July 27, 1987
JIX 3sxrrQx
.mToRxEY Q~~ERXU.
Eonorable Carlos Valdez Opinion No. JM-758
Nueces County Attorney
901 Leopard, Room 206 Re: Conditions under which taxing
Corpus Christi, Texas 78401 units are required to make tax
increment fund payments beyond
three years
Dear Mr. Valdea:
Your letter requesting an opinion from this office reads in part:
The Tax Increment Financing Act of 1981, article
1066e. V.T.C.S., among other things, provides the
authority and procedure for the establishment of a
reinvestment zone. Section 10(c) of said article
attempts to explain when a taxing unit is. not
required to pay a tax increment into the zone's
fund beyond a certain time limit.
, . . .
My question is: Under section 10(c) of article
10660, must the three conditions set out therein
exist before a taxing unit would not be required to
pay into the zone's fund or is the existence of any
one of the three conditions sufficient to satisfy
the requirement?
The Tax Increment Financing Act of 1981, declared constitutional
by the Texas Supreme Court in City of El Paso V. El Paso Community
College District, 729 S.W.Zd 296. 29 Tex. Sup. Ct. 3. 541 (Tex. 1986)
Imotion for rehearing overruled, 30 Tex. Sup. Ct. 3. 433 (May 13.
198711. was desinned to take effect u1)on the adoption of an amendment
adding article Vk, section l-g, to the Texas Constitution. See Acts
1981. 67th Leg., 1st C.S., ch. 4, 14, at 45. Cf. Attorney-&era1
Opinion MW-337 (1981) (invalidity of earlier tax-%crement financing
statute).
As explained by'the supreme court in City of El Paso v. El Paso
Community College District, m:
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Eonorable Carlos Valdez - Page 2 (JM-758)
Tax increment financing is designed to aid cities
and towns in financing public improvements in
blighted or underdeveloped areas. Under Article
1066e, a municipality must designate a specific
area which. in its opinion, meets the definitional
requirements of a 'reinvestment zone.' To%. Rev.
civ. Stat. Ann. art. 1066e 13(b) (Vernon Supp.
1985). Any increase in ad valorem tax revenues
from land within the zone is then committed to the
purchase of property, improvement of approved
property, or retirement of revenue bonds issued to
provide funding for the approved projects.
729 S.W.2d at 296.
Section 10(a) of article 1066e requires each taxing unit that
taxes real property within the designated "reinvestment zone" to pay
into the "tax increment fund" a certain portion of the taxes it
collects there. For definitions of "taxing unit" and "tax increment
fund," see subsections 2(6) and 2(9) of the statute. The obligation
of taxing units to contribute to the fund expires in a limited time,
however, unless certain events occur. -
Id. )10(c).
Section 10(c) of the statute reads:
?
(c) A taxing unit is not required to pay a tax
increment into the zone's tax increment fund
beyond three years from the date the zone was
created, or, if the zone was created before the
effective date of this Act, beyond September 1.
1986, unless the following conditions exist or
have been met within three years from the date the
sane was created, or prior to September 1, 1986,
in those sones created before the effective date
of this Act:
(1) bonds have been issued for the zone under
Section 11 of this Act;
(2) the town or city has' acquired property
within the aone pursuant to the project plan; or
(3) construction of improvements pursuant to
the project plan has commenced in the zone.
Your question presents a matter of statutory construction, which
obliges us to search for the intent of the legislature. 53 Tex.
Jur.2d Statutes 1125 (1964). The act must be construed as a whole and
in a harmonious and consistent manner. Lampson v. City of Beaumont.
687 S.W.2d 788 (Tex. App. - Beaumont 1985, no writ).
p. 3543
honorable Carlos Valdez - Page 3 (JM-758)
Section 10 of the 1981 act was extensively revised in 1983 to
read as it does now. Subsection (c) was added at that time. See Acts
1983. 68th Leg., ch. 554, at 3213, 3226. You suggest that thantent
of the changes may be to excuse a taxing'unit from making payments to
a tax increment fund unless within three years (1) bonds have been
issued, and (2) property has been acquired, end (3) ~construction of
improveme= has commenced. Section 10(c) stzs that a taxing unit
is not required to make payments "unless the following conditions
exist." That language suggests that a series in the conjunctive will
follow. It is our conclusion that a series in the disjunctive
follows.
We are of the opinion that the legislature intended to relieve
taxing units of the obligation to make payments to the tax increment
fund only if none of the three conditions have been met within the
time allowed.We are led to this conclusion because the first
"condition" is the issuance of bonds, and an examination of the
remainder of the act discloses that, although the act permits cities
to issue bonds secured by the tax increment fund, they are not
required to do so. V.T.C.S. art. 1066e. 111.
Section 9 of the act allows a city to implement project plans by
a number of means other than the issuance of bonds, including the
direct expenditure of tax increment funds. as provided in section 14
of the act.
We think the powers set out in section 9 sufficiently illustrate
that cities and towns dare not compelled to issue bonds in developing
projects, but may choose other devices for that purpose.
If the act does not require the issuance of bonds to further its
purposes. it could not have been the intent of the legislature that
taxing units could frustrate that purpose after three years simply
because a city had chosen to prosecute its project plan without
issuing bonds. Inasmuch as the issuance of bonds "under section 11"
is one of the three "conditions" of section 10(c), we do not believe
the legislature intended that all of them be met within the three year
period in order to obligate taxing units to continue making payments
to the tax increment fund.
It is noteworthy that similar punctuation (with the disjunctive,
"or") is used in section 3(b) of the act (both versions) as well
as in section 10(c). -See Gov't. Code 6312.012(b) ("punctuation of a
1. Two separate acts amended section 3(b) in 1983. See Acts
1983. 68th Leg., ch. 554, 51. at 3213, 3216-17; Acts 1983. 68thLeg.,
ch. 841. $5. at 4771. 4790-91.
p. 3544
Eonorable Carlos Valdez - Page 4 (JM-758)
law does not control or affect legislative intent in enacting the
law"). Section 3(b) establishes the criteria an area must meet to be
designated as a reinvestment zone, and clearly means to list alterna-
tives.
If our conclusion were in need of further buttress, it is
furnished by legislative history. The bill analysis for Senate Bill
No. 641 in the Sixty-eighth Legislature, which initiated the 1983
legislation adding section 10(c) to the Tam Increment Financing Act of
1981, states:
Senate Bill 641 amends Article 1066e by
tightening the definition of 'blighted' and
requires a 'but for' test. It requires 60 days
notice to affected taxing entities and more
detailed preliminary plans. It gives counties and
school boards as well as other taring entities
representation on the board. It dissolves e zone
if redevelopment does not begin within three
years. It prevents cities from involving more
than 15% of a county or school districtls tar base
in a sane and allows the county or school board or
other entity to negotiate back .up to 15% of the
increment. (Emphasis added).
Bill Analysis to S.B. No. 641. prepared for Rouse Coannitteeon Urban
Affairs, filed in Bill File to S.B. No. 641, Legislative Reference
Library. In.the portion of the bill analysis examining the proposed
legislation section-by-section, it says:
Section 10. Allows taxing entities to collect
their own tares in the zone and pay over their
share into the tam increment fund. Allows entities
to keep up to 15% of their increment as negotiated
in the planning phase. Provides that the entities
must deposit their share into the fund before the
90th day after their delinquency date and sets
a penalty for failure to do SO. Deletes the
old procedure whereby the city collected every
entities' tames in the sane and returned the amount
generated by the base to each entity. If the city
has not commenced development in the sane within
three years, the entities are no longer required
to pay their increment into the fund and the zone
dissolves. (Emphasis added).
If any of the three "conditions" of section 10(c) are met,
development has commenced.
p. 3545
Ronorable Carlos Valdez - Page 5 (~~-758)
SUMMARY
Section 10(c) of the Tax Increment Financing
Act of 1981 relieves taxing units of an obligation
to make payments into a tax increment fund only if
none of the three conditions listed there have
been met within the time allowed.
JIM MATTOX
Attorney General of Texas
MARY KELLER
Executive Assistant Attorney General
JUDGE ZOLLIE STKAKIRT
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Rick Gilpin
Assistant Attorney General
p. 3546