Does a Texas water district's payment to a city for utilities count taxes paid by businesses, not just households?

Plain-English summary

A state senator asked the Attorney General to interpret section 43.0761 of the Local Government Code, which applies to a large conservation and reclamation district straddling two or more municipalities. The question arose from a Pasadena restaurant and bar owner who paid water and sewer taxes to the district but got no service from it, paid the city of Pasadena for the actual service, and so effectively paid twice. The city had agreed to rebate certain district payments to affected taxpayers, but the district refused to remit the restaurant owner's share, arguing a restaurant is not a "household user." The opinion stressed it was not finding facts or deciding the owner's rights; it was answering the statutory-interpretation question about what the district owes the city.

The statute works like this. A district that, within ten years of creation, had not provided water and sewer service to all household users in its territory had to either start serving all household users by September 1, 1998, or make periodic payments to the municipality that does serve the unserved area. The opinion agreed that "household user" in subsection (a) means a residential user, not a commercial establishment like a restaurant. But that phrase appears only in subsection (a), which describes the district's duty and the trigger for payment. It does not appear in subsection (b), which sets how the payment is measured.

Subsection (b) caps the district's annual payment at the lesser of two amounts: the city's total annual cost of providing the service, or the total annual taxes paid to the district by "the owners of taxable property within the district" who receive service from the city. The Legislature used the broader phrase "owners of taxable property," not "household users," and every word in a statute is presumed to have a purpose. The opinion could not say which of the two measures would be smaller in a given case, because that needs facts. But if subsection (b)(2) supplies the measure, the district must pay the city the total taxes paid by owners of taxable property, which can include a restaurant owner, since a restaurant is property capable of private ownership under the Tax Code's definition. So the payment is not limited to taxes from household users.

Currency note

This opinion was issued in 2001. 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

Water districts and municipalities under section 43.0761 (what the opinion held): The opinion concluded that the reimbursement a district owes a city under subsection (b)(2) is measured by taxes paid by all owners of taxable property who receive city service, not just household users, so commercial-property taxes count.

Business owners paying district taxes (what the opinion held for them): The opinion concluded a business like a restaurant, though not a "household user," can be an "owner of taxable property," so its district taxes figure into the subsection (b)(2) measure, while cautioning it was not deciding the individual owner's right to any rebate.

Common questions

Is a restaurant a "household user" of water and sewer service?
No. The opinion agreed a commercial establishment like a restaurant is not within the ordinary meaning of "household user," which refers to a residential user.

Then why do a restaurant owner's taxes matter under this statute?
The opinion explained that the payment measure in subsection (b)(2) uses the broader phrase "owners of taxable property," not "household users," and a restaurant owner can be an owner of taxable property.

How is the district's payment to the city calculated?
The opinion described subsection (b) as capping the annual payment at the lesser of the city's total cost to provide the service or the total taxes paid to the district by owners of taxable property who receive city service.

Did the AG decide the restaurant owner gets her money back?
No. The opinion was explicit that it was answering a question of statutory interpretation, not finding facts or adjudicating the owner's rights.

Background and statutory framework

Section 43.0761 applies to a conservation and reclamation district of more than 10,000 acres serving households and located in two or more municipalities, one with a population over 1.6 million. Tex. Loc. Gov't Code Ann. § 43.0761(e) (Vernon 1999). A district existing on September 1, 1997, that within ten years of creation had not served all household users had to serve all household users by September 1, 1998, or make periodic payments to the municipality providing the service. Id. § 43.0761(a). Those payments are operation-and-maintenance expenses, made at least every three months, capped at the lesser of the municipality's total annual cost of providing the service or the total annual maintenance, operation, and debt-service taxes paid to the district by the owners of taxable property within the district who receive service from the municipality. Id. § 43.0761(b), (b)(2). An undefined statutory term is construed by its common usage; "household user" means a residential user. Tex. Gov't Code Ann. § 311.011(a) (Vernon 1998). Every word in a statute is presumed to serve a purpose. Bomar v. Trinity Nat'l Life & Accident Ins. Co., 579 S.W.2d 464, 465 (Tex. 1979). "Property" for tax purposes means any matter or thing capable of private ownership, which can include a restaurant. Tex. Tax Code Ann. § 1.04(1) (Vernon Supp. 2001).

Citations

Statutory provisions:

• Tex. Loc. Gov't Code Ann. § 43.0761 (Vernon 1999)
• Tex. Loc. Gov't Code Ann. § 43.0761(a) (Vernon 1999)
• Tex. Loc. Gov't Code Ann. § 43.0761(b) (Vernon 1999)
• Tex. Loc. Gov't Code Ann. § 43.0761(b)(2) (Vernon 1999)
• Tex. Loc. Gov't Code Ann. § 43.0761(e) (Vernon 1999)
• Tex. Gov't Code Ann. § 311.011(a) (Vernon 1998)
• Tex. Tax Code Ann. § 1.04(1) (Vernon Supp. 2001)

Cases:

• Bomar v. Trinity Nat'l Life & Accident Ins. Co., 579 S.W.2d 464 (Tex. 1979)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0419
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2001/jc0419.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor character-level errors from the source OCR have been corrected; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS

JOHN CORNYN

October 3, 2001

The Honorable David Sibley
Chair, Business and Commerce Committee
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Opinion No. JC-0419

Re: Applicability of section 43.0761, Local Government Code, to business users of water and sanitary sewer services that have paid taxes to a water district (RQ-0373-JC)

Dear Senator Sibley:

You have requested that this office interpret the provisions of section 43.0761 of the Local Government Code, and in particular the statutory references to "household users" of water and sanitary utility service and to "owners of taxable property within the district." See TEX. LOC. GOV'T CODE ANN. § 43.0761 (Vernon 1999). The district at issue is defined by section 43.0761(e) as "a conservation and reclamation district of more than 10,000 acres that provides water and sanitary sewer utility service to households and parts of which are located in two or more municipalities, one of which has a population of more than 1.6 million." Id. § 43.0761(e).

As we understand it, your request is prompted by the concerns of the owner of a restaurant and bar in Pasadena, Texas.[1] We are given to understand that while the restaurant owner is not a "household user" of water and sewer services in the ordinary sense of the phrase, the restaurant is taxable property in the district in question; that in fact its owner pays water and sewer taxes to the district, but receives no services from the district; that she also pays the city of Pasadena for such services; that the city has passed a resolution providing for the rebate to the relevant taxpayers of certain funds paid to it by the district pursuant to section 43.0761; that the district has not paid the city the amount it received from the restaurant owner on the apparent ground that a restaurant is not a household user; and that consequently, she has in effect paid twice for the same service.[2] This office does not find facts in the opinion process. However, no one appears to deny these assertions. We will therefore assume them arguendo, but we caution that our assumption is by no means a finding of fact. Further, while we mention these facts as illustrative, our concern here is not the adjudication of any rights of the restaurant owner, but solely the question of statutory interpretation. We are concerned essentially with the measure of payments owed under section 43.0761(b) by the water district to the city.

[1] See Letter from Honorable David Sibley, Chair, Business and Commerce Committee, Texas State Senate, to Honorable John Cornyn, Texas Attorney General, at 1 (Mar. 28, 2001) (on file with Opinion Committee).

[2] See Letter from Bronwyn Zardanetta, Owner, Ernie's Restaurant & Bar, Pasadena, Texas, to Robert Peeler, Office of Honorable Mike Jackson, State Senator (Nov. 9, 2000) (on file with Opinion Committee).

Section 43.0761 of the Local Government Code provides, in relevant part:

            (a) A district existing on September 1, 1997, that, within 10 years after the date of its creation, has not provided water and sanitary sewer utility service from its facilities to all household users in its territory shall:

                    (1) provide water and sanitary sewer utility service from its facilities to all household users in its territory not later than September 1, 1998; or

                    (2) for that part of the district for which the district does not provide water and sanitary sewer utility service, and for which a municipality does provide those services, provide for periodic payments, as described by Subsection (b), by the district to the municipality that provides the services.

            (b) Payments made under Subsection (a)(2) are operation and maintenance expenses of the district and shall be made at least every three months. The total annual amount of the payments may not exceed the lesser of:

                    (1) the total annual cost to the municipality of providing the water and sanitary sewer utility service, including both capital and operation and maintenance costs and expenses; or

                    (2) the total annual amount of maintenance and operation taxes and debt service or bond taxes paid to the district by the owners of taxable property within the district that receive water and sanitary sewer utility service from the municipality.

TEX. LOC. GOV'T CODE ANN. § 43.0761(a), (b) (Vernon 1999) (emphasis added).

You have asked the meaning of the term "household user" in subsection (a). The term is not defined by the statute, and accordingly the Code Construction Act requires us to construe it "according to the rules of grammar and common usage." TEX. GOV'T CODE ANN. § 311.011(a) (Vernon 1998). The Oxford English Dictionary defines "household" inter alia as "[t]he inmates of a house collectively; an organized family, including servants or attendants, dwelling in a house; a domestic establishment." VII OXFORD ENGLISH DICTIONARY 442 (2d ed. 1989). A "household" user of water and sewer services would, accordingly, be a residential user of such services, rather than a commercial establishment such as a restaurant.

We note that the phrase "household user" occurs in subsection (a) in the discussion of what apparently now is a condition contrary to fact. That is, the water district in question could, until September 1, 1998, have fulfilled its statutory obligations by providing water and sewer service to all household users in the district. We assume, given that payments are now being made by the district to the city of Pasadena, that the district did not do so.

The payments the district must make are calculated by one of two means. The district is, pursuant to subsection (b), obligated to pay the city either the annual cost to the city of providing the services, or the annual amount paid in taxes to the district by "the owners of taxable property" who receive water and sewer services from the city.

While we agree with the district that a commercial establishment such as a restaurant and bar is not within the ordinary meaning of "household user," the phrase "household user" is not found in subsection (b)'s enumeration of the methods of calculating payment. See TEX. GOV'T CODE ANN. § 43.0761(b) (Vernon 1999). The provision of water and sanitary sewer services to household users is the principal function of the district, as is clear from subsection (e)'s definition of the district. However, the district's failure to carry out that function triggers its repayment obligations under subsection (b); and in that subsection the legislature has chosen not to limit the obligation to payments made by household users, but has used a more expansive term. It is "generally presumed that every word in a statute is used for a purpose." Bomar v. Trinity Nat'l Life & Accident Ins. Co., 579 S.W.2d 464, 465 (Tex. 1979).

We cannot determine which of the two methods of calculation would yield a lesser amount in the instant case, given that such a determination would require factual findings. However, should subsection (b)(2) provide the proper measure, the district's obligation according to the plain language of the statute is to pay the municipality the total amount of taxes paid to the district by "owners of taxable property," not by "household users."

"Property," for the purposes of the Tax Code is defined as "any matter or thing capable of private ownership." TEX. TAX CODE ANN. § 1.04(1) (Vernon Supp. 2001) ("Title 1, Property Tax Code"). Clearly a restaurant for these purposes may be taxable property. If the owner of the restaurant and bar in question is an owner of taxable property and has in fact paid such taxes to the district for water and sewer services, and those services have been provided not by the district but by the city, then under subsection (b)(2) the district owes the city the total annual amount of such payments.

                                    SUMMARY

           While a restaurant is not a "household user" of water and sewer services, the owner of a restaurant may be an "owner of taxable property" for the purposes of section 43.0761 of the Texas Local Government Code. See TEX. LOC. GOV'T CODE ANN. § 43.0761 (Vernon 1999). Accordingly, the measure of payment mandated by section 43.0761(b)(2) of the Local Government Code, which is not limited to household users, includes such owners of taxable property as a restaurant owner. See id. § 43.0761(b)(2).

                                         JOHN CORNYN
                                         Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN D. GUSKY
Chair, Opinion Committee

James E. Tourtelott
Assistant Attorney General, Opinion Committee