If a Texas city has a zero property tax rate, can voters still force a rollback election?

Plain-English summary

State Senator Judith Zaffirini, chair of the Senate Committee on Government Organization, asked the Attorney General a set of questions about cities that have dropped their property (ad valorem) tax rate all the way to zero. The example was the City of Santa Clara, which imposed no property tax for the 2012 and 2013 tax years and then wanted to start taxing again. The worry was that the usual taxpayer-protection elections might apply in a way that traps a city at zero forever.

The first question was about the rollback election in section 26.07 of the Tax Code. That statute lets voters petition for an election to roll a tax rate back down whenever a city adopts a rate that "exceeds the rollback tax rate." The rollback rate is built from the prior year's tax numbers, so for a city that taxed nothing last year, the rollback rate comes out to zero. The AG read the statute by its plain words and noted the Legislature wrote no exception for a city that had stopped taxing. Because courts will not add exceptions that the text does not contain, the AG concluded that if a city's rollback rate is zero and it adopts any rate above zero, the voters can petition for a rollback election to push the rate back to zero. On the related question of where the line sits, the answer followed directly: when the rollback rate is zero, any adopted rate above zero is enough to let voters petition.

The third question moved from statute to the Constitution. Article VIII, section 1-b(h) lets a city's governing body freeze the total property taxes on a homestead owned by someone who is disabled or 65 or older, and it lets 5 percent of the city's registered voters petition to force an election on whether to adopt that freeze. The senator asked whether a city sitting at a zero tax rate still has to hold that election if properly petitioned. The AG again applied plain meaning, citing the rule that those construing the Constitution may not read in language that is not there or depart from plain meaning unless the text is ambiguous or produces an absurd result. Section 1-b(h) has no exception for a zero tax rate and is neither ambiguous nor absurd, so the AG concluded that a city with a zero rate must hold the freeze election when 5 percent of authorized voters properly petition for it. A footnote pointed to an earlier opinion (GA-0798) about a hospital district that had stopped taxing, which had cautioned that a court might not let a taxing unit pick and choose which chapter 26 provisions to follow.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

Senator Zaffirini (as the opinion described it): The opinion answered that section 26.07 applies even when a city's rollback rate is zero, so adopting any rate above zero lets voters petition for a rollback election, and that article VIII, section 1-b(h) still requires a zero-rate city to hold a senior-and-disabled homestead tax-freeze election on a proper 5 percent petition. It found no exception in either the statute or the Constitution for cities at a zero rate.

Cities at or returning from a zero tax rate (such as Santa Clara) (as the opinion described it): The opinion described a zero-rate city that adopts a rate above zero as subject to the rollback-election petition process, and described the homestead tax-freeze election as mandatory on a proper petition regardless of the zero starting rate. It did not create any "new entity" exception for a city resuming taxation.

Taxpayers and senior or disabled homeowners (as the opinion described it): The opinion described voters as retaining the rollback-petition right against any above-zero rate, and described disabled and elderly (65 or older) homestead owners as able to trigger a tax-freeze election through a 5 percent voter petition even where the city currently taxes at zero.

Common questions

Can voters force a rollback election if a city raises its property tax from zero?
Yes. The AG concluded that when a city's rollback rate is zero and it adopts any rate above zero, section 26.07 lets the qualified voters petition for an election to reduce the rate back to zero.

What property tax rate triggers the rollback petition right?
The AG explained that section 26.07 allows a petition whenever the adopted rate exceeds the rollback tax rate, so if the rollback rate is zero, any adopted rate above zero is enough to trigger the right.

Does a city at zero still have to hold a senior and disabled tax-freeze election?
Yes. The AG concluded that article VIII, section 1-b(h) requires a city with a zero rate to hold the freeze election when 5 percent of its registered voters properly petition, because the provision has no exception for a zero tax rate.

Why didn't the AG create an exception for cities that stopped taxing?
The AG explained that courts give effect to the plain language and do not add exceptions the Legislature or the Constitution did not write. Neither section 26.07 nor article VIII, section 1-b(h) contained an exception for a zero-rate taxing unit.

Who is covered by the homestead tax freeze in article VIII, section 1-b(h)?
The AG described it as covering the total ad valorem taxes on a residence homestead owned by a person who is disabled or who is 65 years of age or older.

Background and statutory framework

Section 26.07 lets voters petition for a rollback election when a municipality adopts a rate exceeding its rollback tax rate (Tex. Tax Code Ann. § 26.07(a) (West 2008)), with the rollback rate computed from the effective maintenance-and-operations rate times 1.08 plus the debt rate (id. § 26.04(c)(2)) and the effective M&O rate computed by a statutory formula (id. § 26.012(9) (West Supp. 2013)). The constitutional homestead tax freeze and its petition mechanism appear in article VIII, section 1-b(h) (Tex. Const. art. VIII, § 1-b(h)).

For the statutory question, the AG applied the rule that the primary objective is legislative intent shown by plain language (Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010)) and that courts do not read in additional requirements or exceptions (City of Rockwall v. Hughes, 246 S.W.3d 621, 630-31 (Tex. 2008)), noting that taxing units must substantially comply with statutory procedures (Corpus Christi Taxpayer's Ass'n v. City of Corpus Christi, 716 S.W.2d 578, 580 (Tex. App.-Corpus Christi 1986, writ ref'd n.r.e.)). For the constitutional question, it applied the rule against reading language into the Constitution (Cramer v. Sheppard, 167 S.W.2d 147, 154 (Tex. 1943)) and the plain-meaning rule absent ambiguity or absurdity (Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 629 (Tex. 2013)). A footnote compared a prior opinion on a hospital district that had ceased levying taxes (Tex. Att'y Gen. Op. No. GA-0798 (2010)).

Citations

Constitutional and statutory provisions:

• Tex. Const. art. VIII, § 1-b(h) (homestead tax freeze for disabled and elderly; petition election)
• Tex. Tax Code Ann. § 26.07(a) (West 2008) (rollback election on petition)
• Tex. Tax Code Ann. § 26.04(c)(2) (rollback tax rate computation)
• Tex. Tax Code Ann. § 26.012(9) (West Supp. 2013) (effective maintenance-and-operations rate formula)

Cases:

• Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010)
• City of Rockwall v. Hughes, 246 S.W.3d 621, 630-31 (Tex. 2008)
• Corpus Christi Taxpayer's Ass'n v. City of Corpus Christi, 716 S.W.2d 578, 580 (Tex. App.-Corpus Christi 1986, writ ref'd n.r.e.)
• Cramer v. Sheppard, 167 S.W.2d 147, 154 (Tex. 1943)
• Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 629 (Tex. 2013)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. No. GA-0798 (2010)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1070
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1070.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

July 2, 2014

The Honorable Judith Zaffirini Opinion No. GA-1070
Chair, Committee on Government
Organization Re: Whether a municipality that has a current
Texas State Senate tax rate of zero is subject to a rollback election
Post Office Box 12068 under section 26.07 of the Tax Code or an
Austin, Texas 78711-2068 ad valorem tax-freeze election under article
VIII, section 1-b(h) of the Texas Constitution
(RQ-1179-GA)

Dear Senator Zaffirini:

You ask three questions about whether the voter approval requirements of certain tax laws apply to municipalities that have reduced their ad valorem tax rate to zero.[1] You first ask whether section 26.07(a) of the Tax Code "allow[s] voters to petition for a rollback election when a city increases the ad valorem tax rate from zero?" Request Letter A, at 2.

Section 26.07 provides that if a municipality "adopts a tax rate that exceeds the rollback tax rate ... , the qualified voters of the [municipality] by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate." TEX. TAX CODE ANN. § 26.07(a) (West 2008). The rollback tax rate is calculated by multiplying the effective maintenance and operations rate by 1.08 and then adding the current debt rate. Id. § 26.04(c)(2). The effective maintenance and operations rate is calculated using the following formula:

(LAST YEAR'S LEVY - LAST YEAR'S DEBT LEVY - LAST YEAR'S JUNIOR COLLEGE LEVY)
-------------------------------------------------------------------------
(CURRENT TOTAL VALUE - NEW PROPERTY VALUE)

Id. § 26.012(9) (West Supp. 2013).

You state that the City of Santa Clara reduced its tax rate to zero and did not impose an ad valorem tax for the 2012 and 2013 tax years. Request Letter A, at 2. The City now wishes to raise the ad valorem tax rate to a rate above zero. Id. You explain that because the current tax rate is zero, both last year's levy and the effective maintenance and operations rate are both zero as well. Id. The City also has "no current debt service," so the rollback rate is zero. Id. You are concerned that "[i]f any increase in the tax rate would trigger voters' ability to petition for a rollback election, the City in theory could be prevented from collecting ad valorem taxes indefinitely," and you question whether the "rollback provision compels" this result. Id.

When construing a statute, the "primary objective is to give effect to the Legislature's intent." Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010). The best evidence of the Legislature's intent is found through the plain language, and we generally will not add requirements or exceptions to a statute that are not contained in the plain language. See City of Rockwall v. Hughes, 246 S.W.3d 621, 630-31 (Tex. 2008) (declining to read additional words into a statute). Through chapter 26 of the Tax Code, the Legislature has provided the method for a taxing unit to adopt a tax rate, including empowering the voters to petition for a rollback election when a city increases the ad valorem tax rate above the rollback rate. The Legislature has not provided an exception to the rollback election procedure for instances when a taxing unit has ceased levying taxes.[2] Taxing units "must substantially comply with the requisite procedures exacted by statute in order to arrive at a valid tax levy," and "[f]ailure to comply with the statutory directives in assessing taxes voids the assessment." Corpus Christi Taxpayer's Ass'n v. City of Corpus Christi, 716 S.W.2d 578, 580 (Tex. App.-Corpus Christi 1986, writ ref'd n.r.e.). Thus, unless the Legislature creates an exception to section 26.07 of the Tax Code, if a municipality's rollback rate is zero, the qualified voters of the municipality by petition may require that an election be held to determine whether or not to reduce the adopted tax rate back to zero. TEX. TAX CODE ANN. § 26.07(a) (West 2008).

Assuming an affirmative answer to your first question, you also ask "at what rate of ad valorem tax is the voters' right to petition for a rollback election triggered." Request Letter A, at 2. Section 26.07 authorizes voters to petition for a rollback election any time the adopted tax rate "exceeds the rollback tax rate." TEX. TAX CODE ANN. § 26.07(a) (West 2008). Under the plain language of the statute, if a municipality's rollback tax rate is zero, any adopted ad valorem tax rate above zero authorizes the voters to petition for a rollback election. Id.

You also ask whether article VIII, section 1-b(h) of the Texas Constitution requires a properly petitioned city to hold an election to determine whether to freeze the ad valorem taxes imposed on the homestead of certain individuals when the current ad valorem tax rate is zero. Request Letter B, at 2. Article VIII, section 1-b(h) authorizes the governing body of a municipality to freeze the total amount of ad valorem taxes imposed on property that is subject to a residence homestead exemption and owned by a person that is disabled or is 65 years of age or older. TEX. CONST. art. VIII, § 1-b(h). Section 1-b(h) also provides that five percent of the registered voters in the municipality may petition the municipality to call an election to determine by majority vote whether to establish the tax freeze. Id. You are concerned that when a municipality has a tax rate of zero, "subjecting the city to such an election [could] prevent the collection of taxes" on a significant percentage of properties subject to homestead exemptions. Request Letter B, at 2. You question whether article VIII, section 1-b(h) compels this result. Id.

"[T]hose who are called upon to construe the Constitution are not authorized to thwart the will of the people by reading into the Constitution language not contained therein, or by construing it differently from its plain meaning." Cramer v. Sheppard, 167 S.W.2d 147, 154 (Tex. 1943) (orig. proceeding). In authorizing a tax freeze for homestead exemptions, the plain language of article VIII, section 1-b(h) does not provide any exceptions for instances when a taxing unit has a tax rate of zero. Unless the text is ambiguous or leads to absurd results, we construe it according to its plain meaning and will not rewrite it to extend beyond its plain terms. See Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 629 (Tex. 2013). Article VIII, section 1-b(h) is neither ambiguous nor does it lead to an absurdity. Thus, article VIII, section 1-b(h) of the Texas Constitution requires a municipality with an ad valorem tax rate of zero, upon receiving a properly filed petition from five percent of authorized voters, to hold an election to determine whether to freeze the total amount of ad valorem taxes imposed on property that is subject to a residence homestead exemption owned by a person that is disabled or is 65 years of age or older.

SUMMARY

Under section 26.07 of the Tax Code, if a municipality's ad valorem rollback rate is zero and it adopts a tax rate above zero, the qualified voters of the municipality by petition may require that an election be held to determine whether or not to reduce the ad valorem tax rate back to zero.

Article VIII, section 1-b(h) of the Texas Constitution requires a municipality with an ad valorem tax rate of zero, upon receiving a properly filed petition from five percent of authorized voters, to hold an election to determine whether to freeze the total amount of ad valorem taxes imposed on property that is subject to a residence homestead exemption owned by a person that is disabled or is 65 years of age or older.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee

[1] You submitted two separate letters to ask these questions, but because the questions are related, we will answer them in one opinion. See Letters from Honorable Judith Zaffirini, Chair, Senate Comm. on Gov't Org., to Honorable Greg Abbott, Tex. Att'y Gen. (Jan. 9, 2014), http://www.texasattorneygeneral.gov/opin. We will hereafter refer to your request regarding section 26.07 of the Tax Code as "Request Letter A" and your request regarding article VIII, section 1-b(h) of the Texas Constitution as "Request Letter B."

[2] In Attorney General Opinion GA-0798, this office addressed a similar question about a hospital district that had ceased levying taxes, and the requestor argued that the district should be considered "a new entity setting its budget and tax rate for the very first time." Tex. Att'y Gen. Op. No. GA-0798 (2010) at 3. That opinion advised, however, that it was impossible to "predict with any certainty that a court would uphold a decision by the District to select the provisions of chapter 26 with which the District will comply." Id. at 4.