Untitled Texas Attorney General Opinion
GA-0883
| Tex. Att'y Gen. | Jul 2, 2011Background
- Texas Attorney General provides an opinion on consolidation of Harris County MUD Nos. 364 and 365 and debt service taxation after consolidation.
- Question presented: whether a consolidated MUD may levy different debt service tax rates on property in the former districts and on newly annexed property.
- Water Code §54.731(a) preserves pre-consolidation debts; debts may be paid by taxes on land in original districts or by contributions from the consolidated district under the consolidation agreement.
- Texas Constitution Article VIII, §1(a) requires equal and uniform taxation, but courts recognize practical deviations where classifications are not arbitrary, unreasonable, or capricious and treat similarly situated property alike.
- Chapter 49 governs annexation; §49.301(b) requires annexed landowners to assume their share of outstanding indebtedness and authorizes a debt-service tax on annexed property based on its debt share.
- Post-consolidation, Water Code §54.601 allows a district to levy a tax on all property within the district to fund debt issued after consolidation, in addition to taxes under §54.731 for pre-consolidation debts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May a consolidated MUD levy different debt service rates within former districts? | Differing rates within the original districts could violate Art. VIII, §1(a). | Tax classifications may be nonuniform yet constitutional if not arbitrary and applied equally. | Yes, potentially; not unreasonable or arbitrary and equal within the class could satisfy the Constitution. |
| Can a consolidated MUD tax newly annexed property differently from original districts? | Annexed property should share debt responsibility proportionally. | §49.301(b) permits different rates on annexed property based on its debt share. | Yes, a consolidated MUD may levy a different rate on annexed property if proportional and not arbitrary. |
| May a consolidated MUD levy a district-wide debt service tax for post-consolidation debt? | Voter approval required for post-consolidation debt; uniform rate across all property. | Post-consolidation debt can be funded by a district-wide tax once voters approve; allowed by §54.601. | Yes, after voter approval, a district-wide debt service tax for post-consolidation debt is authorized. |
| Do original bond covenants require the consolidated MUD to levy a single debt service tax rate for all property? | Covenants may require uniform rate across district. | Analysis depends on specific covenant language; AGO cannot interpret contracts. | Cannot be definitively answered without examining the covenants. |
Key Cases Cited
- Norris v. City of Waco, 57 Tex. 635 (Tex. 1882) (equal and uniform taxation requires uniform treatment within a class)
- Weatherly Indep. Sch. Dist. v. Hughes, 41 S.W.2d 445 (Tex. Civ. App.-Amarillo 1931) (uniformity attained when within-class taxation is equal for same value)
- Hurt v. Cooper, 110 S.W.2d 896 (Tex. 1937) (constitutional equal and uniform taxation focuses on same class being taxed alike)
- Tarrant Appraisal Dist. v. Colonial Country Club, 767 S.W.2d 230 (Tex. App.-Fort Worth 1989) (tax classifications not unreasonable, arbitrary, or capricious if applied equally)
- Enron Corp. v. Spring Indep. Sch. Dist., 922 S.W.2d 931 (Tex. 1996) (legislature may draw distinctions in property valuation for tax purposes)