Can a Texas home-rule city charge the state a capital recovery or impact fee on a state construction project?

Texas AG Opinion JM-523: Capital Recovery Fee on State

Plain-English summary

Austin charged a "capital recovery fee" whenever someone building new construction bought a water tap. The fee, sized by the water meter, was meant to cover two things: the actual cost of hooking up that specific site, and a share of the cost of building and maintaining the general water system to keep up with all the new development in the city. The State Purchasing and General Services Commission asked whether Austin could charge that fee against state construction projects. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

The Attorney General treated the fee as a special assessment and gave a split answer. Under Maverick County Water Control & Improvement District No. 1 v. State, a subdivision of the state cannot levy a special assessment against state property without express legislative authority, at least where the state is not using or requesting the benefit. The AG concluded that this rule reaches all political subdivisions, including home-rule cities, so Austin could not impose an involuntary charge on the state without express authorization and could not treat state property like private property when assessing for local improvements. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

But the AG stressed that Maverick's reach is limited, and it does not stop a city from charging the state for the actual cost of service the state asks for. Here the state was requesting water service. So Austin could require the state to pay the actual costs, both the site-specific costs and the general infrastructure costs it could actually attribute to serving the state, as a condition of extending service. What Austin could not do was bill the state a pro-rata share of local improvements whose benefits are too general to apportion to each user. The AG also noted that any exemption of state property from special assessments, like the tax exemption, applies only to property used exclusively for public purposes. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Texas later enacted a comprehensive impact-fee statute (Local Government Code chapter 395) that governs how municipalities may charge for capital improvements, and the property-tax exemption statute cited here has been recodified. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Common questions

Can a home-rule city levy a special assessment or impact fee against state property?

Not without authorization. The AG concluded that, absent express constitutional or legislative authorization, a home-rule city may not levy a special assessment against state property used solely for public purposes, because a political subdivision cannot impose an involuntary monetary obligation on the state. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

Can the city still charge the state for water service it requests?

Yes, for the actual cost. The AG concluded that Maverick does not prevent a city from requiring the state to pay the actual costs, general and specific, attributable to extending the service the state expressly requests, as a condition of that service. The city just cannot charge the state a pro-rata share of local improvements whose benefits are too general to apportion. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

Does the exemption cover all state property?

No. The AG emphasized that any exemption of state property from special assessments, like the constitutional and statutory tax exemption, is limited to property used exclusively for public purposes. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

Background and statutory framework

The question had been raised but left open in Maverick County Water Control & Improvement District No. 1 v. State and in Attorney General Opinion MW-551 (1982). A special assessment differs from a general tax: it is levied only on land, its amount is based on the benefit conferred on the land, and it is unique as to time and locality (see State ex rel. Londerholm v. City of Topeka). The Maverick court held that state statutes exempt state property from taxation by a water control and improvement district so long as the state holds full legal title (relying on former article 7150, V.T.C.S., now Tex. Prop. Code § 11.11; see also Tex. Const. art. XI, § 9; City of Beaumont v. Fertitta). It acknowledged that special assessments differ legally from taxes, noting Wichita County Water Improvement District No. 2 v. City of Wichita Falls (a city was liable for special assessments levied by a water district because a special assessment is not a tax within the exemption provisions), but found it unnecessary to decide whether a special assessment is a tax, because it adopted the common-law rule that a political subdivision cannot levy a special assessment against state property without express legislative authority.

Attorney General Opinion MW-551 applied Maverick to a home-rule city and concluded a home-rule city could not levy a drainage fee against state-owned property. Home-rule cities have full authority to do anything the Legislature could authorize, so one usually looks to legislative limitations rather than specific grants of power (Lower Colorado River Authority v. City of San Marcos). Maverick involved a water control and improvement district, which holds only expressly or impliedly granted powers, but the AG read Maverick's sources as intending a broad holding, and concluded the Maverick rule applies to all political subdivisions, including home-rule cities. The AG then limited Maverick's impact: the court had adopted its view "at least in a case where . . . the sovereign is neither making nor contemplating any use of the allegedly benefitted land and has neither received nor requested the services rendered," and MW-551 likewise did not address a state willing to pay. Because the state here requested water service, the city could charge it the actual costs of extending that service. Finally, drawing on Satterlee v. Gulf Coast Waste Disposal Authority, State v. Houston Lighting & Power Co., and Central Appraisal District of Erath County v. Pecan Valley Facilities, Inc., the AG held the exemption from special assessments, like the tax exemption, is limited to property used exclusively for public purposes.

Citations and references

The opinion cited the following authorities. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

Constitutional and statutory provisions:

• Tex. Const. art. XI, § 9
• V.T.C.S. art. 7150 (replaced by Tex. Prop. Code § 11.11)

Cases:

• Maverick County Water Control & Improvement District No. 1 v. State, 456 S.W.2d 204 (Tex. Civ. App. - San Antonio 1970, writ ref'd)
• State ex rel. Londerholm v. City of Topeka, 443 P.2d 240 (Kan. 1968)
• City of Beaumont v. Fertitta, 415 S.W.2d 902 (Tex. 1967)
• Wichita County Water Improvement District No. 2 v. City of Wichita Falls, 323 S.W.2d 298 (Tex. Civ. App. - Fort Worth 1959, writ ref'd n.r.e.)
• Lower Colorado River Authority v. City of San Marcos, 523 S.W.2d 641 (Tex. 1975)
• Satterlee v. Gulf Coast Waste Disposal Authority, 576 S.W.2d 773 (Tex. 1978)
• State v. Houston Lighting & Power Co., 609 S.W.2d 263 (Tex. Civ. App. - Corpus Christi 1980, writ ref'd n.r.e.)
• Central Appraisal District of Erath County v. Pecan Valley Facilities, Inc., 704 S.W.2d 86 (Tex. App. - Eastland 1985, no writ)

The opinion also cited Attorney General Opinions MW-551 (1982) and MW-430 (1982), and 14 McQuillin, Municipal Corporations § 38.73 (3d ed. rev. 1970).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0523
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0523.pdf

Original opinion text

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

The Attorney General of Texas

July 17, 1986

JIM MATTOX
Attorney General

Mr. Lias B. "Bubba" Steen
Executive Director
State Purchasing and General Services Commission
P. O. Box 13047, Capitol Station
Austin, Texas 78711

Opinion No. JM-523

Re: Whether the city of Austin may assess a capital recovery fee on state construction projects

Dear Mr. Steen:

You ask whether a home rule city may legally assess capital recovery fees against state construction projects. The city requires that the owner of any new construction must pay a capital recovery fee at the time a water tap is purchased. The amount of the fee is determined by the size and type of water meter required for the project. The fees are intended to include both the actual costs of providing new service to a specific site and the estimated proportional cost of building and maintaining the general water infrastructure to meet the collective demands of all new development. You assert that the city may not assess these fees against state construction projects.

The question presented is one raised but left unanswered in Maverick County Water Control and Improvement District No. 1 v. State, 456 S.W.2d 204 (Tex. Civ. App. - San Antonio 1970, writ ref'd) and Attorney General Opinion MW-551 (1982). A central question in Maverick involved the nature of the charges -- whether they constituted a tax or a special assessment. Special assessments differ from general taxes insofar as special assessments are levied only on land, the amount based on the benefits conferred to the land; a special assessment is unique as to time and locality. See generally 456 S.W.2d 204, note 4 (cases cited therein); Londerholm v. City of Topeka, 443 P.2d 240 (Kan. 1968). The Maverick court held that state statutes clearly exempt state property from taxation by a water control and improvement district so long as the state holds full legal title to the property. 456 S.W.2d at 206 (relying on article 7150, V.T.C.S., now replaced by Tex. Prop. Code § 11.11); see also Tex. Const. art. XI, § 9; City of Beaumont v. Fertitta, 415 S.W.2d 902 (Tex. 1967). The court acknowledged that the legal ramifications of special assessments differ from those of a tax, noting Wichita County Water Improvement District No. 2 v. City of Wichita Falls, 323 S.W.2d 298 (Tex. Civ. App. - Fort Worth 1959, writ ref'd n.r.e.) in which the court held that a city was liable for special assessments levied by a water district. The court in Wichita County reasoned that a special assessment is not a tax within the meaning of constitutional and statutory provisions exempting public property from taxation. 323 S.W.2d at 300. The Maverick court found it unnecessary to determine whether a special assessment is a tax for those purposes because it adopted the common law rule that a political subdivision of the state cannot levy a special assessment against state property without express legislative authority. 456 S.W.2d at 206-07. Attorney General Opinion MW-551 applied this reasoning to a home rule city and decided that a home rule city may not legally levy a drainage fee against state-owned property.

On the other hand, home rule cities have full authority to do anything the legislature could authorize them to do. Lower Colorado River Authority v. City of San Marcos, 523 S.W.2d 641, 643 (Tex. 1975). Accordingly, as a general rule, it is necessary to look to legislative limitations on the power of home rule cities rather than to specific grants of power. Id. The Maverick court dealt with a water control and improvement district, a political subdivision which holds only the powers granted to it expressly or by necessary implication by the constitution or statutes of this state. A home rule city's powers, however, are limited to the area of its jurisdiction. The issue at hand has state-wide implications. Attorney General Opinion MW-551 applied the Maverick case to a home rule city but did not address the different levels of power held by home rule cities and special districts. The sources cited by the Maverick court, however, suggest that its holding was intended to be broad. See 456 S.W.2d at 207, note 6 (cases cited therein). Levying special assessments against the state requires authorization from the state legislature. See id. Accordingly, we conclude that the Maverick rule applies to all political subdivisions, including home rule cities.

Nevertheless, the impact of Maverick is limited. The court stated:

Even if it be assumed that a county or municipality is subject to special assessments levied by another political subdivision of the State, it does not necessarily follow that a subordinate political subdivision can impose an involuntary monetary obligation on the sovereign. It is generally held that, in the absence of clear legislative authorization, a political subdivision of the State has no power to levy a special assessment against State property. [Footnote omitted]. We adopt this view at least in a case where, as here, the sovereign is neither making nor contemplating any use of the allegedly benefitted land and has neither received nor requested the services rendered by the assessing agency. (Emphasis added).

456 S.W.2d at 207. Similarly, Attorney General Opinion MW-551 emphasized that it did not purport to address a situation where the state acted in a manner that indicated a willingness to pay a fee. In the question presented, the state is requesting water service from the city.

Maverick stands for the proposition that the city cannot impose an involuntary monetary obligation on the state without express legislative authorization. Accordingly, the city cannot treat state property in the same manner as private property with regard to special assessments for local improvements. It does not follow, however, that the city cannot charge the state for the actual cost of extending service which the state expressly requests. As indicated previously, the fees in question are intended to include both the actual costs of providing new water service to a specific site and the estimated proportional cost of building the general infrastructure. To the extent that the city can determine the actual costs, both general and specific, attributable to extending service to the state, we do not believe that Maverick prevents the city from requiring the state to pay those costs as a condition of extending service. The city may not, however, assess the state for its pro-rata share of the cost of local improvements which provide benefits that are too general to specifically apportion to each user.

Further, we emphasize that any "exemption" for state property from special assessments by political subdivisions is limited to property used exclusively for public purposes. It is well-settled in Texas that the constitutional and statutory exemption of state property from taxes applies only when the property is used exclusively for public purposes. See Satterlee v. Gulf Coast Waste Disposal Authority, 576 S.W.2d 773 (Tex. 1978); State v. Houston Lighting and Power Co., 609 S.W.2d 263 (Tex. Civ. App. - Corpus Christi 1980, writ ref'd n.r.e.); Attorney General Opinion MW-430 (1982); see also Central Appraisal District of Erath County v. Pecan Valley Facilities, Inc., 704 S.W.2d 86 (Tex. App. - Eastland 1985, no writ). We believe that the courts of this state would apply similar restrictions to the common law "exemption" from special assessments announced in the Maverick case. This conclusion finds support in the sources relied upon in Maverick. For example, one such source states the general rule as follows:

Apart from constitutional or statutory authorization public property . . . used for public purposes is not liable to special assessment for local improvements. . . . (Emphasis added).

14 McQuillin, Municipal Corporations (3d ed., rev. 1970) § 38.73 (cited in Maverick County, 456 S.W.2d at 207, note 6).

SUMMARY

Without express constitutional or legislative authorization, a home rule city may not levy special assessments against state property which is used solely for public purposes. This general rule, however, does not prevent a city from requiring the state to pay the actual costs attributable to extending service to the state when the state requests it.

JIM MATTOX
Attorney General of Texas

JACK HIGHTOWER
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jennifer Riggs
Assistant Attorney General