Can a Texas water authority use the Tax Code's effective-rate and rollback procedures to set its tax rate?

TX AG Opinion GA-0758: Can the South Texas Water Authority set its tax rate using Tax Code chapter 26?

Plain-English summary

Representative Rene Oliveira asked the Attorney General whether the South Texas Water Authority (STWA) could adopt its property taxes using sections 26.04, 26.05, and 26.07 of the Tax Code. Those sections are the familiar "truth-in-taxation" procedures that general-law cities and many other taxing units use to calculate an effective tax rate, adopt a rate after notice, and let voters petition for a rollback election. STWA had been setting its rate under chapter 49 of the Water Code and wanted to switch to the Tax Code method instead.

The Attorney General said no. STWA is a conservation and reclamation district created under article XVI, section 59 of the Texas Constitution, which makes it a "district" governed by chapter 49 of the Water Code. Section 49.107(g) of that chapter states plainly that Tax Code sections 26.04, 26.05, and 26.07 "do not apply" to a tax levied and collected by such a district. Unless some other Water Code provision or the act creating STWA directly conflicts with that rule, STWA cannot use the Tax Code procedures.

STWA's enabling act (a 1979 statute) does let it adopt "laws of this state applicable to general law cities and towns" to the extent "pertinent and practicable." The opinion held that this broad, general authorization does not directly conflict with the narrower, later section 49.107(g). Courts construe statutes to harmonize rather than create conflicts, and by enacting chapter 49 in 1995, sixteen years after STWA was created, the Legislature set up a separate, uniform set of rate-setting procedures for water districts and implicitly decided it was not "pertinent and practicable" for districts like STWA to use the Tax Code sections. So section 49.107(g) operates as a limited exception to STWA's general power to borrow city law, and STWA must use the Water Code procedures.

Currency note

This opinion was issued in 2010. 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 49 of the Water Code and chapter 26 of the Tax Code have both been amended repeatedly since 2010. Confirm the current text of these provisions before relying on anything below.

Who this opinion affected (as of 2010)

Water authorities and conservation/reclamation districts: The opinion told them that if they meet the chapter 49 definition of "district," section 49.107(g) bars them from using Tax Code sections 26.04, 26.05, and 26.07; they must set rates under the Water Code's own procedures (sections 49.107 and 49.236).

District board members and tax assessors: The opinion described the rate-setting path for these districts as the Water Code calculations and notice rules, not the general-law-city truth-in-taxation forms.

Property owners within a water district: The opinion explained that the rollback-petition mechanism in Tax Code section 26.07 was not the avenue for these districts; the Water Code provides the applicable procedures (including, for operation and maintenance taxes, voter approval under section 49.107).

Common questions

Why can't a water authority just use the same tax procedures as a city?
The opinion explained that section 49.107(g) of the Water Code specifically says Tax Code sections 26.04, 26.05, and 26.07 do not apply to a water district's tax. When the Legislature wrote a specific rule for water districts, that rule controls over the district's general power to borrow city law.

Doesn't STWA's charter let it adopt laws applicable to general-law cities?
Yes, but only "to the extent pertinent and practicable." The opinion read that as not conflicting with section 49.107(g); by creating a separate procedure for water districts in 1995, the Legislature implicitly decided the Tax Code procedures were not pertinent and practicable for them.

What procedures does a chapter 49 water district use instead?
The opinion pointed to the Water Code's own calculations and notice requirements, citing sections 49.107(b)-(d) (operation and maintenance tax approval) and 49.236 (notice requirements before adopting a rate).

Background and statutory framework

STWA is a conservation and reclamation district created in 1979 under article XVI, section 59 of the Texas Constitution (Act of May 24, 1979, 66th Leg., R.S., ch. 436, § 1). Chapter 49 of the Water Code defines "district" to include any district or authority created under that constitutional provision (Tex. Water Code Ann. § 49.001(a)(1) (Vernon 2008)), and a district is subject to chapter 49 except where chapter 49 directly conflicts with another Water Code chapter or a special-law district act, in which case the more specific provision controls (id. § 49.002(a)). Section 49.107 governs operation and maintenance taxes and related levy procedures, and subsection (g) states that Tax Code sections 26.04, 26.05, and 26.07 do not apply to a tax levied and collected under that section (id. § 49.107(a), (g)).

The Tax Code sections at issue establish the effective-rate calculation and publication (Tex. Tax Code Ann. § 26.04(c)-(e) (Vernon 2008)), the procedures and notice for adopting a rate (id. § 26.05 (Vernon Supp. 2009)), and the qualified voters' rollback-election petition (id. § 26.07 (Vernon 2008)). The Water Code instead sets separate calculations and procedures for chapter 49 districts (Tex. Water Code Ann. §§ 49.107(b)-(d), 49.236, 49.236(a)(2)(D)-(F) (Vernon 2008)). The opinion construed statutes to harmonize rather than conflict (La Sara Grain Co. v. First Nat'l Bank of Mercedes, 673 S.W.2d 558, 565 (Tex. 1984)), so it read STWA's general 1979 authority to adopt laws applicable to general-law cities (Act of May 24, 1979, 66th Leg., R.S., ch. 436, § 24(c)-(d)) as not in direct conflict with the later, specific section 49.107(g). The legislative history of chapter 49, enacted in 1995 to cure a "lack of procedural uniformity" among local water districts, supported reading section 49.107(g) as a limited exception requiring STWA to use the Water Code procedures.

Citations

Statutes:

• Tex. Water Code Ann. §§ 49.001(a)(1), 49.002(a), 49.107(a), 49.107(g), 49.107(b)-(d), 49.236, 49.236(a)(2)(D)-(F) (Vernon 2008)
• Tex. Tax Code Ann. § 26.04(c)-(e) (Vernon 2008); § 26.05 (Vernon Supp. 2009); § 26.07 (Vernon 2008)
• Act of May 24, 1979, 66th Leg., R.S., ch. 436, § 24(c)-(d), 1979 Tex. Gen. Laws 984

Cases:

• La Sara Grain Co. v. First Nat'l Bank of Mercedes, 673 S.W.2d 558 (Tex. 1984)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0758
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2010/ga0758.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

February 9, 2010

The Honorable Rene O. Oliveira
Chair, Committee on Ways & Means
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0758

Re: Whether the South Texas Water Authority may adopt an effective tax rate under the provisions of chapter 26 of the Tax Code (RQ-0815-GA)

Dear Representative Oliveira:

You ask whether the South Texas Water Authority ("STWA") may adopt its taxes pursuant to the provisions of sections 26.04, 26.05, and 26.07 of the Tax Code.[1] You explain that the STWA currently calculates and adopts its effective tax rate pursuant to chapter 49 of the Water Code but would instead like to use these specific provisions within the Tax Code. Request Letter at 1-2. You suggest that the STWA enabling statute may allow it to do so. Id. at 2.

The STWA is a conservation and reclamation district created pursuant to article XVI, section 59 of the Texas Constitution. Act of May 24, 1979, 66th Leg., R.S., ch. 436, § 1, 1979 Tex. Gen. Laws 984, 984-85. "District" is defined for purposes of chapter 49 of the Water Code to include, with certain exceptions not relevant here, "any district or authority created by authority of ... Section 59, Article XVI, Texas Constitution." TEX. WATER CODE ANN. § 49.001(a)(1) (Vernon 2008). Thus, STWA qualifies as a district, and it is subject to chapter 49 of the Water Code except to the extent that chapter 49 "directly conflict[s] with a provision in any other chapter of [the Water Code] or any Act creating or affecting a special law district," whereupon "the specific provisions in such other chapter or Act shall control." Id. § 49.002(a).

Section 49.107 of the Water Code addresses operations and maintenance taxes levied by districts and certain procedures associated with the levy and collection of both operation and maintenance taxes and debt service taxes. Id. § 49.107(a). Specifically, subsection (g) of that section states that "[s]ections 26.04, 26.05, and 26.07, Tax Code, do not apply to a tax levied and collected under this section or an ad valorem tax levied and collected for the payment of the interest on and principal of bonds issued by a district." Id. § 49.107(g); but see id. § 49.236(d) (incorporating procedures under Tax Code section 26.07(b)-(g) in certain circumstances).[2] Therefore, unless another provision of the Water Code or the act creating STWA directly conflicts with this provision, STWA may not utilize the procedures set forth in sections 26.04, 26.05, and 26.07 of the Tax Code when adopting its tax rate.

You indicate that the language in the act creating STWA may conflict with subsection 49.107(g) such that the provisions of the Tax Code may be used by STWA when adopting its tax rate. Request Letter at 1-2. In particular, you point to section 24 of the act creating STWA, which addresses taxation and states, "[t]he laws of this state applicable to general law cities and towns may be adopted and shall be used to the extent pertinent and practicable." Act of May 24, 1979, 66th Leg., R.S., ch. 436, § 24(c), 1979 Tex. Gen. Laws 984, 996. Sections 26.04, 26.05, and 26.07 of the Tax Code establish procedures to be utilized by certain taxing entities when calculating effective and rollback tax rates, adopting a tax rate, and holding a rollback election. The provisions are applicable to general law cities. As a result, you suggest that the language in section 24 is in direct conflict with subsection 49.107(g) of the Water Code and may trump the application of subsection 49.107(g) to STWA. Request Letter at 2.

We disagree that the language in the act creating STWA directly conflicts with subsection 49.107(g) such that STWA may utilize the procedures set forth in sections 26.04, 26.05, and 26.07 of the Tax Code. Where possible, we are to construe language used in statutes so as to harmonize all relevant laws, not create conflicts. See La Sara Grain Co. v. First Nat'l Bank of Mercedes, 673 S.W.2d 558, 565 (Tex. 1984). In creating STWA in 1979, the Legislature in general terms authorized it to adopt laws "applicable to general law cities" as well as laws "applicable to levy, assessment, and collection of county taxes ... to the extent pertinent and practicable." Act of May 24, 1979, 66th Leg., R.S., ch. 436, § 24(c)-(d), 1979 Tex. Gen. Laws 996 (emphasis added). By its later enactment of subsection 49.107(g) and section 49.236, the Legislature established a separate set of procedures by which taxing entities that are defined as districts under section 49.001 of the Water Code set their tax rates. In adopting this separate set of procedures, the Legislature implicitly determined that it was not "pertinent and practicable" for districts like STWA to utilize Tax Code sections 26.04, 26.05, and 26.07. Section 24 of the act creating the STWA and Water Code subsection 49.107(g) can be harmonized by construing subsection 49.107(g) to create a limited exception to the STWA's general ability to adopt laws applicable to general law cities and towns.[3]

The legislative history associated with the adoption of chapter 49 of the Water Code, and section 49.107(g) in particular, supports this construction. In 1995, sixteen years after the creation of STWA, the Legislature enacted chapter 49 of the Water Code to address the "lack of procedural uniformity between the different types of local water districts," recognizing that the procedural "inconsistencies [led] to confusion among citizens, district board members, and state agency personnel." SENATE COMM. ON NATURAL RESOURCES, BILL ANALYSIS, Tex. S.B. 626, 74th Leg., R.S. (1995). It enacted section 49.107(g) to specifically provide that "certain procedures for calculating tax rates and levying taxes do not apply to any district's or authority's maintenance tax or taxes levied and collected for the payment of the interest on and principal of bonds issued by a district." SENATE COMM. ON NATURAL RESOURCES, BILL ANALYSIS, Tex. S.B. 1444, 77th Leg., R.S. (2001) (emphasis added). Instead, the Legislature created a separate set of procedures and calculations for districts subject to chapter 49 to utilize in adopting tax rates. See TEX. WATER CODE ANN. § 49.236(a)(2)(D)-(F) (Vernon 2008). Pursuant to section 49.107(g), the Legislature has required STWA to utilize these separate procedures and calculations rather than those outlined in Tax Code sections 26.04, 26.05, and 26.07 in adopting its tax rate.

SUMMARY

Pursuant to subsection 49.107(g) of the Water Code, the Legislature has prohibited the South Texas Water Authority from utilizing the procedures and calculations in sections 26.04, 26.05, and 26.07 of the Tax Code to adopt its tax rate.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

ANDREW WEBER
First Assistant Attorney General

JONATHAN K. FRELS
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee

[Footnote 1: Request Letter at 2 (available at http://www.texasattorneygeneral.gov).]

[Footnote 2: Section 26.04 provides a method for governing bodies to calculate the effective tax rate and publish that rate to property owners within the taxing unit. TEX. TAX CODE ANN. § 26.04(c)-(e) (Vernon 2008). Section 26.05 outlines the procedures for governing bodies to adopt a tax rate each year and outlines notice requirements before that adoption takes place. Id. § 26.05 (Vernon Supp. 2009). Section 26.07 authorizes the qualified voters of a taxing unit to petition for an election to reduce the tax rate if the adopted rate exceeds the rollback rate calculated under section 26.04. Id. § 26.07 (Vernon 2008). The Water Code establishes a separate set of calculations and procedures for water districts subject to chapter 49 to utilize in adopting a proposed tax rate, and those procedures differ from the procedures set out in sections 26.04, 26.05, and 26.07 of the Tax Code. See TEX. WATER CODE ANN. §§ 49.107(b)-(d) (Vernon 2008) (requiring a district's operation and maintenance tax be approved by voters); 49.236 (outlining the notice requirements for a district before it adopts a tax rate); compare TEX. TAX CODE ANN. §§ 26.04 (Vernon 2008), 26.05 (Vernon Supp. 2009), 26.07 (Vernon 2008).]

[Footnote 3: The Texas Comptroller of Public Accounts has similarly interpreted subsection 49.107(g) to prohibit authorities such as the STWA from using Tax Code sections 26.04, 26.05, and 26.07 to calculate an effective rate, adopt a tax rate, and have a rollback election. See Truth-in-Taxation: A Guide for Setting Tax Rates for Taxing Units Other Than School Districts, TEX. COMPTROLLER OF PUBLIC ACCOUNTS (available at http://www.window.state.tx.us/taxinfo/proptax/tnt09/) ("The taxing units to which Tax Code Sections 26.04, 26.05, and 26.07 do not apply are defined in Water Code Section 49.001 and include any district or authority created by ... Section 59, Article XVI, Texas Constitution.").]