The Attorney General of Texas 

June 21, 1978 

JOHN L. HILL 

Attorney General 

Honorable W. E. Snelson 

Senator of the State of Texas 

Capitol Building 

Austin, Texas 78711 

Dear Senator Snelson: 

Opinion No. H- 1191 

Re: Whether tax increment bonds 

can be issued without a referendum. 

You have asked whether tax increment bonds may be issued by a city 

for the purpose of aiding the planning or the carrying out of an Urban 

Renewal Project under the management of an established Urban Renewal 

Agency duly created pursuant to a prior election authorizing urban renewal 

powers. Specifically you want to know whether, prior to the passage of the 

constitutional amendment on tax increment bonds, a city may issue these 

bonds on the basis of a prior election authorizing urban renewal rather than 

on the basis of an election specifically authorizing tax increment financing. 

These questions require consideration of two items of recent legislation 

passed by the 65th Legislature. First, the Texas Tax Increment Act of 1977, 

Senate Bill 635, Acts 1977, 65th Leg., ch. 361, at 956, codified as article 

1066d, V.T.C.S., authorizes municipalities to use tax increment financing for 

the redevelopment of blighted commercial areas. Among the various powers 

conferred under section 4 is the general power to issue tax increment bonds. 

Section 8 deals more specifically with tax increment bonds and provides in 

pertinent part: 

fb) Tax increment bonds issued under this Act, 

together with interest thereon and income therefrom, 

shall be exempt from all taxes. Bonds issued under 

this Act shall be authorized by resolution or ordinance 

of the governing body. . . . 

Other sections of the Act detail specific requirements concerning 

designation of development districts (section 5), computation of tax increments (section 6), allocation of tax collections and tax increments (section 7), 

and annual reports (section 9). Finally, section 13 declares: 

P. 4793 
Honorable W. E. Snelson - Page 2 (H-1191) 

This Act takes effect only if and when the constitutional 

amendment proposed by S.J.R. No. 44, 65th Legislature, is 

adopted by the qualified electors of this state. 

The proposed constitutional amendment referred to amends article 8 of the 

Texas Constitution by granting to the Legislature the power to authorize 

municipalities to issue tax increment bonds notwithstanding section 1 or section 14 

of article 8. It further provides for an election on the amendment in November, 

1978. 

The Legislature must be presumed to have carefully chosen the statutory 

language. Jessen Associates, Inc. v. Bullock, 531 S.W.2d 593, 600 (Tex. 1975); 

Perkins v. State, 367 S.W.2d 140, 146 (Tex. 1963). Therefore, we believe section 13 

compels the conclusion that a municipality has no authority to issue tax increment 

bonds under Senate Bill 635 prior to voter approval of the proposed constitutional 

amendment. 

Amendments to the Urban Renewal Law, article 12691-3, V.T.C.S., approved 

by the 65th Legis1atur.e in House Bill 2028, Acts 1977, 65th Leg., ch. 850, at 2126- 

33, contain provisions parallel to those appearing in the Texas Tax Increment Act. 

Approval of the use of the tax increment method of financing is specifically 

provided for in the following new section: 

Sec. Sb. A city may not use the tax increment method of 

financing prescribed by Sections 22a, 22b. 22c, and 22d of 

this Act unless a majority of the qualified voters of the city 

voting on the question, who own taxable property within the 

city that is duly rendered for taxation, approve that method 

of financing in an election held by the city. At an election 

held under this section, the ballots shall provide for voting 

for or against the proposition: ‘Use of tax increment 

financing for urban renewal purposes.’ An election under this 

section may be held in conjunction with an election held 

under Section 5 or 5a of this Act. This referendum shall not 

be necessary if the constitutronal amendment on tax 

increment financing is approved by the voters. 

(Emphasis added). 

The plain meaning of this section evidences the legislative intent that an 

election is required prior to approval of the constitutional amendment proposed by 

S.J.R. No. 44, 65th Legislature, to approve the tax increment method of financing 

set out in other sections of the Urban Renewal Law. This election may be separate 

p. 4794 
Honorable W. E. Snelson - Page 3 (H-1191) 

from or in conjunction with the election required under section 5 or 5a to approve 

an urban renewal project, but the specific issue of whether the tax increment 

method of financing is to be utilized must be presented. The wording in a statute is 

to be given its literal interpretation when that wording is clear and unambiguous. 

$%4,. 

C 180 S.W.Pd 906,, 909 

Since your questions do not raise the issue, we reserve comment on any 

constitutional problems including any which might be associated with the role of 

the county tax assessor-collector or with the issuance of tax increment bonds by 

cities with outstanding general obligation bonds. 

SUMMARY 

The Texas Tax Increment Act will not be effective unless 

the companion constitutional amendment is adopted in 

November, 1978. Prior to the passage of that amendment, 

the Urban Renewal Law, article 12691-3, V.T.C.S., requires 

that use of tax increment financing under that statute must 

be approved in an election held by the city. 

pi i 

Attorney General of Texas 

APPROVED: v 

DAVID M,KENDALL, First Assistant 

C. ROBERT HEATH. Chairman 

Opinion Committee ’ 

jst 

p. 4795