THE ATTORNEY GENERAL OF TEXAS

Honorable Mark W. Stiles Opinion No.JM-1060 Chairman CountyAffairs Committee Re: May an attorney who Texas House ofRepresentatives serves on the board of P. 0. Box 2910 directors of an appraisal Austin, Texas 78769 district contract with a participating taxing unit to collect delinquent taxes (RQ-1650)

Dear Representative Stiles:

You askwhether aprivate attorney who isadirector.of
an appraisal district may contract to collect delinquent taxes for ataxing unit that participates inthe appraisal district. Wewill first consider whether the attorney would bedisqualified by statute frcm serving on the appraisal district board.

An appraisal district isestablished ineach county to appraise property foradvalorem taxpurposes of the taxing units in the district, which include the county, cities, school districts, and any otherpolitical unit that imposes advalorem taxes on property. Tax Code 5 6.01: seeid. F,1.04(12) (defining "taxing unit"). The fivemember board ofdirectors of the appraisal district is elected by the governing bodies of the county, the cities, and the school districts inthe appraisal district. Id. § 6.03. Section 6.03 of the Tax Code, which sets out the eligibility requirements for directors of the app~raisal district, includes the following restriction:

An individual
. . .isnot ineligible because ofmembership on the governing body of a taxing unit orbecause the individual is an r elected official. However, an emolovee of a taxing unit that narticioates inthe district isnot elisible to serve on theboard unless the individual is also a member of the governing body or an elected official of
ataxing unit that participates in the district. (Emphasisadded.)

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Id. 5 6.03(a).

Section 6.30(c) of the Tax Code authorizes contracts between a taxing unit and an attorney to enforce the collection ofdelinquent taxes. Inour opinion, an attorney who contracts under this provision is an independent contractor and not anemployee of the taxing unit. An independent contractor contracts to do a specific piece of work for another, furnishes and controls his assistants, and does thework without being subject to the other's orders on itsdetails. Halliburton v. Texas Indemnitv Ins. co., 213 S.W.2d 677 (Tex. 19481. refers to the attorney as ‘a"privatei Section 6.30(a) attorney. See'aenerally Attorney General Opinion JM-14 (1983) (county may not contract with county attorney under section 6.30(a) of the Tax Code).'

Attorney General Opinion V-137 (1947)determined that the predecessor of section 6.30did not authorize a commissioners court to hire individuals v to collect delinquent taxes on acommission basis. The county had authority to arrange fordelinquent tax collections on acommission basis only by contract pursuant to the predecessor of section 6.30. &at 2. An attorney who contracts to collect delinquent taxes fora taxing unit is not an employee of that unit and is therefore not disqualified from service on the board of directors under the quoted provision of section 6.03(a).

You ask whether the contract creates a conflict of interest .forthe director of the appraisal district, because the board ofdirectors establishes policy for the chief appraiser's determinations of taxable values and exemptions and the contracting attorney may eventually derive a fee based on those values. We will outline the process of tax appraisal and collections to provide a context for our discussion ofyour question.

The Tax Code contemplates a three-step process: appraisal, assessment, and collection of taxes. See Attorney General Opinion JM-35 (1983). The appraisal district participates inthis process only during the first step. The district board of directors establishes an appraisal office and appoints a chief appraiser who determines the value of property and decides whether applicants forexemptions are entitled to them. Tax Code
s 6.05, chs. 11, 22, 23, 25; see cenerally Attorney General Opinion JM-499 (1986). The appraisal district board also appoints the board which reviews the appraisal records prepared by the chief appraiser. Tax Code 55 6.41, 25.22, 41.01. If the appraisal review board finds that the appraisals do not comply with law, itdirects the chief

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appraiser tomake the necessary corrections. Id. 55 41.01, 41.02; see Attorney General Opinion JM-981 (1988).

When the appraisal records have been approved by the appraisal review board, they constitute the appraisal roll for the district. Id. 5 25.24. The chief appraiser certifies the relevant part of the appraisal role to the
assessor for each taxing unit participating inthe district. Id. 526.01. The governing body adopts atax rate, and the
assessor computes the tax owed oneach property and sends a taxbill to the property owner. Id. 55 26.05, 26.09, 31.01.

If the tax isnotpaid on time, the taxing unit may file suit to collect it. Id. s33.41. The governing body of the taxing unitmay contract with anattorney to enforce the collection of itsdelinquent taxes foratotal compensation not to exceed 20percent of the amount of delinquent tax, penalty, and interest collected. Tax Code § 6.30(c).
Chapter 171of the Local Government Code1 deals with conflicts of interest of "localpublic officials," including directors of an appraisal district. Local Gov't Code § 171.001(1). A local public official commits anoffense if heknowingly participates inavote ordecision on a matter involving abusiness entity inwhich he has a substantial interest if "theaction on the matter will have a special economic effect on thebusiness entity that isdistinguishable fromthe effect on thepublic." Acts 1987, 70th Leg., ch. 362, §4, at 1799 (amendingarticle 988b, section 4, V.T.C.S., now codified as section 171.004 of the Local Gov't Code.)2 A localpublic official who has such an interest.in

1. Former article 98833,V.T.C.S., was recodified as chapter 171of the LocalGovernment Codeby the 70th session of the Legislature. Acts 1987, 70th Leg., ch. 149. The

same session of the legislature adopted amendments to former article 988b,V.T.C.S., without reference to the repeal and recodification of that provision. The amendments are preserved and given effect aspart of the code provision. Gov't Code 5 311.031(c).

2. Section 171.003 (a)(l)of the Local Government Code bars a localpublic official fromknowing participation ina vote ordecision "ona matter involving abusiness entity" inwhich he has 'Iasubstantial interest if it is reasonably forseeable that an action on the matter would confer an (Footnote Continued)

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abusiness entity must filean affidavit describing that interest and abstain from participation in the matter. Local Gov't Code 5 171.004.

The attorney's law firm isa business entity within chapter 171 of the Local Government Code. Id. 5 171.001. Presumably, he has a *'substantialinterest" inhis firm. Chapter 171of the Local Government Codewill apply to the attorney's participation in decisions of the appraisal district ifaction by theboard onamatter "will have a special economic effect on thebusiness entity that is distinguishable fromthe effect on thepublic." The issue before us iswhether the appraisal district board's actions in establishing appraisal policy will have a special economic effect on the law firmof the attorney who holds the delinquent tax collection contract because tax bills are based onproperty values and tax rates and the attorney's fee isusually a percent of the amount of delinquent tax, penalty, and interest collected. Tax Code 5 6.30; see also Attorney General Opinion JM-857 (1988).

Our summary .of the tax appraisal and collections process shows that officials andboards other than the appraisal district board make decisions~that affect property valuation. You indicate that theboard establishes policy implemented by the chief appraiser indetermining taxable values and exemptions, but theboard's policy and the chief appraiser's determinations must also comply with Tax Code provisions. See oenerallv Attorney General Opinion JM-499 (1986). The chief appraiser's decisions are reviewed by the appraisal review board, which may order him tomake changes. Members of the appraisal review board are appointed by the appraisal district board for twoyear terms of office. Tax Code § 6.41. Directors of the appraisal district and employees of the appraisal office are among the persons disqualified from service on the appraisal review board. Id. The county appraisal district and the appraisal review

(Footnote Continued) economic benefit to thebusiness entity." Senate Bill 1131 of the 70th Legislature inserted the language "or real property" after "business entity" inthis provision. Acts 1987, 70th Leg., ch. 323, § 1,at 1733. House Bill 1948 of the 70th Legislature adopted anew standard forthe circumstances which barred a local public official with a substantial interest in amatter from participating in board action. Acts 1987, 70th Leg., ch. 362, at 1799. These amendments can be harmonized by adopting the standard of House Bill 1948,which also applies to real property. w Gov't Code 55 311.025(b), 311.031(c).

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board are separate and distinct bodies. To&e Sauare &.soc. v.Anoelina Countv Aonraisal Dist., 709 S.W.2d 776, 778 (Tex.App. -Beaumont 1986,nowrit) (noticeof appeal served on the district board does not constitute notice to the review board). The appraisal district board does not control theproperty values submitted to the taxing units.

The appraisal board's participation in the taxing process ends when the chief appraiser certifies the appropriate part of the appraisal roll to each taxing unit inthedistrict. Thus, it has nopart inestablishing the secondmain determinant oftaxbills --the tax rate adopted by the governing body of each taxing unit. Moreover, the board's appraisal policies must necessarily be consistent with law, and theboard would seem to lackpower to increase appraised values in order to increase fees for collecting delinquent taxes. Board actions in adopting appraisal policies should have only aminor andpredictable effect on thevalue of tax collections contracts within the district. We conclude, as amatter of law, that under the Tax Code provisions we have discussed, theboard's actions in establishing policies forproperty appraisals do not "have a special economic effect" on anattorney who has contracted under section 6.30 of the Tax Code to collect delinquent taxes for a local taxing unit. Therefore, chapter 171 of the Local Government Code does not require the director to
recuse himself from the board's decisions on appraisal policy.

Under other circumstances, however, the attorney's interest inacontract fordelinquent tax collections might require him to recuse .himself. For example, if the appraisal district board of directors contracts with a taxing unit to collect its taxes under section 6.24 of the Tax Code, adirector who collects delinquent taxes for the
same taxing unitmay have to recuse himself from some board actions related to the district's contract. See also Tax Code 5 6.26 (electionto require that appraisal district collect property taxes forall taxing units).

You askwhether the office ofdirector of an appraisal district is incompatible with theduties, loyalties, and responsibilities ofaprivate attorney collecting delinquent taxes foraparticipating taxing unit. InLetter Advisory No. 87 (1974), this office stated that the common law doctrine of incompatibility does not apply to an independent contractor who works forapublic agency pursuant to contract. Moreover, ourdiscussion of chapter 171 of the Local Government Code is relevant toyour question about incompatility. The lackof connection between the functions of the appraisal district board and the taxing unit's collection ofdelinquent taxes would probably also prevent the two

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positions frombeing incompatible. See oenerallv Attorney. General Opinion JM-203 (1984) (discussing common law doctrine of incompatibility).

The attorney is subject to the Texas Code of Professional Responsibility, which includes provisions relevant to the conflicting loyalties which might arise in cases like the oneyou present. Disciplinary Rule 2-103provides in part:
(A) A lawyer shall not recommend employment, as aprivate practitioner, of himself, his partner, orassociate to anon-lawyer who has not sought his advice regarding employment of a lawyer, except as follows: [Exceptions omitted.]

Supreme Court of Texas, Rules Governing the State Bar of Texas art. X, 59 (Codeof Professional Responsibility) DR 2-103 (1982). Disciplinary Rule E-101, which relates to action as apublic official, provides inpart:

(A) A lawyer who holds public office shall not:

. . . . (3) Accept any thing ofvalue from anyperson when the lawyer knows or it is obvious that the offer is forthe purpose of influencing his action. as a public official.

Id. DR E-101 (1971).
Finally, section 39.03 of the Penal Code provides:

(a) Apublic servant commits an offense if, inreliance on information towhich he has access inhis official capacity andwhich has notbeenmade public, he:

(1) acquires or aids another to acquire a pecuniary interest in any property, transaction, or enterprise that may be affected by the information.

Neither the disciplinary rules nor the Penal Code provision prohibit thedual service you inquire about, but they are directed at curtailing the abuses that might arise under those circumstances.

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SUMMARY

An attorney who has contracted with a taxing unit to collect itsdelinquent taxes isnot an lVemployee"under section 6.03(a) of the Tax Code and isnot ineligible under that provision tobe a director of the appraisal district which includes that taxing unit.

An appraisal district director's contract to collect delinquent taxes for a local taxing unit does not require him to recuse himself pursuant to chapter 171of the Local Government Code fromparticipation in board actions establishing policy to be implemented by the chief appraiser.

The common lawdoctrine of incompatibility does not bar a director of an appraisal district from contracting under section 6.30 of the Tax Code with a local political subdivision to collect itsdelinouent taxes.

JIM MATTOX Attorney.General ofTexas

MARY KELLER First Assistant Attorney General

LOUMCCREARY Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLHY Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared by Susan L.Garrison Assistant Attorney General

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