July 27, 1987 JIX 3sxrrQx **.mToRxEY** Q~~ERXU.

Eonorable CarlosValdez Opinion No. JM-758 Nueces CountyAttorney 901 Leopard,Room 206 Re: Conditionsunderwhich taxing Corpus Christi,Texas 78401 units are required to make tax increment fund payments beyond threeyears
Dear Mr. Valdea:
Your letterrequestingan opinion from thisoffice reads inpart:

The Tax IncrementFinancingAct of 1981,article 1066e.V.T.C.S., among other things, provides the authorityand procedure for the establishmentof a reinvestment zone. Section 10(c) of said article attempts to explain when a taxing unit is.not required to pay a tax increment into the zone's fundbeyond a certain time limit.

, . . . My question is: Under section 10(c) of article 10660, must the three conditions set out therein existbefore a taxingunitwould notbe required to pay into the zone's fund or is the existenceof any one of the three conditions sufficient to satisfy the requirement?
The Tax Increment Financing Act of 1981,declared constitutional by the Texas Supreme Court in City of El Paso V. El Paso Community College District, 729 S.W.Zd 296. 29 Tex. Sup. Ct. 3. 541 (Tex. 1986) Imotion for rehearing overruled, 30 Tex. Sup. Ct. 3. 433 (May 13. 198711.was desinned to take effectu1)onthe adoptionof an amendment adding articleVk, section l-g, to theTexas Constitution. SeeActs 1981. 67th Leg., 1st C.S., ch. 4, 14, at 45. Cf. Attorney-&era1 Opinion MW-337 (1981) (invalidityof earlier tax-%crement financing statute).
As explainedby'the supreme court in City of El Paso v. El Paso CommunityCollegeDistrict,m:

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Tax increment financing is designed to aid cities and towns in financing public improvements in blighted or underdeveloped areas. Under Article 1066e, a municipality must designate a specific areawhich. in itsopinion,meets the definitional requirements of a 'reinvestmentzone.' To%. Rev. civ. Stat. Ann. art. 1066e 13(b) (Vernon Supp. 1985). Any increase in ad valorem tax revenues from landwithin the zone is then committed to the purchase of property, improvement of approved property, or retirementof revenuebonds issued to provide funding for the approvedprojects.
729 S.W.2d at 296. Section 10(a) of article 1066e requires each taxing unit that taxes real property within the designated "reinvestment zone" to pay into the "tax increment fund" a certain portion of the taxes it collects there. For definitions of "taxingunit" and "tax increment fund," see subsections 2(6) and 2(9) of the statute. The obligation of taxing units to contribute to the fund expires in a limited time, however, unless certain eventsoccur. Id. )10(c). - Section 10(c) of the statutereads:

(c) A taxingunit is not required to pay a tax increment into the zone's tax increment fund beyond three years from the date the zone was created, or, if the zone was created before the effective date of this Act, beyond September 1. 1986, unless the following conditions exist or have beenmet within threeyears from the date the sane was created, or prior to September 1, 1986, in those sones created before the effective date of thisAct: (1) bonds have been issued for the zone under Section 11 of thisAct; (2) the town or city has'acquired property within the aone pursuant to theprojectplan; or (3) construction of improvements pursuant to theproject planhas commenced in the zone. ?

Your questionpresents a matter of statutory construction,which obliges us to search for the intent of the legislature. 53 Tex. Jur.2d Statutes 1125 (1964). The actmust be construedas a whole and in a harmonious and consistentmanner. Lampson v. City of Beaumont. 687 S.W.2d 788 (Tex.App. - Beaumont 1985,no writ).

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Section 10 of the 1981 act was extensively revised in 1983 to read as itdoes now. Subsection (c)was added at that time. SeeActs 1983. 68thLeg., ch. 554, at 3213, 3226. You suggest that thantent of the changesmay be to excuse a taxing'unit frommaking payments to a tax increment fund unless within three years (1) bonds have been issued, and (2) property has been acquired, end (3)~constructionof improveme= has commenced. Section 10(c) stzs that a taxing unit is not required to make payments "unless the following conditions exist." That language suggests that a series in the conjunctivewill follow. It is our conclusion that a series in the disjunctive follows.
We are of the opinion that the legislature intended to relieve taxing units of the obligation to make payments to the tax increment fund only if none of the three conditions have been met within the time allowed.

We are led to this conclusion because the first "condition" is the issuance of bonds, and an examination of the remainder of the act discloses that, although the act permits cities to issue bonds secured by the tax increment fund, they are not required todo so. V.T.C.S. art. 1066e. 111.
Section 9 of the act allows a city to implementproject plans by a number of means other than the issuance of bonds, including the direct expenditureof tax increment funds. as provided in section 14 of the act.
We think thepowers set out in section 9 sufficiently illustrate that cities and townsdarenot compelled to issuebonds in developing projects,but may choose other devices for thatpurpose.
If the act does not require the issuance ofbonds to further its purposes. it could not have been the intent of the legislature that taxing units could frustrate that purpose after three years simply because a city had chosen to prosecute its project plan without issuing bonds. Inasmuch as the issuance of bonds "under section 11" is one of the three "conditions" of section 10(c),we do not believe the legislatureintendedthat all of thembe met within the threeyear period in order to obligate taxing units to continuemaking payments to the tax incrementfund.

"or")It is noteworthy that similar punctuation (with the disjunctive, is used in section 3(b) of the act (both versions) as well as in section 10(c). See Gov't. Code 6312.012(b) ("punctuationof a -

1. Two separate acts amended section 3(b) in 1983. See Acts 1983. 68th Leg., ch. 554, 51. at 3213, 3216-17;Acts 1983. 68thLeg., ch. 841. $5. at 4771. 4790-91.

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law does not control or affect legislative intent in enacting the law"). Section 3(b) establishes the criteria an areamust meet tobe designated as a reinvestment zone, and clearlymeans to list alternatives.
If our conclusion were in need of further buttress, it is furnished by legislative history. The bill analysis for Senate Bill No. 641 in the Sixty-eighth Legislature, which initiated the 1983 legislationadding section 10(c) to theTam IncrementFinancingAct of 1981, states:

Senate Bill 641 amends Article 1066e by tightening the definition of 'blighted' and requires a 'but for' test. It requires 60 days notice to affected taxing entities and more detailedpreliminaryplans. It gives countiesand school boards as well as other taring entities representation on the board. It dissolves e zone if redevelopment does not begin within three years. It prevents cities from involving more than 15% of a county or schooldistrictls tarbase in a sane and allows the countyor schoolboard or other entity to negotiate back .upto 15% of the increment. (Emphasisadded).
Bill Analysis to S.B. No. 641. prepared for Rouse Coannitteeon Urban Affairs, filed in Bill File to S.B. No. 641, Legislative Reference Library. In.the portion of the bill analysis examining the proposed legislation section-by-section,it says:

Section 10. Allows taxing entities to collect their own tares in the zone and pay over their share into the tam incrementfund. Allows entities to keep up to 15% of their incrementas negotiated in the planning phase. Provides that the entities must deposit their share into the fund before the 90th day after their delinquency date and sets a penalty for failure to do SO. Deletes the oldprocedure whereby the city collected every entities' tames in the saneand returned the amount generatedby thebase to each entity. If the city has not commenced development in the sane within three years, the entities are no longer required to pay their increment into the fund and the zone dissolves. (Emphasisadded).
If any of the three "conditions" of section 10(c) are met, developmenthas commenced.

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SUMMARY Section 10(c) of the Tax Increment Financing Act of 1981 relieves taxingunits of an obligation tomake payments intoa tax increment fund only if none of the three conditions listed there have been met within the time allowed.

JIM MATTOX Attorney General of Texas
MARY KELLER Executive AssistantAttorneyGeneral
JUDGE ZOLLIE STKAKIRT SpecialAssistant AttorneyGeneral
RICK GILPIN Chairman, Opinion Committee Preparedby Rick Gilpin AssistantAttorney General

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