg., 1st C.S. (1981) (stating that the first part of the amendment “is new and is offered as 

a preparatory step to making Texas businesses and low income citizens eligible for Federal Tax 

breaks under the Kemp-Garcia bill,” and the second part repeats the failed 1977 constitutional 

amendment authorizing tax increment financing). 

In sum, the Legislature that adopted both article VIII, section l-g(a) and (b) and the 

implementing legislation, intended subsection (a) to authorize tax exemption or tax relief such as the 

tax abatements authorized in the Property Redevelopment and Tax Abatement Act, codified at Tax 

Code chapter 312, and subsection (b) to authorize tax increment financing as provided in the Tax 

Increment Financing Act of 198 1, codified at Tax Code chapter 3 11. See Kirby Lumber Corp., 35 1 

S.W.2d at 312; see also City of El Paso, 729 S.W.2d at 298 (construing the term “political 

subdivisions” in article VIII, section l-g(b) consistent with the 1981 implementing legislation to 

include school districts because “the reason for proposing the amendment was to provide a 

constitutional basis for the [Tax Increment Financing] Act”). 
The Honorable Royce West - Page 10 .(GA-0514) 

III. Conclusion 

Because only section l-g(b) of the Texas Constitution enables the use of tax increments to 

make improvements in a particular area-the reinvestment zone-as authorized under chapter 3 11, 

its “unproductive, underdeveloped, or blighted” requirement applies to any designation of an area 

as a tax increment fmancing reinvestment zone, including an area subject to petition under Tax Code 

section 311.005(a)(5). Therefore, we conclude that a city may not designate an area as a 

reinvestment zone under Tax Code section 311.005(a)(5) unless the area is “unproductive, 

underdeveloped, or blighted” even if its plan of tax increment financing does not include issuance 

of bonds or notes. 

Given our construction that only Texas Constitution article VIII, section 1 -g(b) permits tax 

increment financing, we do not consider whether the “unproductive, underdeveloped, or blighted” 

requirement applies to a reinvestment zone designated under section l-g(a). 
The Honorable Royce West - Page 11 (GA-0514) 

SUMMARY 

A city may not designate an area as a reinvestment zone under 

Tax Code section 311.005(a)(S) unless the area is “unproductive, 

underdeveloped, or blighted” within the meaning of article VIII; 

section 1 -g(b) of the Texas Constitution, even if the area’s plan of tax 

increment financing does not include issuance of bonds or notes. 

KENT C. SULLIVAN 

First Assistant Attorney General 

ELLEN L. WITT 

Deputy Attorney General for Legal Counsel 

NANCY S. FULLER 

Chair, Opinion Committee 

Sheela Rai 

Assistant Attorney General, Opinion Committee