Can a Texas navigation district reactivate an old property tax to fund port projects without a new voter election?

Plain-English summary

Representative Rene O. Oliveira, on behalf of the Port Isabel-San Benito Navigation District, asked the AG three questions about the district's power to tax. The district was created in 1928-1929 under article III, section 52 of the Texas Constitution, in an election that authorized it to levy a property tax, and it collected that tax at least through 1976. In 1939 it converted into a self-liquidating navigation district under what is now chapter 63 of the Water Code. The district wanted to "reactivate" a tax to pay for dredging, dock and road upgrades, port maintenance, and possible new facilities, and asked whether it could do that under section 63.282 of the Water Code.

On the first question, the AG explained how the taxing structure works. A navigation district created under chapter 61 does not itself levy a maintenance and operation tax; that power sits with the county commissioners court. When such a district converts to a self-liquidating district, section 63.282 lets the district's own commission impose a maintenance and operation tax, but only if the voters approve a proposition that specifically describes the tax (capped at 20 cents per $100 of valuation). The district's materials did not show that voters had ever approved such a specific proposition. Because taxing units must substantially comply with the statutory procedures or the levy is void, the AG concluded that although the point was one of first impression, a court would likely hold that the general 1929 vote approving the district and ad valorem taxation does not satisfy the specific election section 63.282 requires.

On the second question, the AG said a section 63.282 maintenance and operation tax is for "the maintenance, operation, and upkeep of the district and its improvements," and does not by itself authorize brand-new improvement projects. Whether a given project counts as a new improvement or as maintenance and operation of existing improvements is a fact question for the navigation commission to decide in the first instance, not something an AG opinion resolves. On the third question, the AG concluded that, unlike chapter 61, section 63.282 does not require a self-liquidating district to get the county commissioners court's permission before levying the maintenance and operation tax once voters have approved it.

Currency note

This opinion was issued in 2015. 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. The Water Code provisions on navigation districts (chapters 60, 61, and 63, including section 63.282) may have been amended since 2015, so confirm the current statutes and any applicable tax-rate or election rules before relying on these specifics.

What the opinion meant for those who asked

The navigation district and its commission (as the opinion described it): The opinion described section 63.282 as requiring a voter-approved proposition specifically describing a maintenance and operation tax, and concluded a court would likely find the general 1929 election insufficient for that purpose. It described that tax as covering upkeep of existing improvements rather than new construction, and said the district commission decides in the first instance whether a project is a new improvement or maintenance.

The county commissioners court (as the opinion described it): The opinion described chapter 61 districts as depending on the county commissioners court to levy the maintenance and operation tax, but concluded that a self-liquidating district under section 63.282 does not need the commissioners court's approval once voters have approved the tax.

District taxpayers and voters (as the opinion described it): The opinion described the maintenance and operation tax as something the voters must approve through a proposition describing it, capped at 20 cents per $100 of valuation, and treated a levy that skips the required election as likely void for failure to follow the statutory procedure.

Common questions

Can a navigation district restart an old property tax without a new election?
The AG concluded it most likely cannot, at least for a maintenance and operation tax under section 63.282 of the Water Code. That section requires voters to approve a proposition specifically describing the tax, and the AG said a general 1929 vote approving the district and ad valorem taxation would likely not satisfy that requirement.

What happens if a district levies the tax without the required vote?
The AG pointed to the rule that taxing units must substantially comply with the statutory procedures to arrive at a valid levy, and that failing to do so voids the assessment. So a maintenance and operation tax imposed without the specific election section 63.282 calls for would be vulnerable.

Can maintenance-tax money pay for new construction, like a new port channel?
Not in the first instance, according to the AG. Section 63.282 funds the "maintenance, operation, and upkeep of the district and its improvements," not new improvement projects. Whether a particular project is new construction or upkeep of existing improvements is a fact question for the navigation commission to decide.

Does the district need the county commissioners court's permission to set the tax?
No. The AG concluded that, unlike chapter 61, section 63.282 does not require a self-liquidating navigation district to obtain the county commissioners court's approval before levying the maintenance and operation tax once voters have approved it.

Background and statutory framework

Navigation districts can be created under article III, section 52(b) or article XVI, section 59(a) of the Texas Constitution and are governed by various chapters of the Water Code: chapter 60 (general provisions), chapter 61 (article III, section 52 districts), chapter 62 (article XVI, section 59 districts), and chapter 63 (self-liquidating districts). A general-law article III, section 52(b) district is created in an election in which voters may approve general ad valorem taxing authority (Tex. Const. art. III, § 52; Tex. Water Code Ann. § 61.035 (West 2004)). Under chapter 61, the district commission certifies bond amounts and the county commissioners court levies both an improvement tax and a maintenance and operation tax (Tex. Water Code Ann. § 61.236(a)-(b)); a court has held the commissioners court may keep levying a maintenance tax after bonds are paid without another election (Matagorda Cnty. Drainage Dist. v. Comm'rs Ct., 278 S.W.2d 539 (Tex. Civ. App.-Galveston 1955, writ ref'd n.r.e.)).

A section 52 district may convert to a self-liquidating district operating under chapter 63 (Tex. Water Code Ann. § 63.039 (West 2004)). Self-liquidating districts are meant to be self-supporting through tolls, rents, fees, and other charges rather than taxation, and the district commission may set charges and issue revenue bonds (Tex. Water Code Ann. § 63.153 (West 2004)). District revenue under chapter 60, subchapter E, is used for operation and maintenance and for debt service on revenue obligations (Tex. Water Code Ann. § 60.105 (West 2004)). Separately, section 63.282 authorizes a self-liquidating district's commission to impose a maintenance and operation tax of up to 20 cents per $100 of valuation, but only with voter approval of a proposition specifically describing the tax (Tex. Water Code Ann. § 63.282 (West 2004)). Because a valid levy requires substantial compliance with the statute (Corpus Christi Taxpayer's Ass'n v. City of Corpus Christi, 716 S.W.2d 578 (Tex. App.-Corpus Christi 1986, writ ref'd n.r.e.)), the AG concluded a court would likely find the 1929 general tax vote insufficient for a section 63.282 maintenance and operation tax. The AG also relied on prior AG letter opinion LO-92-049 (1992) for the point that whether something is an improvement or maintenance is a fact question outside an AG opinion.

Citations

Constitutional and statutory provisions:

• Tex. Const. art. III, § 52 (navigation districts; ad valorem taxing authority approved by voters)
• Tex. Const. art. XVI, § 59(a) (Legislature may enact laws concerning navigation of inland and coastal waters)
• Tex. Water Code Ann. § 61.035 (West 2004) (voter approval of general ad valorem taxing authority)
• Tex. Water Code Ann. § 61.236(a)-(b) (West 2004) (county commissioners court levies improvement and maintenance taxes)
• Tex. Water Code Ann. § 63.039 (West 2004) (conversion to a self-liquidating district)
• Tex. Water Code Ann. § 63.153 (West 2004) (self-liquidating district charges and revenue bonds)
• Tex. Water Code Ann. § 63.282 (West 2004) (maintenance and operation tax, with voter approval, capped at 20 cents per $100)
• Tex. Water Code Ann. § 60.105 (West 2004) (use of district revenue)

Cases:

• Matagorda Cnty. Drainage Dist. v. Comm'rs Ct., 278 S.W.2d 539, 541-42 (Tex. Civ. App.-Galveston 1955, writ ref'd n.r.e.)
• 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.)

Prior Attorney General opinion discussed: LO-92-049 (1992).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0039
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2015/kp0039.pdf

Original opinion text

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

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

September 28, 2015

The Honorable Rene O. Oliveira Opinion No. KP-0039
Chair, Committee on Business and Industry
Texas House of Representatives Re: Taxing authority of the Port Isabel-
Post Office Box 2910 San Benito Navigation District (RQ-0021-KP)
Austin, Texas 78768-2910

Dear Representative Oliveira:

On behalf of the Port Isabel-San Benito Navigation District (the "District"), you ask several questions about the District's taxing authority. [1] The District's brief, attached to your request letter, states the following facts. The District was formed in 1928-1929 under article III, section 52 of the Texas Constitution, in an election that created the District and authorized it to levy an ad valorem tax. District's Brief at 8. In 1939, the District converted into a self-liquidating navigation district under the predecessor to section 63.039 of the Water Code. Id. The District exercised its authority to collect the tax at least through 1976. Id. The District is now considering "reactivat[ing]" the tax to finance projects such as "dredging, upgrading docks and roads, the construction of additional docks, the maintenance of the port, the operation of the Port, making improvements to the Port, and possibly constructing different buildings or facilities at the Port." Id. at 2, 8. The District's questions concern its authority to fund these projects by levying a maintenance and operation tax under section 63.282 of the Water Code.

A navigation district may be created under two provisions of the Texas Constitution pursuant to enabling legislation and may be subject to various chapters of the Water Code. [2] Based on the facts stated in the District's brief, we confine our review to pertinent statutes concerning the taxing authority of a navigation district organized under article III, section 52(b) of the Texas Constitution and originally created under chapter 61, and the taxing authority of a district that has converted to a self-liquidating navigation district under chapter 63. Enabling legislation for an article III, section 52(b) district is located in chapter 61 of the Water Code. See TEX. WATER CODE ANN. §§ 61.001(1), .021 (West 2004). [3] A general law article III, section 52(b) navigation district is created in an election administered by a commissioners court, a navigation board, or both. See generally id. §§ 61.021-.036. In the election, the voters may approve general ad valorem taxing authority. Id. § 61.035. [4] When a navigation district is created, the commissioners court appoints the commissioners of the district's navigation and canal commission ("district commission"). Id. §§ 61.001(2), .071.

Under chapter 61, the district commission determines the cost of improvements and the cost of maintenance, operation, and upkeep of the district and its improvements, and it certifies to the county commissioners court the amount of bonds necessary to be issued for these purposes. Id. §§ 61.231, .236(c). The county commissioners court then levies and collects an improvement tax to pay interest and redeem bonds and a maintenance and operation tax. Id. § 61.236(a)-(b); Matagorda Cnty. Drainage Dist. v. Comm'rs Ct., 278 S.W.2d 539, 541-42 (Tex. Civ. App.-Galveston 1955, writ ref'd n.r.e.) (determining that commissioners court may continue to levy a maintenance tax after all bonds have been paid, without the necessity of an election). Chapter 61 does not provide separately for voter approval of a maintenance and operation tax.

An article III, section 52 navigation district may convert to a self-liquidating district that operates under chapter 63 of the Water Code. See TEX. WATER CODE ANN. § 63.039 (West 2004). Self-liquidating districts "are self-liquidating in character and may be made self-supporting and return the construction cost of the district within a reasonable period by tolls, rents, fees, assessments, or other charges other than taxation." Id. § 63.021(a). The district commission may collect charges for use of district facilities to use "for maintenance and operation of the business of the district, to make the district self-supporting and financially solvent, and to retire the construction cost of the improvements within a reasonable period." Id. § 63.153(5). The district commission may issue bonds and "other forms of obligation payable from revenues derived from improvements and pledge these revenues to the payment of the district's debts in the manner provided in Subchapter E of Chapter 60 of this code." Id. § 63.153(8).

Under chapter 60, subchapter E, a navigation district may acquire or construct "facilities or aids incidental to or useful in the operation or development of the district's ports and waterways or in aid of navigation and navigation-related commerce in the ports and on the waterways," and incur indebtedness to do so. Id. § 60.101(a)(7), (b) (West Supp. 2014). Such indebtedness may be paid only by loan or bond sale proceeds and revenue generated from the project financed by indebtedness. Id. § 60.101(b). District revenue is to be used only for the "operation and maintenance of the improvements and facilities" and interest and sinking-fund payments on outstanding "obligations issued under [subchapter E] and payable out of the revenue of the improvements and facilities." Id. § 60.105(a) (West 2004). The district commission may use revenue that is in excess of that required for these purposes "to pay the cost of improvements and replacements which are not listed and may establish a depreciation fund." Id. § 60.105(b).

Chapter 63 authorizes the district commission of a self-liquidating navigation district to levy a tax to pay principal and interest on bonds that have been approved by the voters. Id. §§ 63.251, .281. Separately, section 63.282 authorizes a district commission to impose a maintenance and operation tax, but only with the approval of the voters:

(a) With the approval of the electors of the district, the [district] commission may levy and have assessed and collected for the maintenance, operation, and upkeep of the district and its improvements an annual tax of not more than 20 cents on the $100 valuation on all taxable property in the district.

(b) The proposition to approve the tax provided in Subsection (a) of this section may be voted on at the election to create the district or may be voted on at a separate election to be held in the manner provided for elections held under Subchapter B of this chapter.

(c) The ballots for the election shall be printed to provide for voting for or against the proposition: "The levy of a tax of not more than 20 cents on the $100 valuation for maintenance, operation, and upkeep of the district and its improvements."

Id. § 63.282.

With this background in mind, we turn to the District's first question, which is whether the general taxing authority approved in the election in 1929 that created the District is "sufficient to 'carry over'" after the District converted into a self-liquidating navigation district. District's Brief at 8. A district commission of a navigation district created under article III, section 52(b) of the Texas Constitution and operating under chapter 61 of the Water Code is not authorized to levy or collect a maintenance and operation tax-that authority is vested in the county commissioners court. TEX. WATER CODE ANN. § 61.236(a)-(b) (West 2004). Upon conversion to a self-liquidating district, section 63.282 authorizes a district commission to impose a maintenance and operation tax but requires the voters to approve a proposition specifically describing the tax. Id. § 63.282. The District's Brief does not suggest that a proposition specifically authorizing a maintenance and operation tax has ever been approved by the voters. 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.). Although it is an issue of first impression, a court would likely conclude that the 1929 election in which the voters approved the District and ad valorem taxation in general does not satisfy the election requirements necessary for a district commission to impose a maintenance and operation tax under section 63.282 of the Water Code.

The District's second question is whether revenue from a maintenance and operation tax may be used for new construction projects and the dredging of a new port channel in addition to maintenance dredging of existing waterways. District's Brief at 9. Various provisions of the Water Code provide for the financing of new facilities and improvements. See, e.g., TEX. WATER CODE ANN. §§ 63.153, .281 (West 2004). Section 63.282 provides separately for a navigation district to levy a maintenance tax for "the maintenance, operation, and upkeep of the district and its improvements," but this provision does not authorize new improvement projects in the first instance. Id. § 63.282(a) (emphasis added). Whether a particular project is a new improvement or maintenance and operation of existing improvements is for the navigation commission to determine in the first instance. Cf. Tex. Att'y Gen. LO-92-049 (1992) at 3 (stating that whether a purchase of property is an improvement or for maintenance or operation is a question of fact that cannot be determined in an attorney general opinion).

The District's third question is whether section 63.282 of the Water Code requires the District to obtain the permission of the Cameron County Commissioners Court to set or authorize a maintenance and operation tax. District's Brief at 10. Unlike chapter 61 of the Water Code, section 63.282 does not require a self-liquidating navigation district to obtain approval from the county commissioners court before it may levy a maintenance and operation tax. Compare TEX. WATER CODE ANN. § 61.236(b)-(c) (West 2004), with id. § 63.282.

SUMMARY

A court would likely conclude that an election creating a navigation district under article III, section 52 of the Texas Constitution pursuant to chapter 61 of the Water Code does not satisfy the election requirements for a maintenance and operation tax under section 63.282 of the Water Code. Section 63.282 of the Water Code authorizes a navigation district to levy a maintenance tax for "the maintenance, operation, and upkeep of the district and its improvements," but does not authorize a levy of a tax for new improvement projects in the first instance. Once the voters have approved a maintenance and operation tax under section 63.282 of the Water Code, a self-liquidating navigation district need not further obtain approval from the county commissioners court before levying the tax.

Very truly yours,

KEN PAXTON
Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Rene O. Oliveira, Chair, House Comm. on Bus. & Indus., to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Apr. 20, 2015) and attached Letter Brief from Brian G. Janis, counsel to Port Isabel-San Benito Navigation Dist. at 8-11 (Apr. 17, 2015), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter" and "District's Brief," respectively).

[2] TEX. CONST. art. III, § 52(b); Id. art. XVI, § 59(a) (authorizing the Legislature to enact laws concerning navigation of inland and coastal waters); see TEX. WATER CODE ANN. §§ 60.001-.564 (chapter 60, general provisions applicable to all navigation districts), 61.001-.239 (chapter 61, article III, § 52(a) navigation districts), 62.001-.318 (chapter 62, article XVI, § 59 navigation districts), 63.001-.379 (chapter 63, self-liquidating navigation districts) (West 2004 & Supp. 2014). In addition to general-law authority to create a navigation district, a navigation district may be created by special act. See, e.g., TEX. SPEC. DIST. CODE ANN. §§ 5004.001-.207 (chapter 5004, creating Cypress Valley Navigation District), 5006.001-.051 (chapter 5006, creating Matagorda County Navigation District No. 1), 5007.001-.228 (chapter 5007, creating the Port of Houston Authority of Harris County, Texas) (West 2014).

[3] General provisions applicable to all navigation districts are contained in chapter 60 of the Water Code. See TEX. WATER CODE ANN. §§ 60.001-.564 (West 2004 & Supp. 2014).

[4] The predecessor statute to section 61.035 of the Water Code, in effect when the district was created in 1928-1929, required the ballot proposition to contain "the words and none others: 'For the navigation district and issuance of bonds and levy of tax in payment thereof;' 'Against the navigation district, and issuance of bonds and levy of tax in payment thereof.'" Act approved Feb. 20, 1909, 31st Leg., R.S., ch. 15, § 7, 1909 Tex. Gen. Laws 32, 35, subsequently codified in the Revised Civil Statutes as article 5965 in 1911 and as article 8207 in 1925.