Does Texas's impact-fee timing rule control a city's fees if the city raised the amounts after June 20, 1987?

TX AG Opinion GA-0577: Does the impact-fee timing rule apply when a city raised its fees after June 20, 1987?

Plain-English summary

Texas cities can charge "impact fees" (sometimes called capital recovery fees) on new development to help pay for the water, sewer, and other public facilities that growth makes necessary. Chapter 395 of the Local Government Code sets out when those fees may be assessed and when they may be collected. One subsection, section 395.016(b), carves out a narrow rule for a specific situation: impact fees that were adopted before June 20, 1987 (the date the statewide impact-fee scheme took effect), charged on land platted after that date.

The City of League City had adopted capital recovery fees back in 1984, before the 1987 cutoff. But it had raised the fee amounts a number of times since then, most recently in July 2006. Senator Mike Jackson, asking on the City's behalf, wanted to know whether section 395.016(b) governed how the City could assess and collect those fees, and if so, whether the City was locked into assessing them only "before or at the time of recordation" of a subdivision plat.

The Attorney General said subsection (b) did not apply. The key word was "adopted." Reading the statutory definition of "impact fee" (a charge or assessment imposed against new development) together with the ordinary meaning of "adopt" (to approve and put into effect), the Attorney General concluded that "impact fees adopted" refers to the approval and imposition of the fee dollar amount. Because the City set its current fee amounts after June 20, 1987, those fees were not "impact fees adopted before June 20, 1987," so subsection (b) did not control them. Having answered the first question no, the Attorney General did not reach the second question about the timing of assessment.

Currency note

This opinion was issued in 2007. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Chapter 395 of the Local Government Code and the case law cited here may have been amended or refined since 2007. Confirm the current statute and any later opinions before relying on this analysis.

Who this opinion affected (as of 2007)

The City of League City and other home-rule municipalities: The opinion told the City that because it had set its current impact-fee amounts after June 20, 1987, the special timing rule in section 395.016(b) did not govern its assessment and collection of those fees. A pre-1987 ordinance did not lock a city into subsection (b) once it reset the fee amounts after the cutoff date.

Developers and homebuilders paying the fees: The opinion explained that the relevant date for subsection (b) was when the fee dollar amount was approved and imposed, not when the city first created some impact-fee ordinance. The opinion did not decide the broader question of when, under the rest of section 395.016, the City could assess or collect the fees.

Legislators and city attorneys reading chapter 395: The opinion turned on the meaning of "adopted" in subsection (b), holding it refers to approval and imposition of the fee amount. The opinion did not opine on whether the City's fee increases complied with the chapter 395 procedures for adopting or amending impact fees.

Common questions

What is an impact fee?
It is a charge a city or other governmental entity imposes on new development to help pay for new public facilities (like water and sewer capacity) that become necessary because of growth. The opinion notes these fees are sometimes called "capital recovery fees" or "subsequent user fees."

What does section 395.016(b) actually cover?
By its own terms, subsection (b) "applies only to impact fees adopted before June 20, 1987, and land platted after that date." For that narrow situation, it lets the political subdivision assess the fees before or at the time of recordation and collect them at certain later points.

Why didn't subsection (b) apply to League City if the City had fees before 1987?
Because the City raised and reset its fee amounts after June 20, 1987. The Attorney General read "adopted" to mean the approval and imposition of the fee dollar amount, so the amounts in question were adopted after the cutoff and fell outside subsection (b).

Did the opinion say when the City could assess or collect its fees?
No. Because subsection (b) did not apply, the Attorney General did not reach the second question about whether the City was limited to assessing fees "before or at the time of recordation." The rest of section 395.016 governs that timing, and the opinion did not analyze it.

Background and statutory framework

Effective June 20, 1987, the Legislature established a statutory scheme governing the imposition of impact fees by municipalities and other governmental entities, now codified at chapter 395 of the Local Government Code (Act of May 25, 1987, 70th Leg., R.S., ch. 957, §§ 1-11, 1987 Tex. Gen. Laws 3245, 3245-55). A Texas court has described an impact fee as a charge "on new development to pay for new public facilities that become necessary as the result of city growth in a particular area" (DeSoto Wildwood Dev., Inc. v. City of Lewisville, 184 S.W.3d 814, 820 n.3 (Tex. App.-Fort Worth 2006, no pet.)), and the term is defined by statute (Tex. Loc. Gov't Code Ann. § 395.001(4)).

Section 395.016 sets the times impact fees may be assessed and collected, depending largely on when the fees are adopted and when the land is platted (Tex. Loc. Gov't Code Ann. § 395.016; see also §§ 395.016(f) (defining "assessment"), 395.024 (collected funds deposited in interest-bearing accounts), 395.018-.019). Subsection (b) is the narrow provision the question turned on: it "applies only to impact fees adopted before June 20, 1987, and land platted after that date," and for such development lets the subdivision assess the fees before or at recordation and collect them at certain later points (Tex. Loc. Gov't Code Ann. § 395.016(b)).

The pivotal term was "adopted," which chapter 395 does not define. Words are read in context and construed according to common usage (Tex. Gov't Code Ann. § 311.011(a); Fitzgerald v. Advanced Spine Fixation Sys., 996 S.W.2d 864, 865 (Tex. 1999)). A Texas court has defined "adopt" to mean "to take or receive as one's own what is not so naturally; to select and take and approve" (City of Dallas v. Beeman, 45 S.W. 626, 628 (Tex. Civ. App.-1898, writ dism'd)), and revisor's notes treat "adopt" as encompassing terms like "promulgate," "formulate," and "prescribe" (Tex. Health & Safety Code Ann. § 753.002 revisor's note; Tex. Occ. Code Ann. § 262.102 revisor's note; Tex. Transp. Code Ann. § 722.004 revisor's note). Reading the statutory definition of "impact fee" together with the ordinary meaning of "adopt," the Attorney General concluded that "impact fees adopted" refers to the approval and imposition of the fee dollar amount. Because the City imposed its current fee amounts after June 20, 1987, those fees fell outside subsection (b), and the second question did not need to be answered. The opinion did not opine on whether the City's fee increases complied with the adoption and amendment procedures in chapter 395 (Tex. Loc. Gov't Code Ann. §§ 395.041-.058).

Citations

Statutes and session laws:

• Tex. Loc. Gov't Code Ann. § 395.016(b) (Vernon 2005)
• Tex. Loc. Gov't Code Ann. § 395.016(f) (Vernon 2005)
• Tex. Loc. Gov't Code Ann. § 395.016 (Vernon 2005)
• Tex. Loc. Gov't Code Ann. § 395.001(4) (Vernon 2005)
• Tex. Loc. Gov't Code Ann. § 395.024 (Vernon 2005)
• Tex. Loc. Gov't Code Ann. §§ 395.018-.019 (Vernon 2005)
• Tex. Loc. Gov't Code Ann. §§ 395.041-.058 (Vernon 2005)
• Tex. Gov't Code Ann. § 311.011(a) (Vernon 2005)
• Act of May 25, 1987, 70th Leg., R.S., ch. 957, §§ 1-11, 1987 Tex. Gen. Laws 3245, 3245-55
• Tex. Health & Safety Code Ann. § 753.002 revisor's note (Vernon 2003)
• Tex. Occ. Code Ann. § 262.102 revisor's note (Vernon 2004)
• Tex. Transp. Code Ann. § 722.004 revisor's note (Vernon 1999)

Cases:

• DeSoto Wildwood Dev., Inc. v. City of Lewisville, 184 S.W.3d 814, 820 n.3 (Tex. App.-Fort Worth 2006, no pet.)
• Fitzgerald v. Advanced Spine Fixation Sys., 996 S.W.2d 864, 865 (Tex. 1999)
• City of Dallas v. Beeman, 45 S.W. 626, 628 (Tex. Civ. App.-1898, writ dism'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0577
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2007/ga0577.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain - the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

October 25, 2007

The Honorable Mike Jackson
Chair, Committee on Nominations
Texas State Senate
Post Office Box 12068
Austin, Texas 78711

Opinion No. GA-0577

Re: Assessment and collection of impact fees for land platted after June 20, 1987 (RQ-0587-GA)

Dear Senator Jackson:

On behalf of the City of League City, Texas (the "City"), you ask questions regarding the assessment and collection of impact fees.[1] Specifically, you inquire "[w]hether the assessment and collection of impact fees for land platted after June 20, 1987 [are] controlled by the provisions" of section 395.016(b) of the Local Government Code. Request Letter, supra note 1, at 2; see also TEX. LOC. GOV'T CODE ANN. § 395.016(b) (Vernon 2005) ("This subsection [395.016(b)] applies only to impact fees adopted before June 20, 1987, and land platted after that date."). If the assessment and collection are controlled by section 395.016(b), you then ask whether "the City [is] prohibited from assessing impact fees at a time other than 'before or at the time of recordation' of a subdivision plat." Request Letter, supra note 1, at 2.

You explain that "[o]n or about January 12, 1984, the City, . . . a home-rule municipality, . . . adopted an ordinance providing for the assessment and collection of capital recovery fees for the 'construction, design and inspection of General Benefit Facilities for water and wastewater.'"[2] Id. at 1. You go on to explain that the fees have "been increased a number of times since the adoption of the original ordinance through various ordinances amending the original ordinance," most recently in July of 2006. Id.

Based on these facts, we understand the focus of your primary question to be whether the City's current impact fees constitute "impact fees adopted before June 20, 1987" as provided in section 395.016(b). To provide context for your questions, we first review relevant statutory background and terms.

I. Statutory Background

Effective June 20, 1987, the Legislature established a statutory scheme governing the imposition of impact fees by municipalities and other governmental entities, now codified at chapter 395 of the Local Government Code. See Act of May 25, 1987, 70th Leg., R.S., ch. 957, §§ 1-11, 1987 Tex. Gen. Laws 3245, 3245-55; TEX. LOC. GOV'T CODE ANN. ch. 395 (Vernon 2005 & Supp. 2006). An impact fee is generally described in one Texas case as a charge "on new development to pay for new public facilities that become necessary as the result of city growth in a particular area." DeSoto Wildwood Dev., Inc. v. City of Lewisville, 184 S.W.3d 814, 820 n.3 (Tex. App.-Fort Worth 2006, no pet.); see also TEX. LOC. GOV'T CODE ANN. § 395.001(4) (Vernon 2005) (defining the term "impact fee").

One step in implementing an impact fee program under the state scheme is the assessment and collection of the fees. Section 395.016(f) defines "assessment" to mean "a determination of the amount of the impact fee in effect on the date or occurrence provided in this section and is the maximum amount that can be charged per service unit of such development." TEX. LOC. GOV'T CODE ANN. § 395.016(f) (Vernon 2005). The term "collect" refers to the time the governmental entity receives payment of the fees. See MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 243 (11th ed. 2005) (defining "collect" to mean, among other things, "to receive payment"); see also TEX. GOV'T CODE ANN. § 311.011(a) (Vernon 2005) ("Words and phrases shall be read in context and construed according to the rules of grammar and common usage."); TEX. LOC. GOV'T CODE ANN. § 395.024 (Vernon 2005) ("funds collected through the adoption of an impact fee shall be deposited in interest-bearing accounts").

Section 395.016 provides varying times that impact fees may be assessed and collected, dependent largely on when the fees are adopted and when the land is platted.[3] See TEX. LOC. GOV'T CODE ANN. § 395.016 (Vernon 2005). For instance, section 395.016(b), the statute upon which your question is based, provides for impact fees adopted before June 20, 1987, and land platted subsequent to that date:

This subsection applies only to impact fees adopted before June 20, 1987, and land platted after that date. For new development which is platted, . . . the political subdivision may assess the impact fees before or at the time of recordation. Except as [otherwise] provided, . . . the political subdivision may collect the fees at either the time of recordation of the subdivision plat or connection to the political subdivision's water or sewer system or at the time the political subdivision issues either the building permit or the certificate of occupancy.

Id. § 395.016(b) (emphasis added).

II. Analysis

On behalf of the City you ask whether section 395.016(b) governs the City's assessment and collection of impact fees. Your request indicates that the City questions whether it is subject to subsection (b) because the City had impact fees in place prior to 1987. See Request Letter, supra note 1, at 1.[4] We understand the argument to be that the City's actions after June 20, 1987, do not take the City out of the purview of subsection (b). We do not agree.

On its face, subsection (b) applies only "to impact fees adopted before June 20, 1987, and land platted after that date." TEX. LOC. GOV'T CODE ANN. § 395.016(b) (Vernon 2005). The meaning of the phrase "impact fees adopted" in subsection (b) is pivotal in answering your question. The term "impact fee" is defined, in relevant part, as a "charge or assessment imposed by a political subdivision against new development." Id. § 395.001(4) (emphasis added). Thus, the term refers to the dollar amount imposed on new development.

The term "adopted" is not defined in chapter 395. Accordingly, we look to the plain and common meaning of the term to understand its significance in the context of section 395.016(b). See TEX. GOV'T CODE ANN. § 311.011(a) (Vernon 2005); Fitzgerald v. Advanced Spine Fixation Sys., 996 S.W.2d 864, 865 (Tex. 1999). A Texas court has defined "[t]he word 'adopt' [to] mean[] 'to take or receive as one's own what is not so naturally; to select and take and approve.'" City of Dallas v. Beeman, 45 S.W. 626, 628 (Tex. Civ. App.-1898, writ dism'd); see also BLACK'S LAW DICTIONARY 32 (6th ed. 1991) (defining "adopt" to mean, among other things, "[t]o accept, consent to, and put into effective operation; as in the case of a constitution, constitutional amendment, ordinance, court rule, or by-law"). Revisor's notes scattered throughout state law indicate the word "adopt" encompasses various terms including "promulgate," "formulate," and "prescribe." See TEX. HEALTH & SAFETY CODE ANN. § 753.002 revisor's note (Vernon 2003); TEX. OCC. CODE ANN. § 262.102 revisor's note (Vernon 2004); TEX. TRANSP. CODE ANN. § 722.004 revisor's note (Vernon 1999).

Based on the statutory definition of "impact fee" and the ordinary meaning of "adopt," we conclude that impact fees adopted, in the context of subsection (b), refers to the approval and imposition of the fee dollar amount. You inform us that the City increased its impact fees subsequent to June 20, 1987. See Request Letter, supra note 1, at 1.[5] Thus, the fee amounts about which you ask were approved and imposed at a time outside the bounds of subsection (b).

Because the assessment and collection of the City's impact fees are not governed by subsection (b), we need not answer your second question.

SUMMARY

A municipality's assessment and collection of impact fees are not governed by Local Government Code section 395.016(b) when the municipality approves and imposes the impact fee dollar amounts after June 20, 1987.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Christy Drake-Adams
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Honorable Mike Jackson, Chair, Committee on Nominations, Texas State Senate, to Honorable Greg Abbott, Attorney General of Texas, at 2 (Apr. 30, 2007) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] Impact fees are sometimes referred to by other names such as "capital recovery fees" and "subsequent user fees." See TEX. LOC. GOV'T CODE ANN. § 395.001(4) (Vernon 2005) (providing that the term "impact fee" includes "capital recovery fees" or other fees that function as described in section 395.001(4)); R. Alan Haywood & David Hartman, Legal Basics for Development Agreements, 32 TEX. TECH L. REV. 955, 966-67 (2001) ("Depending on the locality, these fees may be referred to as 'subsequent user fees,' 'capital recovery fees,' or 'impact fees.'").

[3] The timing of assessment and collection of impact fees may also depend on the type of capital improvement project undertaken, whether services are currently available, and whether there is any agreement between the political subdivision and landowner as to the collection of impact fees. See TEX. LOC. GOV'T CODE ANN. §§ 395.018-.019 (Vernon 2005).

[4] Accord Brief from Ian P. Faria, of Coats, Rose, Yale, Ryman, & Lee, P.C., on behalf of Cervelle Custom Homes, L.L.P., to Honorable Greg Abbott, Attorney General of Texas, at 6 (June 7, 2007) (on file with the Opinion Committee) ("The Opinion Request notes some uncertainty in the interpretation of Section 395.016 where a city, such as League City, has adopted impact fees before June 20, 1987 and later amended the amount of those fees.").

[5] We recognize that chapter 395 contains procedures that govern the adoption and amendment of impact fees. See, e.g., TEX. LOC. GOV'T CODE ANN. §§ 395.041-.058 (Vernon 2005). You do not ask and we do not opine on whether the City's current fees were made in compliance with these procedures.