OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS

JOHN CORNYN

February 22,200l

The Honorable Frank Long District Attorney 8th Judicial District P.O. Box 882 Sulphur Springs, Texas 75483 Opinion No. JC-0348

Re: Whether a tax assessor-collector may use interest earned on motor vehicle inventory tax
escrow accounts to supplement her own salary (RQ-0290-JC)

Dear Mr. Long:

You ask whether atax assessor-collector may use interest earned on motor vehicle inventory tax escrow accounts to supplement her own salary. We conclude that section 23.122 of the Tax Code does not preclude the tax assessor-collector from using interest earned on motor vehicle inventory tax escrow accounts to supplement her own salary. The tax assessor-collector must determine in the first instance that this use ofthe interest is alegitimate cost of administration ofthe motor vehicle inventory tax prepayment program and, in addition, that it serves apublic purpose as required by article III, sections 51 and 52 of the Texas Constitution. The tax assessor-collector’s initial determination that this use of the interest monies is lawful is subject to judicial review. Furthermore, the county auditor is authorized to audit the interest monies, to review expenditures from the fund, and to make audit reports to the commissioners court.
Section 23.122 of the Tax Code requires certain motor-vehicle dealer owners to prepay property taxes levied against their motor vehicle inventory. See TEX.TAXCODEANN. 823.122(b) (Vernon Supp. 2001). Each month, amotor-vehicle dealer owner must deposit with the county tax assessor-collector in the county in which the inventory is located aportion of the property tax the
owner is expected to owe for the year. See id. The tax assessor-collector must place the prepaid taxes in an escrow account to the owner’s credit:

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. . . The money shall be deposited by the collector in or otherwise credited by the collector to the owner’s escrow account for prepayment of property taxes

. . . . An escrow account required by this section is used to pay property taxes levied against the dealer’s motor vehicle inventory, and the owner shall fund the escrow account
as provided by this subsection.

Id. The tax assessor-collector isrequired tomaintain anescrow account for each owner inthe county depository. See id. 523.122(c). The tax assessor-collector disburses funds in the escrow account to “relevant taxing units,” i.e., taxing units “authorized by law to levy property taxes against aThe Honorable Frank Long - Page 2 (~~-0348)

dealer’s motor vehicle inventory,” id. 823.122(a)(7), in proportion to the amount of taxes levied, id. 823.122(i). The owner may not withdraw funds from the escrow account. Id. §23.122(d). See generally Tex. Att’y Gen. LO-98-085, at l-2 (sumrnarizing motor vehicle inventory tax scheme).

Your inquiry focuses on the interest on the escrow accounts, which subsection (c) of section 23.122 allocates to the tax assessor-collector:



### 0 C

. . . The collector shall retain any interest generated by the
escrow account todefray the cost ofadministration oftheprepayment procedure established by this section. Interest generated by an escrow account created as provided by this section is the sole property of the collector, and that interest may be used by no entity other than the collector. Interest generated by anescrow account may not be used to reduce or otherwise affect the annual appropriation to the collector that would otherwise be made.

TEX.TAXCODEANN. $23.122(c) (Vernon Supp. 2001) (emphasis added).

This office has concluded that because interest generated by amotor vehicle inventory tax escrow account isthe “sole property” of and may be used only by the tax assessor-collector, itisnot subject to the control ofthe commissioners court. See Tex. Att’y Gen. Op. No. DM-398 (1996) at 2; accord Tex. Att’y Gen. LO-98-085, at 5-6. The tax assessor-collector’s discretion with respect to the use of interest monies is statutorily limited to defraying the costs of administering the tax prepayment procedure. See TEX.TAXCODEANN.523.122(c) (Vernon Supp. 2001). Accordingly, this office has concluded that the interest may not be used for general office expenses of the tax assessor-collector that areunrelated to the costs ofadministering the prepayment program. See Tex. Att’y Gen. Op. No. DM-398 (1996) at4; accord Tex. Att’y Gen. LO-98-085, at 6. If an item will be used both in the administration of motor vehicle inventory tax prepayment and in the general administration ofthe tax office, interest monies may be used to fund only that portion ofthe cost of the item allocable to the motor vehicle inventory tax prepayment program. See Tex. Att’y Gen. Op. No. JC-0149 (1999) at 3.

Whether aparticular expenditure is alegitimate “cost of administration of the prepayment program” and istherefore apermissible use ofthe interest is aquestion of fact. See Tex. Att’y Gen. Op. No. DM-398 (1996) at 3. “What constitutes a legitimate cost of administration of the prepayment program is amatter offact upon which this office cannot opine.” Id.; accord Tex. Att’y Gen. Op. No. JC-0 135 (1999) at 2. The tax assessor-collector must make the initial determination that aparticular expenditure is alegitimate cost of administration under section 23.122(c), subject tojudicial review. See Tex. Att’y Gen. Op. No. JC-0135 (1999) at2-3. Similarly, the determination
as to what extent a particular purchase is a legitimate cost related to administration of the motor vehicle inventory tax prepayment program is for the tax assessor-collector to make in the first instance, subject tojudicial review. See Tex. Att’y Gen. Op. No. JC-0149 (1999) at 3.The Honorable Frank Long - Page 3 (~~-0348)

You ask whether the tax assessor-collector may use interest generated by the motor vehicle inventory tax escrow accounts to supplement her own salary. Again, the statute requires that the interest be used to “defray the cost of administration of the prepayment procedure established by this section.” TEX.TAXCODE ANN.523.122(c) (Vernon Supp. 2001). This office has concluded that interest monies may be used to supplement the salaries of atax assessor-collector’s full-time employees who administer the prepayment program “ifthe assessor-collector determines that salary supplements are alegitimate cost of administration under section 23.122(c).” Tex. Att’y Gen. Op. No. JC-0135 (1999) at 2. The opinion reasoned that the salaries ofthose personnel who manage or administer the program “probably arerelated tothe costs ofadministering the prepayment program” and noted that while nothing inthe statute expressly authorizes this use, “we find nothing forbidding,
as amatter of law, the use of [the] interest for salary supplements.” Id. at 3.

One might argue that the authority to supplement salaries conflicts with the authority ofthe commissioners court of acounty to establish the county budget, to direct the use of county funds, and to set the salaries ofcounty officers and employees. Seegenerally TEX.LOC.GOV’TCODE ANN. 85 11l.OOl-.094, 152.001-.907 (Vernon 1999 & Supp. 2001) (chapters 111 and 152 of the Local Government Code). Clearly, however, in enacting section 23.122(c), the legislature intended to grant a county tax-assessor-collector autonomy with respect to the use of the interest monies and, correspondingly, to limit the authority of the commissioners court in that regard. See TEX.TAX CODEANN. 823.122(c) (Vernon Supp. 2001) (“Interest generated by an escrow account created as provided by this section is the sole property of the collector, and that interest may be used by no entity other than the collector. Interest generated by an escrow account may not be used to reduce
or otherwise affect the annual appropriation to the collector that would otherwise be made.“) (emphasis added).

With respect to your question, nothing in section 23.122(c) ofthe Tax Code expressly either authorizes or prohibits use ofthe interest to supplement the salary ofthe tax assessor-collector. By contrast, a similar statute, article 102.007 of the Code of Criminal Procedure, which creates the prosecutor’s hot-check fund, provides that expenditures from the fund “shall be atthe sole discretion ofthe attorney” but expressly prohibits use ofthe fund to supplement the prosecutor’s salary. TEX. CODECFUM.

PROC. ANN.art. 102.007(f) (Vernon Supp. 2001). We find the lack ofsuch aprohibition in section 23.122 ofthe Tax Code significant evidence oflegislative intent not to prohibit use ofthe interest monies to supplement the salary ofatax assessor-collector. Compare TEX.TAXCODEANN. tj23.122(c) (Vemon Supp. 2001), with TEX.CODECRIM.PROC. ANN.art. 102.007(f) (Vernon Supp. 2001) (“Fees collected under

. . .this article shall be deposited in the county treasury in a special fund to be administered by the county attorney, district attorney, or criminal district attorney. Expenditures from this fund shall be at the sole discretion ofthe attorney and may be used only to defray the salaries and expenses ofthe prosecutor’s office, but in no event may the county attorney, district attorney, or criminal district attorney supplement his or her own salary from thisfund.“) (emphasis added). Thus, we conclude that provided that the tax assessor-collector determines that supplementing her salary is a legitimate cost of administration of the motor vehicle inventory tax prepayment program under section 23.122(c), this use ofthe interest ispermitted by the statute. As the interest monies may be used only to “defray the cost of administration of the prepaymentThe Honorable Frank Long - Page 4 (JC-0348)

procedure,” TEX.TAX CODEANN. 8 23.122(c) (Vernon Supp. 2001), however, the tax assessorcollector may not use the interest monies to supplement her salary for services she performs that are not legitimately related to administration of the program. See Tex. Att’y Gen. Op. No. JC-0149 (1999) at 1, 3 (if purchase will be used both in the administration of motor vehicle inventory tax prepayment and in the general administration of the tax office, cost ofpurchase must be allocated between interest monies and other funds). Furthermore, ifthe salary of the tax assessor-collector established by the commissioners court already compensates that officer for her time administering the motor vehicle inventory tax prepayment program, itmay be difficult forthe tax assessor-collector to establish as amatter of fact that a salary supplement is alegitimate cost of administration under section 23.122(c). Although the legislature has given tax assessor-collectors a great deal of autonomy with respect to the interest monies, we caution that the interest monies are not the personal property of the tax assessor-collector, but rather public funds, the use of which is limited by the Texas Constitution and subject to review by the courts, other county officials, and the public. See Tex. Att’y Gen. Op. No. JC-0135 (1999) (noting that under Texas Constitution article III, section 53, which prohibits retroactive compensation for services already rendered, employee salary supplements paid with interest monies may not be awarded asabonus for work already performed); id. at 3 (interest monies subject to review by county auditor); Tex. Att’y Gen. Op. No. DM-398 (1996) at 2 (concluding that tax assessor-collector has exclusive right to dispose of interest monies but does not have exclusive right of enjoyment). Article III, sections 51 and 52 of the Texas Constitution limit the legislature’s authority to appropriate public funds to private individuals and corporations, either directly orby statutes authorizing expenditures by state orlocal entities. Section 51provides that the “Legislature shall have no power to make any grant or authorize the making of any grant of public moneys to any individual, association of individuals, municipal or other corporations whatsoever.” TEX.CONST.art. III, 5 51. Section 52 prohibits the legislature from authorizing any political corporation or subdivision ofthe state “to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever.” Id. 8 52(a). The purpose of article III, sections 51 and 52 is the same ~ to prevent the gratuitous application of public funds to private individuals. See Byrd v. City ofDallas, 6 S.W.2d 738, 740 (Tex. 1928); Graves v.Morales, 923 S.W.2d 754,757 (Tex. App.-Austin 1996, writ denied). But the constitution does not bar agovernmental expenditure that benefits aprivate interest ifitismade for the direct accomplishment of a legitimate public purpose. See Byrd, 6 S.W.2d at 740. “A transfer offunds for apublic purpose, with aclear public benefit received inreturn, does not amount to a lending of credit or a grant of public funds in violation of article III, sections 51 and 52.” EdgewoodIndep. Sch. Disk v.Meno, 917 S.W.2d 717,740 (Tex. 1995).

These constitutional limitations do not preclude a tax assessor-collector from making an expenditure ofinterest money that benefits aprivate person, such asanemployee salary supplement, if she determines that the expenditure serves a public purpose and that a clear public benefit is received in return. Likewise, if the tax assessor-collector decides to use interest monies to supplement her own salary, she must determine that the expenditure serves apublic purpose and that
a clear public benefit is received in return. Although we find it very troubling that atax assessor-The Honorable Frank Long - Page 5 (JC-0348)

collector would put herself in position of making this determination, we do not believe that the constitution prohibits this.

In addition, atax assessor-collector’s decision to use interest monies to supplement her own salary is subject to scrutiny by the courts, other county officials, and the public. First, the tax assessor-collector’s determination that supplementing her own salary is a legitimate cost of the administration of the motor vehicle inventory tax prepayment program under section 23.122(c) is subject to judicial review. See Tex. Att’y Gen. Op. No. JC-0135 (1999) at 3. Furthermore, the county auditor is authorized and required to audit the motor vehicle inventory tax escrow accounts,
aswell as interest earned on the prepaid taxes. See id.; Tex. Att’y Gen. Op. No. JC-0149 (1999) at 3. Section 115.001(l) of the Local Government Code provides a county auditor with “continual
access” to accounting books and related materials of any oflicer. See TEX.LOC.GOV’TCODEANN. 0 115.00 1 (Vernon 1999). Section 115.002(b) requires a county auditor, at least four times each year, to examine the county tax assessor-collector’s books to verify their correctness. Id. 6 115.002. Section 115.0035 of the Local Government Code requires a county auditor to examine, at least annually, the “accounts” ofcounty officials. Id. 8 115.0035(b). “Accounts” means “all public funds that are subject to the control of any
. . .county

. . .official.” Id. 5 115.0035(a). Thus, the county auditor has express statutory authority to examine the correctness of the county tax assessorcollector’s books, whether ornot the books relate to county funds. See id.; see also Tex. Att’y Gen. Op. Nos. JC-0135 (1999) at 3; DM-398 (1996) at4 (stating that county auditor may audit interest). This authority includes the authority to review expenditures from the fund. Audit reports should be submitted to the commissioners court. See TEX.LOC.GOV’T CODEANN. 8 115.0035(c) (Vernon 1999) (“The auditor shall verify the correctness of the accounts and report the findings of the examination to the commissioners court

. . . .“). In any county where this occurs, we urge both the county auditor and the commissioners court to closely review use ofinterest generated from motor vehicle inventory tax escrow accounts to supplement the salary ofthe tax assessor-collector. Lastly,
we note that information regarding the tax assessor-collector’s salary is made public by the Public Information Act. See TEX.GOV’T CODEANN. 8552.022(a)(2) (Vernon Supp. 2001) (information about salary ofofficer ofgovernmental body not excepted from required disclosure unless expressly confidential under other law).The Honorable Frank Long - Page 6 (~~-0348)

SUMMARY

Section 23.122 of the Tax Code does not preclude a tax assessor-collector from using interest earned on motor vehicle inventory tax escrow accounts to supplement her own salary. The tax assessor-collector must determine, however, that this use of interest monies is a legitimate cost of administration of the motor vehicle inventory tax prepayment program and, in addition, that it serves a public purpose as required by article III, sections 51 and 52 of the Texas Constitution. The tax assessor-collector’s initial determination that this use of the interest monies is lawful is subject to judicial review. Furthermore, the county auditor is authorized to audit the interest monies, to review expenditures from the fund, and to make audit reports to the commissioners court.

Yo sve truly, 

# f4Jv+?r

JOHN CORNYN Attorney General of Texas

ANDY TAYLOR First Assistant Attorney General

CLARK KENT ERVIN Deputy Attorney General - General Counsel

SUSAN D. GUSKY Chair, Opinion Committee
Mary R. Crouter Assistant Attorney General - Opinion Committee