July 27, 1987 

JIX 3sxrrQx 

.mToRxEY Q~~ERXU. 

Eonorable Carlos Valdez Opinion No. JM-758 

Nueces County Attorney 

901 Leopard, Room 206 Re: Conditions under which taxing 

Corpus Christi, Texas 78401 units are required to make tax 

increment fund payments beyond 

three years 

Dear Mr. Valdea: 

Your letter requesting an opinion from this office reads in part: 

The Tax Increment Financing Act of 1981, article 

1066e. V.T.C.S., among other things, provides the 

authority and procedure for the establishment of 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 

fund beyond a certain time limit. 

, . . . 

My question is: Under section 10(c) of article 

10660, must the three conditions set out therein 

exist before a taxing unit would not be required to 

pay into the zone's fund or is the existence of 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 effect u1)on the adoption of an amendment 

adding article Vk, section l-g, to the Texas Constitution. See Acts 

1981. 67th Leg., 1st C.S., ch. 4, 14, at 45. Cf. Attorney-&era1 

Opinion MW-337 (1981) (invalidity of earlier tax-%crement financing 

statute). 

As explained by'the supreme court in City of El Paso v. El Paso 

Community College District, m: 

p. 3542 
Eonorable Carlos Valdez - Page 2 (JM-758) 

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 

area which. in its opinion, meets the definitional 

requirements of a 'reinvestment zone.' To%. Rev. 

civ. Stat. Ann. art. 1066e 13(b) (Vernon Supp. 

1985). 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 issued to 

provide funding for the approved projects. 

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 "taxing unit" 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 events occur. - Id. )10(c). 

Section 10(c) of the statute reads: 

(c) A taxing unit 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 been met within three years from the date the 

sane was created, or prior to September 1, 1986, 

in those sones created before the effective date 

of this Act: 

(1) bonds have been issued for the zone under 

Section 11 of this Act; 

(2) the town or city has' acquired property 

within the aone pursuant to the project plan; or 

(3) construction of improvements pursuant to 

the project plan has commenced in the zone. 

? 

Your question presents a matter of statutory construction, which 

obliges us to search for the intent of the legislature. 53 Tex. 

Jur.2d Statutes 1125 (1964). The act must be construed as a whole and 

in a harmonious and consistent manner. Lampson v. City of Beaumont. 

687 S.W.2d 788 (Tex. App. - Beaumont 1985, no writ). 

p. 3543 
honorable Carlos Valdez - Page 3 (JM-758) 

Section 10 of the 1981 act was extensively revised in 1983 to 

read as it does now. Subsection (c) was added at that time. See Acts 

1983. 68th Leg., ch. 554, at 3213, 3226. You suggest that thantent 

of the changes may be to excuse a taxing'unit from making payments to 

a tax increment fund unless within three years (1) bonds have been 

issued, and (2) property has been acquired, end (3) ~construction of 

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 conjunctive will 

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 to do so. V.T.C.S. art. 1066e. 111. 

Section 9 of the act allows a city to implement project plans by 

a number of means other than the issuance of bonds, including the 

direct expenditure of tax increment funds. as provided in section 14 

of the act. 

We think the powers set out in section 9 sufficiently illustrate 

that cities and towns dare not compelled to issue bonds in developing 

projects, but may choose other devices for that purpose. 

If the act does not require the issuance of bonds 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 legislature intended that all of them be met within the three year 

period in order to obligate taxing units to continue making payments 

to the tax increment fund. 

"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) ("punctuation of 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. 

p. 3544 
Eonorable Carlos Valdez - Page 4 (JM-758) 

law does not control or affect legislative intent in enacting the 

law"). Section 3(b) establishes the criteria an area must meet to be 

designated as a reinvestment zone, and clearly means 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 

legislation adding section 10(c) to the Tam Increment Financing Act 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 

detailed preliminary plans. It gives counties and 

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 school districtls tar base 

in a sane and allows the county or school board or 

other entity to negotiate back .up to 15% of the 

increment. (Emphasis added). 

Bill Analysis to S.B. No. 641. prepared for Rouse Coannittee on 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 increment fund. Allows entities 

to keep up to 15% of their increment as 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 

old procedure whereby the city collected every 

entities' tames in the sane and returned the amount 

generated by the base 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. (Emphasis added). 

If any of the three "conditions" of section 10(c) are met, 

development has commenced. 

p. 3545 
Ronorable Carlos Valdez - Page 5 (~~-758) 

SUMMARY 

Section 10(c) of the Tax Increment Financing 

Act of 1981 relieves taxing units of an obligation 

to make payments into a 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 Assistant Attorney General 

JUDGE ZOLLIE STKAKIRT 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Rick Gilpin 

Assistant Attorney General 

p. 3546