Honorable Joe Gordon 

County Attorney 

Grty County 

Pamp, Texas 

Dear Sir: opinion No. o-~205 

Re, Constitutional and statutory 

tu exemption ofthe gas system 

.~v,... .a inoorpcrated oi'=y but 

serving .n Incorporated village 8 

miles distant for profit. 

4~ your letter of April 9, 1940, you ruladt for the opinion of this 

Department the following question, xhiohm quote from your letter, together 

with the l o0O.wpPnying factual eitu.tionl 

"lday I ham your opinion as to whether aa inoorporated oity which mm its 

om gas system is subSect to taxation by an independent school distriot aa 

to that portion of the system extending from its oity limits a distanoe of 

l ppro&mntely eight miles to and throughout u lnoorporated villageT 

"The City of M&an purchased its gag system from a p&vats owner aad lncluded in the system as a gas line from IboLeanto Alanread, . distance of eight 

miles, together with ssrvics lines and meters in Alanread. Part of this line 

and all servloe lines are in Alanreed Indspendert School District. This district has assessed that portion of the property in lta dlrtriot for taxation. 

"The operation of the distribution system in Alanreed IS not cam primarily 

for the benefit of the people of Alanreed, but for the p6op>e~ residing in 

Y&an, as the residents of MOLOU are rolling gas to the re8idents of 

Alanreed for a profit3 that is, at the mm nte which the resident8 of 

AImreed p&d for this eervioe at the time this utility 'RI owned by a 

private oonce~." 

Three pmvisiona of the Constitution of Tens are pertinent to thin 

inquiry which ne quote aa follows: 

'Article VIII, Section 1. Taxation shall be equal and uuiform. All proplrty inthis State, whether cmmd by natural persona or ccwporaticms, other 

v shall be taxed in proportion to its valus, which shwn 

asoertained a8 =y ba provided by law. . . . 

"Ark'.iole VIII, Seotion 2. . , e tit the LegislaturS may, by~geaeral laws, 

exempt from bation public property uced for public purpoees. . . . 
Honorable Joe Gordon - Page 2 (0-2P5) 

RArki~le XI, Seotion 9. The property of cmntics, oitles and towns, -3d 

and bald only for pblio purposes, suoh 33 pub110 tiildlngs and the sit33 

themfor. nra aginea and the firniture thereof, and all property used, 

or intended for sxtingui&ing fires0 public ground3 ar.d all other property 

devoted exclusiveljj to the u3e rnd benefit of the publio shall b exempt 

fra forced 3313 and fromtexation, pmvidud, nothing herein ah311 prevent 

th3 onforcensnt of the vendors lien, the meohPnio3 lien or builders lien, 

or other lines now existing." 

Fursu3ntto the fomgoing oon3titutioncl provisions, ths L3gislaturs 

of TOXWJ, by &-tiol3 7160, Vernon'3 Annotated Civil St3tutts3, enaoted tnto 

13~ the following tu sxemption: 

'The followjng pmperty shall be exmnpted from taxation, to-dtt 

*4. Publio property. All pmperty, whether real or personal, belonging 

sxolu3iv3ly to this Stat3, or 3ny political subditision thereof, . . ." 

It is evident frcmr th3 foregoing oonstitutionrl and statutory prov-i3icn3 that axsmption from mtion, la oonneotion withmuaioipal property 

3nd purposes, 13 not dependent upon ownership of the pmperty by the munioipality in question, but r&her upon the use to which such property is put, 

th& is, the prop~Q~ must be dwotad to orused for publio purposes. 

Regarding the us3 of munioipplly omed property *ioh ail1 givs rise 

to the 3bom ooastitutional prd statutory exon~ions, it w3s held la the 0333 

of Corporation of %n Fslipe de Austin V. State, 229 S.W. 6461 "the teat is 

not whether the property is used for government31 purposes. Th3t is not tho 

language of the Constitution. Thin oourt h33 n3ver 3do@ed that n3rmw limitation 3nd the weight of authority Is oppossd to it. Muoh property of 

munioipalitiss exempted from taxation has, and C(UI have, no governmental 

~33. The test is whether it 13 devoted exolusivsly to I public ~33." 

To the 33me effect is Galveston 'i%arf Co. Y. Galveston, 63 Tax. 14, 

holding that the interest of a city In a public wharf, rapresentec by stqck 

in a wh3rf corporation, was not tamble under the Constitution. There is 

nothing "governmental" in the publio ~3.3 of 3 wharf. 

i faot, the okership and operation bJ 3 munioip3lity of plblio utilities. suoh 33 the 3.8 evatsm involved here. hao been held. in the 0333 of 

San Gtonio Indepsn&t &hool Mstriot V. i6ater Work3 Boa& of Trustees, et al, 

120 S.U. (2d) 861, to be a "proprietary Punotion" in contradistinction to 3 

'gowrrmsntal funotion," in~that auoh utilitiaa pertain to the business 

affairs adrcinistered for the speoirl benefit, health cud welfare of the urban 

community ambraced within the corporate boundaries. But despite this 'nongovernmental" nature of the public utility systans owned and operated by 

nunicipolitios, in Texas, such pmpertios have been held, by all deoisions 

of this State, to bb exempt from taxation a3 "public promrty used for 

public purposss,' within the oonatitutional and statutory provisions. 
&norstJe Joe Qordon - Pop 3 (o-2205) 

brewer, the fmt that a portion of the gas system mder oonsideration hem i* looated beyond the.lI@ts of the city Of &&,m do,+a 

not, Of itself, militate lgaimt the exemption Of.suah sy&m h t-tIon. 

fn ++he**e Of City Of Ml.6 V. S1;pte, 28 6.X (26) 227, proparty 1666tsd 

in Denton County, but omd by th6 city of D.ll.3 rsld wed .I . mggmir 

to furnish water to the oitisens of Dallas, naa held tr, bs empt from 

tmtion, under the pertinent oonrtitutianal gnd statutory mq$giong. 

l&r doss the fast th.t rerarme ia dorimd w the City of xoL66n 

from the OPsratioa of this munioiplly omned gas syatsm operate to.rmovr, 

Or nullify the emmptioa froa tlution, aooordad tpl the Coastitutiom and 

*tatutes, if it i* ofhsrwise -ailable, under the prinoiplee hereb@ter 

discussad. The weight of authority is olserly to the sfPe& th&, 611 proPerti latilly owed and held by oitiss md towns ibr publIo purposes, 

though a 1)ouroe of revenue or profIt whioh was paid into the city Treasury 

and used for munioiprl purposes by the olty, ir rxsmpt frm Sate twtion, 

.ths dominant PurpOlO Ia th6 use kvirg direot nferanBa to the purporog for 

But in aroh of the oases oitrd, it apperrr trvn thefrota that tire 

incasno or rewnue of tho nualoipallty ia pu*MOn WM dwiwd fiaa the ~40 Of 

gas, mater, eleotriolty, eta. to ooneun6r6 '6itNa the lbIt3 of th6 m=iOiPfiity owning the pub110 utility, or, inoidentally, tocc0surner8 out*Ide *ha oity 

1Mts but adjacent thersto. The question prrsentod ha* is whether Or not 

the use of. put of the g.6 syetau Owned by the OlQ’ 0fYoLo.n to *amIoe, for 

a profit, the inh6bit6nts of th6 tm Of 436nH6d 6ight dl6* frlpfh6 lMt3 

to the oity of MoLeur removes the Inst6nt 0686 f?CSC th6 o6663 oIf6d, 30 63 

to Ed6 the prOp6rty table* 

w6 h6-m found no 6uthorities lr T6~63 b66ring uPOa this qu@stion, md, 

96 mo6ggity mu3t m3orf to ths ~rsu6siv6 wthoriti6n of other jurirdiotions~ 

There are h unoonflioting 1-66 of suoh l uthoritiU, 0116 holding that tb 

6~6m@ion from fucatioa of muEiCip611y om*d worka md Utiliti63 13 lrOt lO*t 

bo6ug6 Of 6a Inoidontil 1166 for a priYd6 purpoa6 fromwhloh rbwnU6 is 

dorimd, the Oth6r holdi3g that the UOO Of PNFafii*m by a Oily to *em bhab 

itant bsyond the oify tilts, rhioh Is n6ither laoldsntal nor IIISignifi~nt~ 

ig not 6 ~86 for pblio purpe606 iIithia th0 mSUiiSg Of fh6 6%6+iO& rclquirsnentg of th6 Conatltutian and StdUt6C, rsp6oitilyti5h r**prOt to oity PmP6r‘l;y out&do the Oity limit6 whloh 13 u66d OXOh6iV6ly t0 16l-W rosldents in 

the Out3ld6 t6rrItOryo 

Supporting the prinoipls of exenption upon th6 basis of inoidental US6 

am th6 a6863 of Comonwoalth v. City of Riohcond, Cccmnomm~lth 0. City of 

Covinfion, Tom of Korth Xavam. Borou& of’ Vhllingford, ud t’orrm of Ora2Qge 

V. City of Barrr, supra. 
Honorable Joe Gordcn - Page 4 (o-2205) 

Under the facts befors the court In the ease of Com!onwealth vo City 

of Richmond, it appeared that the adjacent town of Bprton Eieights petitioned 

the city council of Bichnond to supply about forty thousand galla of water 

daily on suohtsrms ~8 should teem to the aity reasonable end fair, until 

such time us artesian wells oould be drilled to supply the town of W-ton 

Heights with ample watero This request wa8 granted by ordinance whioh we.3 

'G&CO rsnwed and extendode In addition, the City of Richmond furnished 

water to the Richmond Looomotiva Harks, a branoh of the knsrlcan Looomotive 

i?orka, a luge and extensive plant located adjacent to the territorial limits 

of the City of &bond, and employing several thousand operatives whose 

residence is Idthin the aity Umito. The oity, under the same oonditions, 

finrished water to the repair ahopa of the Chesapeake and Ohio Railroad and 

tha Seabord Air Iins Railmuy, and also to I[. T. C&troll, living on the 

north side of Broad Street rdjaoent to the oity limits, and a few other 

parties under like oonditicnsa The aggragnte amount of ravemae derived 

fran Aunfshing water to industrial plants ad non-resfdents beyost+ the 

oity limits for the year 1911 amounted only'to the sum of $6,456.29. 

Under A oonstitutiaPIa1 provision exempting outnin properties, including "propox-Q directly or indireatly owned ly the St&e, however held, 

and pronsrty 14nhrlly o-d and held by oounttes, oitier, t-s aad sohool 

districts used wholly and exolusively for county, oily, topa or publlo school 

purposes," the couth denied the contention of the Ccnnmonwealth that the public utility property of the City of Rlotmond was tlable beoausa the oity 

had gone beyond its &&rter rights in fumishlng water and gas to psrsone 

residing beyond its corporate limits, and thus was engaged in "competitive 

Lusines" in tha matter of furnishingwater and gas to consumers for oompensation.. The court doolared that the oonstitutional exemptions fnnn ta+,lon 

abve quoted would not be "defeated or annulled by the mere faot that rev+ 

nue or profit aver and above the oost of maintenance, ie realized fromthe 

property~ that jP the use made ofthe pzr~p~rty 80 held has direct referenos 

to the purposes for whioh it is by law authorized to be onned andheld, and 

tends immediatelv and dirsotlyto promote those purposes, then its uee is 

within the provisions exempting the property from taxation, although revenue 

or profit is darivud therefrom as incident to suoh use." 

The QIO of Ccmunonwealth VI City of Covington, supra, turns upon A 

constitutional exemption from taxation nor0 closely paralleling that of our 

Texas Constitution, and reading: "Thare shall be exempt fromtaxation publia property used for publio purposes.' It WLS sought by the Cowonwealth 

of Rentuoky to reoover fromthe City of Covington, in Kenton County, tnxes 

upon lands, mservoirs, water maina, pumpingotations, engines, ato. aituated in Csrmpbell County and used AS a water plant or system for nupplying water 

to the inhabitants of the City of CovIngton and certain citizens of Campbell 

County residing neou its reservoir andwater maina. In holding the ooastltutional exemption fromtoJation to be applicable to this property, the court 

said: 

('The faot that appellee's reaervolr, pumping station, and some of it3 mains 

lie outnide oftha muniaipatity -ind in another county, or that It may incidentally dsriva 50~1) revenue from the use of t&water by persons living 
Iion. Joe Gordon - Pnga 5 (O-2205) 

ntxr its mains and outside the oily limits, ocmnot Affect the question. Very 

fen oitics ham such proparty situated within their ux-porate limits, And in 

many instances it haa'been found naosssary to locate itmilos a?my. The test 108 

Is the propertg used for pub110 p'urp~ses~ that in, prinmrlly for the health, 

comfort, And welfArs of the inhabitants of the olty? If so, it is exempt frcm 

tsration. We do not mean that a oity may s+cer upon, the lmsineas of maintaini::, 

a waterworks Aystem for other oities or towns, but Only thnt the fAOt thAt it 

incidentAlly furnishes WAter to a Oonsidareble nUnbet of peraon6 in proximity 

to the oiqy, without injury to the rights of the inhAbitAnts of the oity, does 

not Alter the publio OhArAuter or UBO of tkB property, or meke it subject to 

taxation." 

In the 018e of Tow of Or~np;s v* City of Eu'ra, AuprA, the public use 

Ofthe lrater svstom of the munioipality in question war srteblished EO aa to 

bring it with& +&a provisions of-the &Atuts Felating to eXAq'tions of property 

used for publio purposee, dEEpitA the hct that 'at CertAin 8eaoons of the year, 

more wAter ie supplied $r the defendurt water syr ten than is required for its 

mtiicipal purposes, which is sold by the defendant for meohmioal uses." 

Opposed to the principles oftu exanption amounted in the foregoing 

~ASIM, bao~uae of a differenoe in the fACta, W!O ftid the OABOS of Mayor And 

Aldermen of City of Woxrll10 v. PArk City, 172 6.W. 286: Rtileffiv. Xemrt, 66 

Atl. 662, Snd IMviok County v. City of l-or? Nans,. 161 8.2. 417, oaoh And AX 

illustretive of the prinoiple of 1Aw thet A u8e of munioipally owned works end 

utilities to serve itiIdtantr.beyond the oily limits, whioh la neither inoidentml nor insi~ifioant, is not A US0 for pub110 pWpOsW Within the meaning of tax 

0xaPaption requirmoents. 

The oontentions And feats involvud in the OAee of Meyor And Alderman 

of City of Knotille v. Parks City, supra, mAy be stated fnu %he opinion in 

that OASd AS follcw.?: 

"The bill of canplaillt prOoeeds upon the theory that the property attempted to 

be taxed is exempt because owned by A municipal oorpcration; while it is the 

contention of defendsst oity thet ruch portion of the plant of ocanplelnent 

which IS situated within the bOUIdAries of Park City is not used exolus?vely 

for pub110 or corponrtion pIEpose Of the OCWkplAinABt munioipAlity, but is 

used in serv$ng PAI% City for profit. 

"It Ap&i,ArS thAt the rest boundvy line of Park City is almost oontiguous to 

the east boundPry line of the city of &~oxvllle for A dlStAnce of Abxt one 

mile. Them intervenes whet is deeoribad As a nsutrrl strip, About 300 feat 

wide, onwhich fnctories w 1OoAtAd. 

"Prior to 1909, both of the oities ware served by A privAts WAter corporation, 

the I;notills Water Company, the plant of which was looetsd partially in the 

territory of oath of them. Under 1egiSlAtiOn later noted, the oity of Knoxville 

IXI 1909 acqu&red the plant of this o~lpary, including thet PAX-t Situated in 

Purk City, a&i ASSUWXI the coutrrct tl:an lz existancs betwoe: the ccnpamy 
Eon. Joe Gordon - page 6 (O-2205) 

and Park City, and has since operated Its plant thers. 

'The pmof establishes that the plant of oomplainant aity lying within the tarritorlal limits of Fapk City la, aa to uQ0, independent of and not neoesaasy to 

that part of the systms ahioh is In Xn0xcUls and there in use for that oi@ and 

its inhabitants. I& mains for the Enoxrllle supply are laid in Park City. 

'%nw the purchase of the plant of the Eno~lle Water Ccsspany, the City of 

~oxville has charged the lnhabdtanta of Park City for water at rates which 

are 20 per cent higirer than lfr rates to its osn inhabdbtanta~ and a profit is 

made fs-0~1 the Park City plant. A portion of these pmflts hss been used to 

extsndwater llnss into and to 86~~ a third incorporated towa, Lonsdals, which 

lo not adjacent to ths City of &oxville.s 

The m-mntitutional md statutory exempt&one involved in this case are 

qupted rospe&Aygly, PI folloro~ 

s&l property real, parrrenal or mixed, shall be taxed, but the Legislature may 

exoept rush a.s may bo held by the atate, hy wuntieam olties or.torma, Pnd used 

ox~l~si~sly for publio or oorpratiorr purposea. 

"That all props-, real, prsonal aad mixed ahall b arrerred forixxatlon for 

State, oownty and munloipal purpo8011, exoapt auohar ir drolrmd exempt lnt he 

next seotion~ 

n8e~. S. That the property herein enlrmerated and nome 0th~ #hall M exempt 

framtaxation~ Al1 property of . . . aw lnoorporated alty, tom, or taxing 

dlstriot in the rtate that 10 wed exoluaivrly for publio or muniolpal oorp 

oration purposea." 

The ookt held th$t the physlorl prop rtlw of thewater system of 

Xnoxp~lle looatod wlthinthe bundarlea of Park City muld not be exempt from 

taxation 00 far as they r6rved tha muulolpal purposae of the latter munioiprllty, 

because :bay did not meet the oonstlt~ti0nal and statutory tosto of being em.- 

ployod exoluslrely for publio purpore8* 

Tn the oaae of Warwick County -?a City of bwport hwa, it mm held 

that where olty aoquired a rotor work8 rystaPI operating in olty and in territory 

oontiguoua to olty, purruant to oertaln l uthorlaing rtatutia, and rooairad moro 

than one third of total ro11enuo frOn arls ofrater to peraonl outeldo of city, 

the said mtor system wan liable to taxatioa baoauar not used either wholly or 

ox~lusl~ely for pub110 purp0ro8 of oity, under portlreat tax oxmsption prooiaiono 

of the Conrtltution, Tho ooti rooopalss(l~ tho dirtinotioa pointed out in tho 

two Umor of authorit am dlrcun8ed dth the follonIng lraguaget 

II . . . If tho outslda ULW be incidental or the rvrw~uo thorefrem 60 muall as to 

bs nogliglblo, the nmwrty is rtill oxmspt from taxation, but if the outeido 

wo is osssntial (I.e., Lnpoaod aa an inherent duty of ths oityas the omor of 

the propsrty) and la addition tho rwonuo derived is substantial, then the 

property io not oxsmpt fr0mtaxation. . . . 
. - 

lion. Joe Gordon - Page 7 (0.4205) 

” . . . % do not meen to intjmata thst, as the ounsr of the xstsrxofis, a 

mucicipality may not as a mere incident to Its business supply relatively 

limited quantities of water to persons outside of its territorial limits 

without subjecting Its property to taxation. RS do mean to say that, under 

tho facts of this oass, the supplying of water by tho city of Newport lievr; 

to a large nombsr of ooncumers in ikrwioh County and Xlisabeth City County, 

at reasonable rates, with the right to extend its mains to supply lrptsr to tiln 

citieens of York and &ass City oounties, cannot bs held to be a mere inoidont 

to supPlyin,gwatar to its ovm citizsn8, without disregarding the manifest 

import of the Constitution. E 153." 

In Stiles V. Rawport, supra, it was held that whore the municipal 

corporation of Newport had oonstruoted a branoh lino in another municipsllD~, 

West Derby, whioh was devoted wholly to the needs of the latter, and fur&shed 

its sater supply, that system was taxable by West Derby. Tho Court, in langusge hip>ly applicable to the instant situation, saldr 

"Tho municipal duty of the vil&;e of Newport as regards ths maintenanoe of mains 

and herdrants is confined to its territorial limits. The munioipal rslation which 

cntors into the question of dcmestin supply is oonflnod to its own inhabitants. 

The furnishing of arter to the inhabitants of the defendant village is held to be 

a public use upon the ground that the making of such a povision, ahile not 

strictly a municipal duty, is protootive of the publio health, and therefore a 

public use within the meaning of t&o laws relating to taxation. But this reasoning fails when the furnishing of water to tho village of West Dsrbjr Is In quuostion. He see no ground upon which the West Derby branch of this systsm oan be 

held to be devoted to D puhlia use, aither as mgards fire protoctioa or dcssestio 

needs. ?hs village of K8wpor-t 0~0s no municipal duty to the village of West 

Kcr3J or its inhsbitants, and has no municipal interest there. Its sale of xator 

to that village and Its inhabitants is for the rsvsnuo obtainable thersby, independent of any connection with municipal duty or interest* . . . 

sgsre, the tillago of &sport has built and installed a branch outside its oorporate limits, which Is devoted wholly to the needs of another tillago, and can 

never ba made available for its own munioipal sorvios~ and the question is 

whether the property so orentod and cirsumstsnoed shall be treated a8 soroiag 

an incidental and tharefore a public usa. It might not b3 ocq to frsme a sar’:, 

and ancsptabls definition of an incidental ~30, 3A ns think it may cafsly be 

said tk,at the supplying of the munioipal and domestic needs of another munioipolity through a complete system of distribution pipes and hydrants onatod for 

that purpose is not sooh a usor The plaintiff has assessed the hydrants located 

in Derby, and us hold that they are taxabla." 

From a careful snalysis and consideration of the authorities cited 

and disouscod in support of the two lines of dooisions regarding tgx exsmption 

of municipally owned utilities, wo am constrained to hold that tha gas system 

owned b<r the City of &&san but located outside tho city limits to a distanoe 

of eight miles and saticing the Css noeds of the inoorporated villagsot' Alanreed, is not exempt from ad valoram taxes levied w hllnreed Independent School 
Snorablp Joe Gordon - Page 8 (O-2205) 

District, under pertinent c~stitutianai and statutory tax exampkion provisions, 

because suoh property is not 'publio property used for publio purposes," nithin 

their intsndmcnt. The City of&Wan has no publio or oorporate purposes to 

some within the corporate llnits-of Alanrced. The furnishing of gas end other 

utilities to the Inhabitant.8 of Alanmod I.8 the munloipal purpose and duty sf 

Alanmod and not MoLeax. It Is not enough that the gas systam in question iz 

wined by M&an, hit such properties, to be entitled to tho t~,axanptica afforisd bythe Constitution and statutes, must be "public propwty'used for publio 

purposea.' AndthIs tax ex&nption test is not met by the faots of the instaut 

o&se where it nppe ars th8t the City of k&em8 undertakes to oontinuously supply 

g&s to the inhabitants of mother incorporated munioiplity eight miles distant. 

This is not the inoidcntaly supplying of *tar, gas, oleotricity, eto. to persons 

aad industrial oorporations olose to the oily limits, or the salr of a temporary 

over-supply.of such cczmnodity, witbAn the rule of law annouaoed in these dsoisiona holding that nn incidental or insigaifloant use of suoh property will not 

defeat theta% o%emptione 

Trusting that the foregoing fully uamerb your inquiry, wa are 

Yours very truly 

ATTORBEY GENEiU OF TEXAS 

By /o/ Pat Id. &ff, Jr. 

Pat 16. Gaff, Jr. 

Asslrtant 

APmovED JUNE 10, 1940 

/s/Gwld C. XAXZI 

ATTORNEY GENEFAL OF TEKbs APPROVED 

Opinion committee 

ayawl 

Chairma