JIM MATTOX Attorney General

Supreme Court Building P. 0. BOX 12549 Austin, TX. 7871% 2549 51214752501 Telex 910/874-1387 Telecopier 512/4750288

714 Jackson, Suits 700 Dallas, TX. 752024506 21U7428944

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91 Texas, Suite 700 JUS~O”, TX. 77W2.3111 71~2235886

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An Equal OpportunItyI Aftlrmatlvs Action Employer 

# The Attorney General of Texas

:&arch31. 1986

HonorableAm PostmaMusgrove opinionNo.m-464 CbildrcssCountyA,ttomey Courthouse Ret Whether the city of Cbildress Childress,Texas 79201 is exempt from taxes under section 11.11 of the Tax Code, on city-owned airport land leased to individuals
Dear Ms. Musgrove:
You ask whet,berreal property med by a city but leased to private indlviduale is exempt from ad valorem taxation which the **county** and a hospi,tal district seek to impose. You informus that the property includesan airport operatedby the city inwhich some of the airport facilities are leased to an individual who sells fuel to airplane operatom. The lessee operates the facility as a commercial enterprise but sub,jectto the direction and control of the city as specified in the lease agreement. Also, the federal government operates **a** weather station and directs flight cdntrol at the airport. The land surround,ingthe airport is leased by the city to private individuals and corporations that use the land for commercial purposes, includ,lng farming and ranching. The city receives remunerationfrom the individualsin the form of rentalpaymentswhich are devoted exclusively, you assert, to the use and benefit of the public, specificallyincludingthe upkeep of the airport.
We understand you to .askwhether the city is exempt from ad valorem taxes on ,theairport operation, oo the airport facilities which are leasei. to an individual who sells fuel to airplane operators,and on the land surroundingthe airportwhich is leased for private commercial. purposes. We do not understandyou to ask whether the lesseeswilll~c:subject to taxationoo their leaseholds. We first address the airport facilitiesquestion andwill then address taxation of the surroundins; land. Article VIII, section 1, of the Texas Constitutionprovides the following in pertLumt part:

Taxal:l.oa

shall be equal and uniform. All real property and tangible personal property in this tsltate,whether owned by natural persons or corporations, other thanmunicipal, shallbe taxed in

p. 2126. Honorable Ann PostmaMusgrcve - Page 2 (JM-464)

proportion to it,svalue, which shall be ascertained asway be providedby law. Article VIII, section 2, of the Texas Constitution.provides the following inpertinentpart:

[Tlhe legislature my, by general laws, exempt from taxation public property used for public purposes. . . . (Emphasisadded). Article XI, section !):, of the Texas Constitution provides the following inpertinentpart:

The property of s:ounties, cities and towns, owned and held only folrpublic purposes, such as public buildings and tl;! sites therefor
. . . and all other property debvotedexclusively to the use and benefit of the-$blic shall be exempt from
. . . taxation.
. . . emphasis added). Section 11.11 of the lax Code sets forth the following: 511.11. Public Froperty (a) Except 811provided by Subsections (b) and (c)of this sectjon [whichare not here apposite], property owned b:~this state or a political subdivision of this-state is exempt from taxation if **the** property -is used for public purposes. (Emphasisadded).- Property of a political subdivisionwhich would otherwisequalify for exemption from ad valorem taxation under one of the foregoing constitutionalprovisions will not lose its tax-exempt status merely because a charge is made **:Eor use**  of the property or a profit is generated thereby, providei that charges are incident to its use by the public and the proceeds inure to the benefit of the political subdivision. Lower Colomdo River Authoritv v. Chemical Bank and

915 (Tex. 1967)(

, 190 S.W.2d-48, ~50 CT&. 1945); A b M Consolidated :hoolDistrlcllv. City of Bryan, 184 S.W.2d 914, 915-16 See also City , 415 S.W.2d 902, ,Walker,J.. dissenting);Galveston Wharf Company v.

23 (1884): Cf. City of Dallas v. 1937); SantaRosa Infirmary v. Cite 931 (Tex. Ccmn'n App. 1924, judgmt City of Galveston, 63 Tex..14, Smith, 107 S.W.2d 872, 878 (Tex. ofn Antonio. 259 S.W. 926, adopted); City of Palestfne v. Hissourl-Pacific Lines Hospital Association, 99 S.W.2d 311,-314 (Tex.Civ. App. - Amarillo 1936,writ ref'd) (cases involved not political subdivisions, but rather institutions of purely prblic charity). The fact that the city receives compensation for +le lease of its propertywill not deprive

p. 2127. HonorableAnn PostmaMusgrove - Page 3 (JM-464)

-. the city of its tax-exanpt status on the property if it would

otherwisebe tax-exempt.
But this discussion, of course, does not end our inquiry. The Texas SupremeCourt has consistentlyraafflrmed theprinciple that, in order for public property to be exaupt from ad valorem taxation, it rrmstbe held onlv for oub1.j.c Dumoses and devoted exclusivelv to the use and benefit df the bub:.ic.' Satterleev. Gulf CoastWaste Disposal Authority, 576 S.W.2d 773, 778 (Tex. 1978);Leander Independent School District v. Cedar Park Watsr Supply Corporation, 479 S.W.2d 908, 912 (Tex. 1972);Daugherty v. Thompson, 9 S.W. 99, 102 (Tex. 1888). The test for determiningwhethP:cuublic orooertv is tax exemDt is whether it is used for thehealth, &fort. 'andweifare of the niblic. It is not essmtial that it be used for "governmental" purposes. Lower Colorado River Authority 12 Chemical Bank and Trust Company, supra; Corporationof San Felipe I$ Austin v. State, 229 S.W. 845, 847 (Tex. 1921). It is sufficient t,hatit be used for "proprietary"purposes. A 6 M Consolidated Independent School District -v. Cit; df Bryan, supra. It is imaterial whether only residents of the district are benefitted or whether others benefit as well; the fact that property is owned by the public ctndis used for the health, comfort, and welfare of the public of gnome portion of the state is sufficient to entitle suchproperty to tre:-exempt status. & Power Co., Statev. Houston Lightins

609 8.W.2d :!63,270 (Tex. Civ. App. - Corpus Christi 1980, writ ref'd n.r.e.). (1982);IN-391 (1981). See also Attorney General Opinions MW-430

We have no difficulty in statlng as a matter of law that the city's airport and airpor,tfacilities, Including those leased to a private individual,are impressedwith a public purpose sufficient to meet Texas constitutional .andstatutory tests regarding ad valorem taxes. The Texas Legislature has specifically authorized all cities and towns. includinghome rule cities, to build and purchase airports and tomortgage or otherwills encumber airports,aswell as the land on which they are situated. See V.T.C.S. art. 1015~; see also V.T.C.S. arts. 126921;

1269j;46d-1 t!t:scq.("MunicipalAirpOrtB Act"). Article 46d-16,V.T.C.S., specificcilly provides %n relevantpart: Any property in this [sltateacquiredby a municipaltry for airport purposes pursuant to the provisions of this [slct [articles 46d-1 to 46d-221, and any income derived by such municipality from the ownership,operationor control thereof, shall be exempt from taxation to the sane extent as **other** propertyuc;edforpublic purposes.
In fact, municipal airports constructedwith public funds have been said to differ In no water:lalelement from other public facilities, such as a public auditorium or a municipal hospital. Hayden V. City

p. 2128HonorableAnn PostmaMusgroyre- Page 4 (a-464)

of Houston, 305 S.W.2d 798, 802 (Tex. Civ. App. - Fort Worth 1957, writ ref'd n.r.e.).
We mw turn to the iswle of taxationof the surrounding land. In City of Abilene v. State, 113 S.W.2d 631 (Tax. Civ. App. - Eastland 1937, writ dism'd), real <lroperty was acquired by the city for the purpose of constructing a reservior. After the purchase of the propertybut before the **consitructlon** of the reservoir,the city leased the laud to private persons who used the land for agricultural purposes. The court framed the question to be answered in the followingway:

when a citybecomes the owner of land acquired for a public purpose and there Is delay in the actual use of it for such purpose, will the temporary renting of the land and theuse thereofby **tenants** for agricultural purposes, in the absence of an abandonment of such public purpose, place such property beyond the power of the Legislature to provfde for its 

### l

mmption

from taxationuntil such time as the prollertybe actually used for such public purpose? TEmphasisadded). 113 S.W.2d at 633. The court assumed that the leasing of such lands for a purpose unrelated to ithe operation of the municipality did not constitute a public purpose?.,It relied upon the fact that there had been no abandonment of the public purpose for which the property was purchasedby the city in the first place and concluded that, in spite of the fact that there was 'uoactual public use of the property then involved, "public use" did not require continuous, uninterrupted, or unranittentuse.

It is, therefore, **our** view thatwhen the facts of a giveu case establish the ownership of property by a municipal corporation, which has been acquired for an authorizedpublic purpose, and the purpose for which it is owned and held has not been abandoned, suchproperty is to be regarded as used for public purposes, and the Legislature has the power to p,covideby general law for its exemption from taxation. 113 S.W.2d at 635.
In City of Beaumontv. Fertitta. 415 S.W.2d 902, 912 (Tex. 1967), however, the court expre&ly disapproved the holding in City of Abilene. The continuingv;%:lidity of Fertitta is itself doubtful, due in no small measure to 1:hLe novel legal analysis employed in the majority opinion. See Lellrtder Independent School District v. Cedar Park Water Supply CGoG?on--' 479 S.W.2d 908, 911-912 (Tex. 1972); ,-.

p. 2129HonorableAnn Postma Musgrme - Page 5 ,(X+464)

I

,- Attorney General Opinion MW-430 (1982). That notwithstanding, it is

clear that the court in both Fertitta and Leander construed the Texas Constitution to require acwal , exclusiveuse for a public purpose in order to qualify for exenlptionfrom ad valorem taxes. =F State v. Bouston Lighting k Power Compan& 609 S.W.2d 263, 266 Tex. Civ.App. - Corpus Christi 1980,writ ref'dn.r.e.1.
In order for property to be exempt from ad valorem taxation,such property must be exempt under both the applicable Texas statutory provisions and the Texas Constitution as well. Normally, such a determination involves reso:lutions of factualmatters upon which this office is not empowered t'3rule. However, in light of the express disapproval of the City of Abilene case by the supreme court and the requirementof actual, exclusiveuse for a publicpurpose in order for public property to be held ‘tax-exempt ,we conclude as a matter of law that, in the instance you #describe,the city is not exempt from ad valorem taxation on the city-owned land surroundingthe airportwhich is leased for commerctaland agriculturalpurposes. SUMMARY
In the fact s,ituationherein described, the city is not exempt: from ad valorem taxationon the city-owned land surrounding the airport which is leased for commercialand agriculturalpurposes.
Very rulyyour,

. d-b JIM MATTOX Attorney General of Texas JACKHIGETOWKR FirstAssistantAttorney Gtxvral
MARY KELLER ExecutiveAssistantAttonwy General
ROBERT GRAY SpecialAssistantAttorney General
RICK GILPIN Chairman,Opinion Comnittec: Preparedby JimMoellinger AssistantAttorney General

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