Court Opinion

ID: 4127891
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:34:12.10133+00
Date Added: 2024-06-11T14:31:19.258276
License: Public Domain

ATTORNEY GENERAL OF TEXAS
                                          GREG       ABBOTT

                                                June 18,2012

The Honorable Joseph C. Pickett                         Opinion No. GA-0953
Chair, Committee on Defense and Veterans'
       Affairs                                          Re: Authority of a county to issue bonds pursuant
Texas House of Representatives                          to article VIll, section I-g(b), Texas Constitution
Post Office Box 2910                                    (RQ-I040-GA)
Austin, Texas 78768-2910

Dear Representative Pickett:

         You ask three questions related to whether a county may issue tax increment financing bonds
in the same manner as a city under article VIll, section I-g(b) of the Texas Constitution. J The Tax
Increment Financing Act ("the Act") is found in Chapter 311 of the Tax Code. TEX. TAX CODE ANN.
§ 311.001 (West 2008). It was enacted to aid "in financing public improvements in blighted or
underdeveloped areas." City of EI Paso v. EI Paso Cmty. CoIl. Dist., 729 S.W.2d 296, 296 (Tex.
1986). The Act authorizes certain public entities to designate areas as "reinvestment zones"
after first determining that the areas meet specific statutory requirements. See TEX. TAX CODE ANN.
§§ 311.003 (West Supp. 2011) ("Procedure for Creating Reinvestment Zone"); .005 ("Criteria for
Reinvestment Zone"). Increases in ad valorem tax revenues from property within the zone are then
committed to promoting development or redevelopment of the zone area. See id. § 311.011(c)(6)
(requiring a reinvestment zone financing plan to describe the methods for financing project costs,
including the percentage of tax increment to be derived from property taxes). The Act authorizes
municipalities designating a reinvestment zone to "issue tax increment bonds or notes, the proceeds
of which may be used to ... pay project costs for the reinvestment zone on behalf of which the bonds
or notes were issued." /d. § 311.015(a). Apart from issuing bonds and notes, the Act also authorizes
improvements in a reinvestment zone to be financed directly with tax increment revenues or with
the proceeds of other financial arrangements secured by tax increment revenues. Tex. Att'y Gen.
Op. No. GA-0514 (2007) at 7 (noting that "[a] city need not issue bonds or notes to finance
improvements in a tax increment reinvestment zone"); TEX. TAX CODE ANN. § 311.010(b) (West
Supp. 2011) (authorizing agreements pledging tax increment fund revenues to pay project costs).

         JLetter from Honorable Joseph C. Pickett, Chair, Comm. on Def. and Veterans' Affairs, to Honorable Greg
Abbott, Tex. Att'y Gen. at 2 (Feb. 8, 2012), http://www.texasattorneygeneral.goY/opin ("Request Letter").
The Honorable Joseph C. Pickett - Page 2                  (GA-0953)

        When the Act was adopted in 1981, the Legislature allowed only an incorporated city or town
to "designate an area a reinvestment zone for tax increment financing.,,2 Alongside the Act, the
Legislature proposed article VIII, section I-g(b) of the Constitution, which voters adopted later that
year. Article VIII, section I-g(b) states:

                    The legislature by general law may authorize an incorporated city or
                    town to issue bonds or notes to finance the development or
                    redevelopment of an unproductive, underdeveloped, or blighted area
                    within the city or town and to pledge for repayment of those bonds or
                    notes increases in ad valorem tax revenues imposed on property in the
                    area by the city or town and other political subdivisions.

TEX. CONST. art VIII, § I-g(b).

         In 2005, the Legislature amended certain provisions of the 1981 Act, which is now codified
at chapter 311 of the Tax Code, to similarly allow a county to designate an area within the county
to be a "reinvestment zone.,,3 However, when the Legislature amended the Act, it did not authorize
counties to issue tax increment bonds or notes. Nor did it propose a constitutional amendment that
would have allowed the Legislature to expressly authorize counties to issue tax increment financing
bonds. Six years later, in 2011, the Eighty-second Legislature proposed a constitutional amendment
that would have amended the language in article VIII, section I-g(b) and thereby authorized the
Legislature to enact laws allowing counties to issue tax increment financing bonds. 4 However, in
November 2011, voters rejected the proposed amendment. In light of the voters' rejection of the
constitutional amendment, you first ask whether a county may "issue bonds in the same manner as
a city or town under article VIII, section I-g(b) of the Texas Constitution." Request Letter at 2.

        Regardless of whether a constitutional amendment is necessary for counties to issue tax
increment bonds, an issue we do not address here, the Legislature has not granted counties such
authority. Texas courts have long held that, without statutory authority, a county has no implied
authority to issue bonds. Lasater v. Lopez, 217 S.W. 373, 376 (Tex. 1919) (explaining that
"[w]ithout special authority, a court charged with the administration of the business affairs of a
county is without the power to issue negotiable securities" and defining county bonds as "negotiable
securities"); Lopez v. Ramirez, 558 S.W.2d 954, 957 (Tex. Civ. App.-San Antonio 1977, no writ);
see also Tex. Att'y Gen. Op. No. JC-0068 (1999) at 9 (noting that bonds "can only be issued for the
purposes and in the manner expressly authorized"). Thus, a county may not issue tax increment
financing bonds under chapter 311 of the Tax Code.

        2
          Act of Aug. 10, 1981, 67th Leg., 1st C.S., ch. 4, § 3, 1981 Tex. Gen. Laws 45,46. The Tax Increment
Financing Act was recodified as Chapter 311 of the Tax Code in 1987. Act of May 1, 1987, 70th Leg., R.S., ch. 191,
§ 1, 1987 Tex. Gen. Laws 1410,1413-21.

        3Act    of May 29, 2005, 79th Leg., R.S., ch. 1094, §§ 36--48, 2005 Tex. Gen. Laws 3591, 3607-14.

        4
            Tex. H.R.J. Res. 63, 82d Leg., R.S. (2011).
The Honorable Joseph C. Pickett - Page 3            (GA-0953)

         Your second question asks whether "the reference to 'other political subdivisions' in article
vrn,   section 1-g(b) includes counties, and if so does that provide sufficient authority for a tax
increment collected by a county to be pledged to secure bonds." Request Letter at 2. Article vrn,
section 1-g(b) authorizes an incorporated city or town "to pledge for repayment of those bonds or
notes increases in ad valorem tax revenues imposed on property in the area by the city or town and
other political subdivisions." TEX. CONST. art. vrn, § 1-g(b) (emphasis added). In City ofEl Paso
v. El Paso Community College District, the Texas Supreme Court addressed which entities were
"political subdivisions" for purposes of article vrn, section 1-g(b). 729 S.W.2d at 298. Concluding
that a school district was a political subdivision, the Supreme Court explained the general attributes
of any political subdivision: "1) jurisdiction over a portion of the state; 2) elected officials as a
governing body; and 3) the power to assess and collect taxes." [d. at 299. A county possesses all
of these features. Consequently, under the Supreme Court's test, Texas counties qualify as political
subdivisions for purposes of article vrn, section 1-g(b). Cf Wichita Falls State Hosp. v. Taylor, 106
S.W.3d 692, 694 n.3 (Tex. 2003) (describing a county as a political subdivision in the context of
sovereign immunity).

        However, to respond to the remainder of your question, we turn to article vrn, section 1-g(b)
and section 311.015, which expressly authorize only incorporated cities or towns-not counties-to
issue bonds or notes to finance a reinvestment zone. TEX. CONST. art. vrn, § 1-g(b) (emphasis
added). The Act authorizes "[e]ach taxing unit that taxes real property located in a reinvestment
zone" to pay into the tax increment fund for the zone a certain amount agreed to between the
taxing unit and the governing body that initially designated the zone. See TEX. TAX CODE ANN.
§ 31 1.0 13(a)-(b), (f) (West Supp. 2011). Thus, a county may deposit money into the tax increment
fund, which can then be used "to satisfy claims of holders of tax increment bonds or notes issued for
the zone, to pay project costs for the zone, ... or to repay other obligations incurred for the zone."
[d. § 311.0 14(b) (West 2008). But the authority to levy taxes that support a tax increment fund is
distinct from the authority to issue bonds. Furthermore, the statute provides that only a "municipality
may pledge irrevocably all or part of the [tax increment] fund for payment of tax increment
bonds or notes," including any funds deposited by a county or another political subdivision. [d.
§ 311.0 15(b) (West Supp. 2011) (emphasis added). The power to issue tax increment financing
bonds and to pledge the tax increment fund as security lies solely with the municipality. The
county's authority to pay into the tax increment fund does not authorize the county to issue bonds
or to unilaterally pledge any part of the tax increment fund as security for a municipality's tax
increment financing bonds.

        Your final question asks, "[i]f the reference to 'other political subdivisions' in article vrn,
section 1-g(b) does not include a county, which taxing entities does it include?" Request Letter
at 2. Because we conclude that "political subdivisions" as used in article vrn, section 1-g(b)
includes counties, we do not address your third question further.
The Honorable Joseph C. Pickett - Page 4          (GA-0953)

                                       SUMMARY

                     The Legislature has not authorized a county to issue tax
               increment financing bonds as a city may under chapter 311 of the Tax
               Code.

                       A county qualifies as a "political subdivision" as that term is
               used in article vrn, section 1-g(b). A municipality has exclusive
               authority to pledge all or part of a tax increment fund, including any
               tax increments deposited by a county, for payment of tax increment
               bonds or notes. A county may not issue tax increment financing
               bonds or unilaterally pledge any part of the tax increment fund.

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chair, Opinion Committee

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee