Court Opinion

ID: 4128542
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:39:36.125044+00
Date Added: 2024-06-11T14:33:24.333345
License: Public Domain

ATTORNEY
                                     GENERAL
                                           OF TEXAS
                                           GREG       ABBOTT

                                               May 25,2007

The Honorable Susan Combs                        Opinion No. GA-0549
Texas Comptroller of Public Accounts
Post Office Box 13528                            Re: Method of calculating deduction under section
Austin, Texas 7871 1-3528                        403.302(d)(4), Government Code, of the total taxable
                                                 value of school district property located in a tax
                                                 increment reinvestment zone (RQ-0570-GA)

Dear Comptroller Combs:

        You ask about the duties of the Comptroller of Public Accounts (the "Comptroller") under
section 403.302(d)(4) of the Texas Government Code.' Section 403.302 requires the Comptroller
to conduct an annual study in each Texas school district to determine the total taxable value of all
property in each district. See TEX.GOV'TCODEANN. 5 403.302(a) (Vernon Supp. 2006); see also
Tex. Att'y Gen. Op. No. JC-0152 (1999) at 8-9 (discussing purpose and history of section 403.302).
The total taxable value amount from the study is used in calculating the state's financial support for
school districts. See TEX.GOV'TCODEANN.$403.302(g) (Vernon Supp. 2006); TEX.EDUC.CODE
ANN. $5 41.001 (Vernon 2006), 41.002,42.302(a) (Vernon Supp. 2006).

         The total taxable value of school district property under section 403.302 is the "market value
of all taxable property less" certain specified exemptions and deductions. TEX.GOV'TCODEANN.
5 403.302(d) (Vernon Supp. 2006). You characterize the specified exemptions and deductions as
"the property values on which the school district may not impose a tax because of the various state-
mandated exemptions [and] . . . property value 'lost' to other provisions, such as tax increment
financing." Request Letter, supra note 1, at 1;see also TEX.TAXCODEANN,ch. 3 11 (Vernon 2002
& Supp. 2006) (governing tax increment financing).

       Your specific question pertains to the deductions that relate to tax increment financing
contained in section 403.302(d)(4) of the Government Code, which provides:

                 For the purposes of this section, "taxable value" means the market
                 value of all taxable property less:

         'See Letter from Honorable Susan Combs, Texas Comptroller of Public Accounts, to Honorable Greg Abbott,
Attorney General of Texas, at 1 (Feb. 19, 2007) (on file with the Opinion Committee, also available at
http://www.oag.state.tx.us) [hereinafter Request Letter].
The Honorable Susan Combs - Page 2              (GA-0549)

                       (4) subject to Subsection (e), the total dollar amount of any
                captured appraised value of property that:

                            (A) is within a reinvestment zone created on or before
               May 3 1, 1999, or is proposed to be included within the boundaries of
               a reinvestment zone as the boundaries of the zone and the proposed
               portion of tax increment paid into the tax increment fund by a school
               district are described in a written notification provided by the
               municipality or the board of directors of the zone to the governing
               bodies of the other taxing units in the manner provided by Section
               31 1.003(e), Tax Code, before May 31, 1999, and within the
               boundaries of the zone as those boundaries existed on September 1,
               1999, including subsequent improvements to the property regardless
               of when made;

                            (B) generates taxes paid into a tax increment fund
                created under Chapter 31 1, Tax Code, under a reinvestment zone
                financing plan approved under Section 3 11.011(d), Tax Code, on or
                before September 1, 1999; and

                            (C) is eligible for tax increment financing under
                Chapter 3 11, Tax Code . . . .

TEX.GOV'TCODEANN.         5 403.302(d) (Vernon Supp. 2006). You wish to know whether this section
requires you, in your calculation of the total taxable value of school district property, to subtract the
dollar amount of all of the captured appraised value of property located in the reinvestment zone, or
to subtract the amount of only the percentage of the captured appraised value that generates the
school district tax actually paid into the tax increment fund. See Request Letter, supra note 1, at 2.

        In addressing your question it is helpful to understand the operation of a municipality's tax
increment reinvestment zone and a school district's involvement in the zone. Tax increment
financing is a mechanism whereby municipalities can raise funds to finance public improvements
in blighted or underdeveloped areas. See City of El Paso v. El Paso Cmty. Coll. Dist., 729 S.W.2d
296,296 (Tex. 1987). Under the Tax Increment Financing Act, chapter 3 11 of the Texas Tax Code,
a municipality designates an area as a reinvestment zone and establishes the tax increment base as
the total appraised property values within the zone on the date the zone is created. See TEX.TAX
CODEANN.5 $ 311.OO1, .012(c) (Vernon 2002). As improvements to the blighted or underdeveloped
area are made, the appraised property values are expected to increase. See id. 5 3 11.004(a)(7)
(Vernon Supp. 2006); El Paso County Cmty. Coll. Dist. v. City of El Paso, 698 S.W.2d 248, 250
(Tex. App.-Austin 1985), rev ' d o n other grounds, 729 S.W.2d 296 (Tex. 1987). The increase in
the appraised property value above the tax increment base is "captured." See TEX.TAXCODEANN.
$ 3 11.012(b) (Vernon 2002). The tax revenue derived by the municipality from the captured
appraised property value-the tax increment-is paid into a tax increment fund for the reinvestment
The Honorable Susan Combs - Page 3                      (GA-0549)

zone. See id. $5 31 1.012(a), .013(b); see also Tex. Att'y Gen. Op. No. GA-0514 (2007) at 2 ("In
other words, [the tax increments] are the taxes attributable to the increased value of the real property
in the zone due to its development."). Because the tax increment revenue is committed to the
development and improvement of the reinvestment zone, the additional revenue derived from the
increase in appraised property values and paid into the tax increment fund is not available for the
general support of the municipality. See TEX.TAXCODEANN. $8 3 11.013(b), .014(b) (Vernon
Supp. 2006); see also Tex. Att'y Gen. Op. No. MW-337 (1981) at 5.

         As a taxing unit, a school district may participate and pay taxes into the tax increment fund
under an agreement with the municipality responsible for creating the reinvestment zone. See TEX.
TAXCODEANN. $8 1.04(12) (Vernon Supp. 2006) (defining "taxing unit" under the Tax Code),
3 11.002(4) (defining "taxing unit" for purposes of chapter 3 11 with reference to section 1.04),
3 11.013(f) ("A taxing unit is not required to pay into the tax increment fund any of its tax increment
produced from property located in a reinvestment zone . . . unless the taxing unit enters into an
agreement to do so with the governing body of the municipality . . . ."). An agreement between the
municipality and the school district "must specify the portion of the tax increment to be paid into the
fund and the years for which that tax increment is to be paid into the fund."2 Id.5 3 11.013(f). Under
section 3 11.013, a taxing unit "shall pay into the tax increment fund for the zone an amount equal
to the tax increment . . . less . . . a portion, not to exceed 15 percent, of the tax increment produced
by the unit as provided by the reinvestment zone financing plan or a larger portion as provided by
Subsection (0."    Id.5 3 11.013(b). Thus, the statute authorizes a school district to retain a portion
of the tax increment revenues. But, consistent with the chapter 3 11 financing scheme, the portion
of the tax increment paid into the tax increment fund by the school district is no longer available for
the general support of the school district. CJ: id. 5 3 11.014(b); see also Tex. Att'y Gen. Op. No.
MW-337 (1981) at 5.

         With this background we examine Government Code section 403.302(d)(4). Section
403.302(d)(4) describes the amount of any captured appraised value that is to be subtracted from the
market value of a school district's taxable property. See TEX.GOV'TCODEANN.5 403.302(d)(4)
(Vernon Supp. 2006). The deductible property value amount must meet the requirements of
subdivisions (A)-(C). See id.5 403.302(d)(4)(A)-(C). In construing a statute, our primary objective
is to determine and give effect to the Legislature's intent. McIntyre v. Ramirez, 109 S.W.3d 74 1,745
(Tex. 2003). We start with the plain and common meaning of the statute's words. Id. Words and
phrases must be read in context and construed according to the rules of grammar and common usage.
TEX.GOV'TCODEANN.5 3 11.01l(a) (Vernon 2005); see also Alex SheshunoffMgmt. Servs., L.P.
v. Johnson, 209 S.W.3d 644,65 1-52 (Tex. 2006).

       By any measure, section 403.302(d)(4) is not a model of clarity. Nevertheless, under the
ordinary reading of the text, it is apparent that the subject of subdivisions (A)-(C) must be
"property," and not "value." That is clear because, in subdivision (A), "value" cannot be "within a

         'Prior to 1989, taxing units were required to contribute to the tax increment find all taxes levied and collected
on the increased property values in the reinvestment zone. See Act of May 24, 1989, 71st Leg., R.S., ch. 1137, Fj 25,
1989 Tex. Gen. Laws 4683,4691-92.
The Honorable Susan Combs - Page 4              (GA-0549)

reinvestment zone," but some "property" is; in subdivision (C), "value" cannot be "eligible for tax
increment financing under Chapter 3 11, Tax Code," but some property is; and (B) would have to
have the same subject as (A) and (C), lacking, as it does, a subject of its own. Consequently, under
the natural reading of the statute, for every "property" that satisfies subdivisions (A), (B), and (C),
the "total dollar amount of any captured appraised value" must be subtracted from the "market value
of all taxable property." Under this construction, the amount deducted would not be limited to the
proportion of school district tax actually paid into the tax increment fund, but rather would be the
"total dollar amount of any captured appraised value" of the property.

        However, a statutory provision should not be given a meaning inconsistent with other
provisions of the statute, although it might possibly be susceptible to a different construction if
standing alone. Barr v. Bernhard, 562 S.W.2d 844, 849 (Tex. 1978). Section 403.302(d)(4) is, at
the outset, expressly made "subject to Subsection (e)." TEX.GOV'TCODEANN. § 403.302(d)(4)
(Vernon Supp. 2006). And subsection (e), in turn, provides that the "total dollar amount deducted
under [section 403.302(d)(4)] . . . may not be increased by a change made . . . in the portion of the
tax increment retained by the school district." Id. 5 403.302(e) (emphasis added). If it were true that
subsection (d) required deducting the total amount of captured appraised value-regardless of the
amount retained by the school district-then subsection (e) would have no effect whatsoever.
Subsection (e) necessarily presumes that a change in the amount retained would, absent its specific
prohibition, require a change in the amount deducted. If changes in the amount retained can never
affect the amount deducted, then the prohibition of subsection (e) would be superfluous.

       Thus, the most natural reading of the text of subsection (d) runs contrary to the principle that
we must give effect to every word in a statute and, if possible, should not treat any statutory language
as mere surplusage. We should not lightly presume that the Legislature did a useless act. See In re
Mo. Pac. R. R. Co., 998 S.W.2d 212,216 (Tex. 1999); see also State v. Shumake, 199 S.W.3d 279,
287 (Tex. 2006). If possible, we must construe a statute's provisions in harmony with each other.
See La Sara Grain Co. v. First Nat 'I Bank of Mercedes, 673 S.W.2d 558,565 (Tex. 1984).

        The canons of statutory construction therefore require us to attempt to construe subsection
(d) differently in order to render subsection (e) effective, useful, and in harmony with subsection (d).
We believe that the text of subsection (d) permits such an alternative reading. Namely, although
"property" remains the subject to the verbs of subdivisions (A)-(C), nothing in the statute specifies
that "property" is a single, indivisible noun. Thus, it is possible to construe subdivision (d)(4)(B)
to limit the amount deducted to only that portion of property in a reinvestment zone that generates
tax revenue that is actually paid into a tax increment fund. In other words, when a school district
elects to remit to a tax increment fund only some of the taxes generated by the property, the
remaining portion of the property falls outside subsection (d) because it is generating taxes that are
not paid into the tax increment fund. Under this construction, the amount deducted would be
proportional to the percentage of property that generates the school district tax actually paid into the
fund.

         Although we might not reach this construction of subsection (d) in isolation, we believe this
latter construction is necessary to give full effect to the terms of subsection (e) as well. Accordingly,
The Honorable Susan Combs - Page 5             (GA-0549)

interpreting subsection (d) in harmony with subsection (e), we construe section 403.302(d)(4) of the
Government Code to require you, in your calculation of the total taxable value of school district
property, to subtract the amount of only the percentage of the captured appraised value that generates
the school district tax revenues actually paid into the tax increment fund.

        Furthermore, subdivision (A) of section 403.302(d)(4), which establishes time limits by
which a reinvestment zone must be established, states that a zone that is only proposed as of May
3 1, 1999, incorporates "the proposedportion of tax increment paid into the tax incrementfund by
a school district" as stated in the Tax Code section 3 11.003(e)notification. TEX.GOV'TCODEANN.
9 403.302(d)(4)(A) (Vernon Supp. 2006) (emphasis added); see also TEX.TAXCODEANN. 5
3 11.003(e) (Vernon Supp. 2006) (describing the required contents of a municipality's or county's
notification to taxing units of a proposed reinvestment zone). Again, this statutory language would
be superfluous if the percentage of the tax increment paid into the tax increment h n d were irrelevant
to the amount of the captured appraised value deducted. See In re Mo. Pac. R.R. Co., 998 S.W.2d
at 216.

         Finally, we recognize that limiting a school district's deduction to the percentage of captured
appraised value proportional to the percentage of tax increment actually paid into the tax increment
fund comports with the purpose of section 403.302. See TEX.GOV'TCODEANN.5 3 11.023(1), (5)
(Vernon 2005) (stating that in construing a statute, a court may consider the object sought to be
obtained and the consequences of a particular construction); McIntyre, 109 S.W.3d at 745 (same).
Because the purpose of section 403.302 is to deduct the value of property that does not generate tax
revenue for the general support of the school district or, in your words, to deduct the property values
that are "lost" to the district, the amount of the captured appraised value deducted should not be 100
percent where a district retains a percentage of the tax increment for its own use. See TEX.GOV'T
CODEANN. 5 403.301 (Vernon 2005) (setting forth the policy and purpose of the study of school
district property values under section 403.302); Request Letter, supra note 1, at 1.

        We accordingly conclude, based on the language of subsections 403.302(d) and (e) as the
language is informed by the principles of statutory construction, that section 403.302(d) requires a
deduction of the amount of the captured appraised value of school district property located in a tax
increment reinvestment zone that corresponds to the percentage of the tax increment actually paid
into the tax increment fund by the school district.
The Honorable Susan Combs - Page 6          (GA-0549)

                                     S U M M A R Y

                      Section 403.302(d)(4) of the Government Code requires the
              Texas Comptroller of Public Accounts to deduct the total dollar
              amount of only the percentage of the captured appraised value of
              school district property located in a tax increment reinvestment zone
              that corresponds to the percentage of the tax increment actually paid
              into the tax increment fund by the school district.

                                            Very t ~ u l yyours,

KENT C. SULLIVAN
First Assistant Attorney General

ELLEN L. WITT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Charlotte M. Harper
Assistant Attorney General, Opinion Committee