Court Opinion

ID: 4127832
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:33:36.579825+00
Date Added: 2024-06-11T14:37:35.523726
License: Public Domain

ATTORNEY GENERAL OF TEXAS
                                           GREG        ABBOTT

                                              December 10,2012

The Honorable Joseph C. Pickett                      Opinion No. GA-0981
Chair, Committee on Defense and
   Veterans' Affairs                                 Re: Authority of a county to form a transportation
Texas House of Representatives                       reinvestment zone, collect an ad valorem tax
Post Office Box 2910                                 increment, and pledge and assign all or part of the
Austin, Texas 78768-2910                             increment to secure bonds to pay the cost of a
                                                     transportation project (RQ-1 071-GA)

Dear Representative Pickett:

         You ask whether a county is authorized to form a transportation reinvestment zone ("TRZ")
for a transportation project, collect an ad valorem tax increment, and pledge and assign all or part
of the tax increment receipts to secure bonds to pay the cost of a transportation project. 1 You also
seek clarification of Attorney General Opinion GA-0953. Request Letter at 1.

         You ask specifically about section 222.107 of the Transportation Code, which appears in
chapter 222, subchapter E, concerning toll facilities. See TEX. TRANSP. CODE ANN. §§ 222.101-.110
(West 2011 & Supp. 20 12). Section 222.107 authorizes a county to create a TRZ for a pass-through
toll project under section 222.104. See id. § 222.107(b) (county TRZs); id. § 222.104 (pass-through
tolls). A county commissioners court may designate an area as a TRZ "after determining that an area
is unproductive and underdeveloped" and that action under section 222.107 would further specified
statutory purposes. !d. § 222.107(c); see also id. § 222.105(2) (statement of statutory purposes,
including the "facilita[tion of] the improvement, development or redevelopment of property").

       The order designating a TRZ must also designate an ad valorem tax increment base year. !d.
§ 222.107(f)(2), (4)-(5). When the county collects ad valorem taxes thereafter, it may pay an amount
representing the county's TRZ tax increment, less certain amounts, into an ad valorem tax increment
account. !d. § 222.107(h)(l); see also id. § 222.107(a) (providing the formula for establishing a
county's ad valorem tax increment for a particular year). Finally, subsection (i-1) provides that "[i]n
the event a county collects a tax increment, it may issue bonds to pay all or part of the cost of a
transportation project and may pledge and assign all or a specified amount of money in the tax
increment account to secure those bonds." !d. § 222.107(i-1).

         1
         See Letter from Honorable Joseph C. Pickett, Chair, Comm. on Def. and Veterans' Affairs, to Honorable Greg
Abbott, Tex. Att'y Gen. at 1-2 (July 16, 2012), http://www.texasattorneygeneral.gov/opin ("Request Letter") .
The Honorable Joseph C. Pickett - Page 2                     (GA-0981)

        Thus, section 222.1 07 sets forth a statutory scheme that, so long as it is consistent with the
Texas Constitution, would allow a county to form a TRZ, collect an ad valorem tax increment, and
pledge an amount of money in the tax increment account to secure bonds issued to pay a
transportation project's costs. However, because section 222.1 07 (i -1) purports to authorize a county
to issue ad valorem tax increment bonds secured with a pledge of the ad valorem tax increment
account, we must consider the issue we reserved in Attorney General Opinion GA-0953-the
potential constitutional limitations on a county' s authority to engage in ad valorem tax increment
bond financing. See Tex. Att'y Gen. Op. No. GA-0953 (2012) at 2. 2

        In Attorney General Opinion MW-337, this office determined that the Tax Increment
Financing Act of 1979 (the "1979 Act"), on its face, violated the constitutional requirement that
"[t]axation shall be equal and uniform." Tex. Att'y Gen. Op. No. MW-337 (1981) at 5; see TEX.
CONST. art. VIII,§ 1(a). The opinion determined that by authorizing a taxing authority to pledge the
future increase in ad valorem taxes over a set base level-the tax increment-to the payment of tax
increment project costs, the 1979 Act caused an unequal distribution of the ad valorem tax burden.
Tex. Att'y Gen. Op. No. MW-337 (1981) at 5. The opinion observed that all of the value of property
outside of the tax increment district would be taxed to pay the general expenses of the taxing
authority while only a portion of the value of property inside the district would be taxed for those
purposes. !d. Consequently, the opinion determined, the 1979 Act was unconstitutional absent an
enabling constitutional amendment. !d.

        In 1981, the Legislature proposed and the voters approved an amendment to article VIII,
section 1-g(b) of the Texas Constitution, which now provides as follows:

                  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, § 1-g(b) (emphasis added). The plain text of the amendment enabled the
Legislature to grant the authority to issue tax increment bonds to incorporated cities and towns, but
it did not extend the Legislature's enabling authority to counties. See Collingsworth Cnty. v. Allred,

         2
          Your request letter suggests that, because we answered your question in Attorney General Opinion GA-0953
on statutory grounds, we implicitly determined that no constitutional authorization is necessary for a county to issue tax
increment bonds. See Request Letter at I. Your suggestion is inaccurate. In GA-0953 , we determined that because a
county lacks statutory authority to engage in tax increment bond financing of improvement under chapter 3 1 I o f the
Tax Code, it was not necessary to consider potential constitutional im pediments to the exercising of that author ity. Tex.
Att'y Gen. Op. No. GA-0953 (2012) at 2. Following the practice of the courts we generally cons ider "c nstitut iona l
questions [only] when we cannot resolve issues onnonconstitutional grounds." In re B.L.D., 113 S. W .3d 340, 349 (Tex.
2003). Nothing in GA-0953 suggests that a county with statutory authority to issue ad valorem tax increment bonds may
do so in the absence of clear constitutional authority.
The Honorable Joseph C. Pickett - Page 3         (GA-0981)

40 S. W .2d 13, 15 (Tex. 1931 )(observing rule of constitutional construction thatthe statement of one
thing implies exclusion of others). More recently, in 2011, the Legislature proposed a constitutional
amendment that would have enabled it to enact laws authorizing counties to issue ad valorem tax
increment financing bonds, but the amendment was rejected by the voters. See Tex. H.R.J. Res. 63,
82d Leg., R.S. (2011).

       The article VIII, section 1(a) requirement of equal and uniform taxation applies to counties.
See Parker Cnty. v. Spindletop Oil & Gas Co., 628 S.W.2d 765,767 (Tex. 1982). We are not aware
of any basis for determining that a county is authorized by the Texas Constitution to issue bonds
secured by a pledge of an ad valorem tax increment. Consequently, we conclude that a county's
issuance of tax increment financing bonds secured by a pledge of the county's ad valorem tax
increment would be subject to constitutional challenge as violating the equal and uniform taxation
requirements in article VIII, section 1(a) ofthe Texas Constitution.
The Honorable Joseph C. Pickett - Page 4        (GA-0981)

                                      SUMMARY

                      A county's issuance of tax increment financing bonds secured
              by a pledge of the county's ad valorem tax increment would be
              subject to constitutional challenge as violating the equal and uniform
              taxation requirements of article VIII, section l(a) of the Texas
              Constitution.

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chairman, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee