Court Opinion

ID: 4129725
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:55:38.79594+00
Date Added: 2024-06-11T14:31:20.397247
License: Public Domain

QBffice    of toe Rlttornep         @enerat
                                           &t&e     of ;PCexa$
DAN MORALES
 All-ortNEY
         CENERAL                            November 17,1997

   The Honorable Michael P. Fleming                Opinion No. DM-456
   Harris County Attorney
   1001 Preston, Suite 634                         Re: Whether a county may amend a tax abatement
   Houston, Texas 77002-1891                       agreement entered into pursuant to Tax Code chapter
                                                   3 12 by deleting land from an existing reinvestment
                                                   zone and related questions (RQ-938)

    Dear Mr. Fleming:

           You ask about the authority of a county to amend a tax abatement agreement entered into by
   the county pursuant to Tax Code chapter 312. First, you ask whether a county is authorized to
   amend a tax abatement agreement by deleting land from au existing reinvestment zone. You also
   ask whether property within a county reinvestment zone must be contiguous and whether a county
   may designate only a portion of a building, such as a floor, as a reinvestment zone. Fiiy,     you ask
   about the criteria for tax abatement agreements. We conclude that a county is not authorized to
   amend a tax abatement agreement by deleting land from an existing reinvestment zone. We also
   con&de that a county reinvestment zone must be contiguous and may not consist of only a portion
   of a building. Lastly, we conclude that the legislature intended to leave the substance of criteria for
   tax abatement agreements to the discretion of each county commissioners court, subject to very
   general constraints and certain specific limitations imposed by chapter 312.

           In 1981, the voters rat&d article VIII, section l-g of the Texas Constitution, subsection (a)
   of which permits the legislature to enact general law authorizing cities and other taxing tits “to
   grant exemptions or other relief tiom ad valorem taxes on property located in a reinvestment zone
   for the purpose of encouraging development or redevelopment and improvement of the property.”
   The legislatnm. enacted the Property Redevelopment and Tax Abatement Act, now codified as Tax
   Code chapter 312, in anticipation of this constitutional amendment.

           Subchapter C of chapter 3 12 authorizes a commissioners court of a county to enter into a tax
   abatement agreement with the owner of taxable real property located in a reinvestment zone only if
   the county commissioners court has designated the reinvestment zone according to certain statutory
   procedures. See Tax Code 5 312.402(a). In order to be eligible to designate a reinvestment zone,
   a county must first establish guidelines and criteria governing tax abatement agreements. See id.
   § 312.401(a); see also id. 5 312.002(a); A commissioners court may not designate an area as a
   reinvestment zone until it has held a public hearing on the designation and finds that the designation
   “would contribute to the retention or expansion of primary employment or would attract major
   investment in the zone that would be a benefit to the property to be included in the zone and would
The Honorable Michael P. Fleming - Page 2                 (~~-456)

contribute to the economic development of the county.” Id. 9 312.401(b).’ The designation of a
reinvestment zone expires after five years and may be renewed “for periods not to exceed five
years.” Id. $312.401(c). The expiration of the designation of a reinvestment zone does not atfect
existing tax abatement agreements. Id. A reinvestment zone designated under Government Code
chapter 2303, the Texas Enterprise Zone Act, constitutes a reinvestment zone for purposes of
subchapter C, and a county is not required to adhere to the subchapter C statutory procedures in
order to enter into tax abatement agreements with property owners within the zone. Id. $3 12.4011.

        Once a county has designated a reinvestment zone, the commissioners court of the county
is authorized to execute tax abatement agreements with owners of taxable real property within the
zone. Id. $9 312.401, .402(a). The execution, duration and other terms of a county tax abatement
agreement are governed by sections 312.204,312.205, and 312.211, which govern municipal tax
abatement agreements. Id. Similarly, a county tax abatement agreement “may be modified or
temrinated in the same manner and subject to the same limitations as provided by [slection 3 12.208,”
id. § 312.402(e), the provision goveming the modification and termination of municipal tax
abatement agreements. A wunty tax abatement agreement may not exceed a period of ton years, id.
9 312.204(a), and may not be modified to extend beyond that ten-year period, id. 8 312.208(a).
Again, the expiration of the designation of the reinvestment zone does not affect existing agreements
within the zone. Id. $ 3 12.401(c).

        Yourbrief suggests that a reinvestment zone and a tax abatement agreement are legally one
and the same. Based on our analysis of the statutory provisions discussed above, we view the
relationship between a reinvestment zone and a tax abatement agreement differently. Although
property subject to a tax abatement agreement may be coextensive with a reinvestment zone: a tax
abatement agreement and a reinvestment zone are legally distinct. Designation of a reinvestment
zone is a prerequisite to wmmissioners court authority to.enter into a tax abatement agreement A
reinvestment zone is established by commissioners court order after the court has held public
hearings and made the requisite findings. In addition, a reinvestment zone may (but need not)’
enwmpass holdings of many property owners and may be subject to more than one tax abatement
agmement’ Furthermore, a reinvestment zone’s designation expires five years after the date of the

         ‘Section 3 12.401 authorizesthe commissionen court of a county to designate as a “‘reinwstment zone ao area
of the countythat does not include areain the taxingjurisdictionof a municipality.”Tax Code 5 312.401(a).

        %e Letter Opiion No. 89-31 (1989) @rqaty          of single owner may   qualify as reinvestment zone under
statdmy predecessor to Tax code ch. 3 12).

         The language io section 312.401(c) providing that “[t]he eqdration oftbe desigoation [of a reinvesment mnej
does not affect existing agreements,” and section 3 12.204(b), which requires agreements made with the. owners of
prop&y in a reinvesimmt mm. to contain certain identical terms, demonstrates that the legislature envisioned that a
land witbin a reinvestnat zone could be owned by more.tb.aoone pmpaty owner and could be sobjeot to multiple tax
abatement agreemeots.

                                                          p. 2550
The Honorable Michael P. Pleming - Page 3                 (~~-456)

designation and may be renewed for periods not to exceed five years.5 A tax abatement agreement,
on the other hand, is a w&actual agreement negotiated between the county and a specific property
owner.    A tax abatement agreement governs the taxation of specific property within a zone. A
commissioners court is not required to hold hearings or make t%ulings regarding a tax abatement
agreement. Finally, a tsx abatement agreement, which may not exceed a ten-year period, has a
different life span than a reinvestment zone.6

       With this overview of a county’s authority to enter into a chapter 312 tax abatement
agreement and the relatior&ip between a reinvestment zone and a tax abatement agreement, we turn
to your specific questions. Fit, you ask if a county is %uthorized to amend a tax abatement
agreement by deleting land from an existing reinvestment zone.” For the following reasons, we
conclude that a wunty is not authorized to do so.

         First, we find no authority for a county to modify a reinvestment zone. A county has only
those powers conferred by the Texas Constitution and statutes, either expressly or by necessary
implication.’ Subchapter C w&ins no provision expressly authorizing a county to modify a
reinvestment zone once the zone has been designated and we do not believe such authority can be
implied. The authority to modify a reinvestment zone is not neoessary to the implementation of
subchapter C. Furthermore, the Tax Increment Financing Act, which was also enacted by the
legislature in 1981 in anticipation of article VIII, section l-g of the Texas Constitution, w&ins a
provision expressly authorizing a city to reduce or enlarge tbe boundaries of an existing reinvestment
zone. See Tax Code 5 311.007; see also id. $ 311.017 (providing for early termination of
reinvestment zone), In addition, the Texas Enterprise Zone Act, a similar economic-development
statute now codified in chapter 2303 of the Government Code, permits a governing body that
nominated an enterprise zone to amend the boundary of the enterprise zone. See Gov’t Code
5 2303.110. We believe that ifthe legislature had intended to authorize a wmmissioners court to
modify a Proper@ Redevelopment and Tax Abatement Act reinvestment zone it would have
expressly provided such authority.

        Second, Tax Code section 312.208, which governs a wunty’s authority to modify a tax
abatement agreement, does not authorize modification of an agreement by changing the reinvestment
zone in which the taxable real pmperty is located. We do not believe such authority can be implied.
While section 312.208 does provide that a tax abatement agreement may be modified to include
“provisions that wuld have been included in the original agreement or to delete provisions that were

        %Y. Code 5 312.401(c).

         %ee id. 85 312.204(a) (tax abatement not to exceed IO-year pexiod), .208(a) (effect of modification of tax
abatement agreement may not extend agreement beyond IO-year period); see oh id. 5 312.401(c) (expiration of
reinvestment zone designation does not affect existing tax abatement agreements).

        ‘Tex. Chst. art. V, 5 18; Canales v. Laughlin, 214 S.W.Zd 451,453 (Tex. 1948); Anderson v. Wood, 152
S.W.2d 1084,1085 (Tex. 1941); I’hwi.rCo~rryv. Ghnga, 753 S.W.2d716,72O(Tex.App.-Austin 1988, writdenied).

                                                         p.   2551
The Honorable Michael P. Fleming - Page 4                 (DM-456)

not necessary to the original agreement,” subchapter C does not specify the boundaries of the
reinvestment zone as a term of a tax abatement agreement. See Tax Code @ 312.204(a) (setting
forth limitations on tsx abatements), .205(a) (setting forth terms that must be included in tax
abatement agreement). Moreover, for the reasons discussed above, we do not believe that the
boundaries of a reinvestment zone may be included as a wntractual term between the wunty and
the property owner. Again commissioners court authority to designate an economic development
zone is unilateral and contingent only on the court’s adherence to statutory requirements. Id.
4 312.401(a), (b). Commissioners court authority to enter into a tax abatement agreement
presupposes that the taxable property at issue is located in a previously designated reinvestment
zone. Id. 6 312402(a). We do not believe that a commissioners court order enacted after a public
hearing and the making of certain findings can be modified by agreement between the county and
a private party.

        To summarize, chapter 312, subchapter C does not authorize a county to modify a
reinvestment zone after it has been designated. The authority to modify a tax abatement agreement
does not include the authority to modify the reinvestment zone in which the property subject to the
agreement is located. Because we conclude that a wunty is not authorized to amend a tax abatement
agreement by deleting land from an existing reinvestment zone, we do not address your related
questions.*

         Next you pose two questions about the physical chsracteristics of a reinvestment zone. You
ask !irst whether property within a wunty reinvestment zone must be wntiguous and second whether
a county is authorized to designate a portion of a building, such .as a floor, as a reinvestment zone.
Because these questions are related, we address them together.

         While subchapter C does not establish any express requirements for the physical
characteristics of a rehrveatment zone, the language of the subchapter provides guidsnce. We believe
that the legislature’s use of the term “zone” in chapter 312 is significant. In addition, we note that
the legislature in subchapter C has specifically referred to a reinvestment zone as “an area.‘* The
Code Construction Act provides that “[w]ords and phrases shall be read in context and wnstrued
according to the rules of grammar and common usage.” Gov’t Code 5 311.01 l(a). The wmmon
definition of the term “zone” in the context of municipal regulation is a region or territory created
for a particular purpose.rO Similsrly, other statutes employ the term “zone” to describe some portion

          ‘You ask how a tax ahatemeotagmment amendment deleting property fmn a ninveslmmt zone would affect
the five-year periods for reinvestmentmes set forth io section 3 12.401. You also ask whether a commissione.rs court
most hold B hearing prior to changing the houndaries of a reiovestment zone.

        Tax Code 5 312.401(a), (h).

        %x OXFORD
                ENGLISHDICTIONARY 818 (2d cd. 1989); WEBSTER’NINTH
                                                             S    NEWC~LLEGUTEDICTIONARY
1372 (1990).

                                                           p.   2552
The Honorable Michael P. Fleming - Page 5                   (DM-456)

of the earth’s surthce” The term “ka” is also wmmonly understood to refer to a single parcel of
land.‘*

         With these definitions in mind, we turn to your questions. First, we conclude that the term
“zone” itself and the use of the phrase %I area” to describe a reinvestment zone indicate that the
legislature intended a reinvestment zone to embrace a single, wntignous whole and that it did not
intend a reinvestment zone to include nonwntiguous territory. The requirement that a reinvestment
zone be wntiguous is wnsistent with other economic-development statutes, which expressly provide
that analogous zones must be wntiguous. I3 With respect to your second question, because the terms
“‘zone”and “srea” refer to territory, a parcel of land, or a portion of the earth’s surface, we conclude
that no part of a building may be included in a reinvestment zone unless the zone includes the land
on which the building is located. A reinvestment zone may not consist of only a floor of a multi-
story building. The conclusion that a reinvestment zone must consist of a portion of land is also
consistent with the express provisions in other economic-development statutes.14

        The foregoing wnstruction of chapter 312 should not lit      the authority of a county to
designate reinvestment zones and enter into tax abatement agreements. Nothing in chapter 312
precludes the county from designating a wntiguons reinvestment zone and then entering into tax
abatement agreements with owners of taxable real property affecting only some property within the
zone, such as noncontiguous property owned by a single taxpayer or a floor of a multi-story

         “See, eg., Agric. Code $5 74.002 (defining “peatmanagementzone” as ‘geographical mne”), .102 (desmiii
an %radieation zone” as “googmphic area”); Oov’t Code. 5 2303.101(a) (enterprise zone must “have a continuous
boot&y” and be “at leastone square mile but not largerthan the greaterof. .“); Health & Safety Code $361.003(l)
(deiining “appamntm&age zone” as ‘rcchargc mm de&mtcd on maps’); L.ocd Ciov’t Code $23 1.052 (authorizing
ummdseicmm court to establish “military zone,‘* which “may not extend more than one mile from the boundary line
of the military establishm.%t”);Nat. Res. Code 8 33.004 (defining “coastal zone” as “the portion of the coastal area
located within [certain] bowlaries”); Tax Code Q311.003(a) (providing for designation of “contiguous geographic
ana” as reinves~t      zone); V.T.C.S. art 54211&g 6.01(l) (defining “boffer zone” as “strip of land”).

        “See, e.g., Ahvood v. Humble Oil & Refining Co., 338 F.2d 502,506 (5th Cir. 1964). cert. denied, 381 U.S.
926 (1965) (““Ihe word area means a swface, a territory, B region.‘“) (citing Fleming v. Farmers F’eonut Co., 128 F.2d
404 (5th Cir. 1942)); Mai.wn v. Mutzy, 233 S.W.Zd 309,3 12 (Tex. Civ. App.--Amarillo 1950, writ ref d ox.=.) (“The
word ‘BTC~’ usually means mu%,space, region, or a broad part of lmd.“); BLACK’SLAWDICTIONARY     97 (5th cd. 1979)
(d&kg area as “[a] so&cc, a territory, a region. . . A particular extent of space OIsurface OTone serving B special
purpose.“).

          “See Tax Code 5 3 11.003(a) (providing for desigoatioo of “contiguous geographic arca”as reinveslment zone%
Gov’t Cede 0 2303.101(a)(l) (enterprise zone must “have a continuous boundary”), (2) (enterprise zone most be “at
least one square.mile but not larger than the greater of. .“).

         “see id.

                                                            p.   2553
The Honorable Michael P. Fleming - Page 6                            (DM-456)

building. Is We also note that chapter 312 does not limit a wunty to designating only one
reinvestment zone in the county.

         Finally, you ask, ‘What criteria should be used when considering the granting of a tax
abatement in a reinvestment zone.” Subchapter C requires the goveming body of the county, the
wmmissionets court, to establish “guidelines and criteria governing tax abatement agreements” prior
to designating a reinvestment zone. Tax Code $5 312.002(a), .401(a). ‘The guidelines must provide
for the availability of tax abatement for both new facilities and structures and for the expansion or
modernization of existing facilities and structures.” Id. 9 3 12.002(a). Subchapter C is otherwise
silent regarding the critena governing tax abatement agreements. Given this silence and the fact the
legislature has expressly directed commissioners courts to establish guidelines and criteria goveming
tax abatement agreements, it appears that the legislature intended to leave the substance of such
criteria to the discretion of each commissioners court. We believe subchapter C imposes only two
very general limitations on this discretion; first, we believe that the wunty is authorized to enter into
a tax abatement agreement with an owner of taxable real property only if the property owner agrees
to make improvements to the p’~perty’~ and, second, we believe that improvements that form the
basis of a tax abatement agreement must be Consistent with the purpose of the reinvestment zone
designation.”      In addition, the criteria must comport with the few express limitations and
requirements for a tax abatement agreement set forth by subchapter Cl8

         “See Letter Opiion No. 89-31 (1989) (“It is clear that the [statutory predecessoI to chapter 3 121 does not
require all similarly situated properties to cnjoy tax-abatement benefits available to contiguous property.“).

         ‘%ee Tax Code g 3 12.204(a) (authority to enter into tax abatement agreement predicated on condition that
property owner “make specific improvement or repairs to the property”).

          “See id. g 312.401(b) (county reinvestment ulne designation must “conhibute to the retention or expansion
of primay employment or. . &act major investment in the zone that would be a benefit to the propertyto be included
in tbe zone and would contribute to the economic development of the county”); see also Tex. Coast. art. VIII, 5 I-g(a)
(authorizing tax relief “for the purpose of encoomging development or redevelopment and improvement of the
property”).

         %ee, e.g., id. $8 312.204(a) (setting foxtblhitati~mon lax abatements),(b) (limitations applicable when there
arc tax abatement agreements with more tfian one property owner in reinvestment zone), .205(a) (setting forth terms
that must be included in tax abatrment agreement),.402(d) (property owned or leased by commissioners coort member
may not be subject to tax abatement agreement).

                                                            p.   2554
The Honorable Michael P. Fleming - Page 7             @M-456)

                                       SUMMARY

               A wunty is not authorized to amend a Tax Code chapter 312 tsx
           abatement agreement by deleting land &om an existing reinvestment zone.
           A wunty reinvestment zone under cha@er 3 12 must be contiguous and may
           not consist of only a Portion of a building. The legislature intended to leave
           the substance of criteria for tax abatement agreements to the discretion of
           each county wnnnissioners court, subject to very general constraints and
           certain specific limitations imposed by chapter 3 12.

                                              DAN MORALES
                                              Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
chair, opiion committee

Prepared by Mary R. Grouter
Assistant Attorney General

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