Can a Texas county create an emergency services district and vote on its sales tax at the same election?

TX AG Opinion GA-0242: Emergency Services District Tax

Plain-English summary

Llano County had tried and failed to create an emergency services district (ESD) in 2002 because voters did not want to pay an additional property tax. County officials heard that voters would support an ESD funded by a one-cent sales and use tax instead, since everyone pays sales tax rather than just property owners. The county attorney asked the Attorney General whether the commissioners court could call one election that both created the ESD and adopted a sales and use tax to fund it, and separately whether the county could adopt a different, countywide health-services sales tax under Tax Code chapter 324.

The opinion said no to combining the two elections. Health and Safety Code chapter 776 lays out a sequence: a petition, a hearing, a commissioners-court election that confirms the district's creation and authorizes a property tax up to the constitutional cap, and only after the district exists and the commissioners court has appointed its five-member board can that board call a separate election to adopt a sales and use tax. Because a sales tax vote can only be called by a board that doesn't exist until the district is confirmed, the commissioners court cannot bundle a sales-tax adoption into the district-creation election. The opinion also concluded the district's property tax rate can be set anywhere from zero up to the ten-cent constitutional ceiling. On the second question, the opinion found Llano County could not adopt the Tax Code chapter 324 health-services sales tax if doing so, combined with existing sales and use taxes in the City of Llano, would push the total local sales tax rate above two percent anywhere in the county, since chapter 324 offers no way to carve the city out of a countywide tax.

Currency note

This opinion was issued in 2004. 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.

Who this opinion affected (as of 2004)

Llano County and its commissioners court: The opinion confirmed the county could pursue creating an ESD with a property tax rate set as low as zero, but could not fund it with a sales tax through the same creation election, and could not adopt the Tax Code chapter 324 health-services sales tax if it would push the combined local rate above two percent in the City of Llano.

Other Texas counties pursuing emergency services districts under chapter 776: The opinion's reading of the statutory sequence, petition, hearing, creation election with a property tax authorization, then a separate board-called election for any sales and use tax, applied to any county trying to establish an ESD under the same chapter.

County officials considering a Tax Code chapter 324 health-services sales tax: The opinion clarified that chapter 324 sets up a countywide tax with no mechanism to exclude cities within the county, so counties needed to check whether adding it would push any city's combined local sales tax rate above the two percent statutory ceiling before proceeding.

Common questions

Why couldn't Llano County just ask voters to approve the ESD and its sales tax in a single ballot?
Because of how Health and Safety Code chapter 776 sequences the process, according to this opinion. The commissioners court's election only confirms the district's creation and authorizes a property tax; the sales and use tax has to be adopted at a separate election called later by the district's own board of emergency commissioners, which doesn't exist until after the district is confirmed.

Could the county set the ESD's property tax rate at zero and rely on a sales tax instead?
The opinion found no legal barrier to setting the initial property tax rate at zero, noting other jurisdictions have used zero tax rates for similar purposes. But it cautioned that a district with no property tax revenue might struggle practically to cover board expenses or the cost of holding a later sales-tax election, since a sales tax cannot be adopted until after the district and its board already exist.

Can a Texas county add a health-services sales tax on top of what a city already collects?
Not if the combined rate would exceed the statutory cap, according to this opinion. Tax Code chapter 324's health-services sales tax applies countywide with no way to exempt cities, so if a county's chapter 324 tax combined with a city's own sales and use taxes would exceed two percent anywhere in the county, the county cannot adopt it.

Background and statutory framework

Texas Constitution article III, section 48-e authorizes the legislature to create special districts that provide emergency services and lets participating counties' commissioners courts levy a property tax of up to ten cents per $100 valuation to support them, once approved by district voters. The legislature implemented that authority in Health and Safety Code chapter 776 for counties with a population of 125,000 or less (chapter 775 covers ESDs without a population cap). Llano County, with roughly 17,500 residents, qualified under chapter 776. To create a single-county ESD, at least 100 qualified voters who own taxable real property in the proposed district must petition the county judge, describing the district's boundaries and services and showing compliance with the statute's overlapping-district rules. The commissioners court then holds a hearing, and if it finds the district feasible and beneficial, grants the petition, fixes the boundaries, and orders an election to confirm the district's creation and authorize a property tax up to the constitutional cap. If voters approve, the commissioners court appoints a five-member board of emergency commissioners to govern the new district.

Two earlier AG opinions addressed how much discretion a commissioners court has in setting an ESD's tax rate. A 1989 opinion, construing the ESD statute as it existed at the time, concluded the commissioners court had no discretion and had to set the tax rate at the full ten-cent constitutional maximum in the election order. A later opinion agreed that the election order had to track the statute's exact tax-rate language, but confirmed the constitution itself did not bar the legislature from allowing rates below ten cents. A 2001 amendment then changed the statute to authorize an election order setting a maximum rate "not to exceed the rate allowed by" the constitution, and added a separate provision letting the district's board later call an election to raise its maximum tax rate, up to the constitutional ceiling. The opinion read those two 2001 changes together: because the board couldn't later seek to raise the rate if the original election had already been forced to adopt the full ten-cent maximum, the amended statute must let the commissioners court set an initial rate anywhere from zero up to ten cents.

On the sales and use tax question, the opinion traced through chapter 776's separate sales-tax provisions: a district "may adopt a sales and use tax" only at an election called by resolution of its own board, and that board doesn't exist until after the commissioners court has appointed it following a successful creation election. Because no sales tax may be adopted before the district is confirmed and its board appointed, a single combined election calling for both district creation and sales-tax adoption isn't authorized by the statute. Separately, the opinion addressed Tax Code chapter 324, which lets a county with 50,000 or fewer residents adopt a half-percent countywide sales and use tax for health services, but bars adoption if the combined rate of all sales and use taxes in the county, including city taxes, would exceed two percent anywhere in the county. Because chapter 324 requires the tax to apply countywide with no carve-out for cities, and Llano County's proposed tax combined with the City of Llano's existing sales taxes would exceed two percent within the city, the opinion concluded the county could not adopt the chapter 324 tax under those circumstances.

Citations

Statutes:

• TEX. CONST. art. III, § 48-e
• TEX. HEALTH & SAFETY CODE ANN. § 776.003 (Vernon 2003)
• TEX. HEALTH & SAFETY CODE ANN. ch. 775 (Vernon 2003 & Supp. 2004)
• TEX. HEALTH & SAFETY CODE ANN. § 776.011(a) (Vernon 2003)
• TEX. HEALTH & SAFETY CODE ANN. § 776.013
• TEX. HEALTH & SAFETY CODE ANN. § 776.013(3)
• TEX. HEALTH & SAFETY CODE ANN. § 776.015(a)-(b)
• TEX. HEALTH & SAFETY CODE ANN. § 776.015(c)
• TEX. HEALTH & SAFETY CODE ANN. § 776.016(a)-(b)
• TEX. HEALTH & SAFETY CODE ANN. § 776.017(a)
• TEX. HEALTH & SAFETY CODE ANN. § 776.019(a)
• TEX. HEALTH & SAFETY CODE ANN. § 776.020(a)
• TEX. HEALTH & SAFETY CODE ANN. § 776.020(d)
• TEX. HEALTH & SAFETY CODE ANN. § 776.033(a) (Vernon Supp. 2004)
• TEX. HEALTH & SAFETY CODE ANN. § 776.0755(a) (Vernon 2003)
• TEX. HEALTH & SAFETY CODE ANN. § 776.075(a) (Vernon 2003)
• TEX. HEALTH & SAFETY CODE ANN. § 776.0751(a) (Vernon 2003)
• TEX. HEALTH & SAFETY CODE ANN. § 776.0752(b)
• TEX. HEALTH & SAFETY CODE ANN. § 776.0752(c)
• TEX. HEALTH & SAFETY CODE ANN. § 776.031(5)
• TEX. HEALTH & SAFETY CODE ANN. § 776.001(1) (Vernon 2003)
• TEX. GOV'T CODE ANN. § 311.021(2) (Vernon 1998)
• TEX. TAX CODE ANN. §§ 324.021-.022, .081 (Vernon 2002)
• TEX. TAX CODE ANN. § 324.021(b) (Vernon 2002)
• TEX. TAX CODE ANN. §§ 324.021(a), .061(b) (Vernon 2002)
• Act of May 22, 1987, 70th Leg., R.S., ch. 673, § 8, 1987 Tex. Gen. Laws 2495, 2496
• Act of May 28, 2001, 77th Leg., R.S., ch. 1140, § 6, 2001 Tex. Gen. Laws 2542, 2543-44

Cases:

• N. Shore MRI Ctr. v. Ill. Dep't of Revenue, 723 N.E.2d 726, 728 (Ill. App. Ct. 1999)
• Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865-66 (Tex. 1999)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0242
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2004/ga0242.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

August 30, 2004

The Honorable Cheryll Mabray
Llano County Attorney
Llano County Courthouse
801 Ford, Room 111
Llano, Texas 78643

Opinion No. GA-0242

Re: Whether a commissioners court may hold an election that creates an emergency service district and imposes a sales and use tax within the proposed district's boundaries (RQ-0202-GA)

Dear Ms. Mabray:

You ask about creating an emergency services district ("ESD") pursuant to Health and Safety Code chapter 776.[1] You state that Llano County called for an election to create an ESD in 2002, but it was not approved because the citizens did not want more ad valorem taxes. See Request Letter, supra note 1, at 1; Tex. Att'y Gen. Op. No. JC-0392 (2001) (concerning creation of an ESD in Llano County). Many voters have stated that they would vote for an ESD funded with a one cent sales and use tax because everyone pays it, unlike an ad valorem tax paid only by property owners. See Request Letter, supra note 1, at 1. You also state that Llano County citizens have considered adopting a county health services sales and use tax under Tax Code chapter 324, and you ask whether the county may do so. See id. at 2.

We first address the creation of an ESD. The Llano County Commissioners Court wishes to call an election with a petition that includes the following wording:

The ESD will provide for emergency medical service within the district. The district is to be created and is to operate under Article III, Section 48-e, Texas Constitution with a levy on the ad valorem property situated in said district not to exceed zero cents (0) on the One Hundred Dollars ($100) valuation for the support thereof; provided that no tax shall be levied in support of said district until approved by vote of the qualified voters residing herein. Said district is to be created and is to operate under the adoption of a not to exceed one cent (1) sales and use tax.

Id. Accordingly, you ask whether the commissioners court may call an election to create an emergency services district and at the same time call an election for a sales and use tax not to exceed one percent in the emergency service district boundaries. See id. at 1.

Texas Constitution article III, section 48-e, provides for establishing ESDs as follows:

Laws may be enacted to provide for the establishment and creation of special districts to provide emergency services and to authorize the commissioners courts of participating counties to levy a tax on the ad valorem property situated in said districts not to exceed Ten Cents (10¢) on the One Hundred Dollars ($100.00) valuation for the support thereof; provided that no tax shall be levied in support of said districts until approved by a vote of the qualified voters residing therein. Such a district may provide emergency medical services, emergency ambulance services, rural fire prevention and control services, or other emergency services authorized by the Legislature.

TEX. CONST. art. III, § 48-e (added Nov. 3, 1987; amended Nov. 2, 1999). Pursuant to section 48-e, the legislature adopted Health and Safety Code chapter 776, authorizing the creation of ESDs in counties with a population of 125,000 or less. See TEX. HEALTH & SAFETY CODE ANN. § 776.003 (Vernon 2003); see also id. ch. 775 (Vernon 2003 & Supp. 2004) (authorizing the creation of ESDs without a population restriction). Llano County has a population of approximately 17,500 persons. See Request Letter, supra note 1, at 1.[2]

To create an ESD located wholly within Llano County pursuant to chapter 776, "a petition signed by at least 100 qualified voters who own taxable real property in the proposed district must be filed with the county judge." See TEX. HEALTH & SAFETY CODE ANN. § 776.011(a) (Vernon 2003). The petition must show "that the district is to be created and is to operate under Article III, Section 48-e," the proposed district's name and boundaries, the services it will provide, that its creation complies with Health and Safety Code section 776.021, which pertains to overlapping districts, and certain information pertaining to the petitioners. Id. § 776.013. After the county judge receives the petition and files it with the county clerk, the commissioners court schedules a hearing to consider the petition. See id. § 776.015(a)-(b).

Notice of the hearing must state, among other things, that the district is to be created and operate under Texas Constitution article III, section 48-e, the name of the proposed district, and its boundaries and functions. See id. § 776.015(c). At the hearing, the commissioners court "shall consider the petition and each issue relating to the creation of the district," and any interested person may appear "to support or oppose creation of the district." Id. § 776.016(a)-(b). "If after the hearing the commissioners court finds that the proposed district is feasible, will benefit the territory in the district, will secure the public safety, welfare, and convenience, and will aid in conserving the real property or natural resources . . . , the commissioners court shall grant the petition and fix the district's boundaries." Id. § 776.017(a). On granting a petition, the commissioners court "shall order an election to confirm the district's creation and authorize the levy of a tax not to exceed the rate allowed by Section 48-e, Article III, Texas Constitution." Id. § 776.019(a). "If a majority of the votes cast in the election favor confirmation, the district is created." Id. § 776.020(a). The commissioners court of a county in which a single-county district is located appoints a five-member board of emergency commissioners to serve as the district's governing body. See id. § 776.033(a) (Vernon Supp. 2004).

Attorney General Opinion JM-1010 addressed legislation implementing Texas Constitution article III, section 48-e. The commissioners court, acting under the predecessor of Health and Safety Code chapter 775, wished to limit the tax to be levied in support of an ESD to a maximum rate of six cents per $100 valuation and to provide for that amount in the election order. See Tex. Att'y Gen. Op. No. JM-1010 (1989) at 1 (addressing former article 2351a-8, Revised Civil Statutes). The statute stated that "the commissioners court shall call an election to confirm the organization and authorize the levy of an ad valorem tax in an amount not to exceed ten cents on the $100 valuation." See Act of May 22, 1987, 70th Leg., R.S., ch. 673, § 8, 1987 Tex. Gen. Laws 2495, 2496 (formerly codified as section 8, article 2351a-8, Revised Civil Statutes). Opinion JM-1010 found the statute to be ambiguous as to whether it required the election order to include the maximum constitutional rate of ten cents on the $100 valuation or allowed the commissioners court to set a lower maximum tax rate in the election order. See Tex. Att'y Gen. Op. No. JM-1010 (1989) at 3. After reviewing the relevant provisions in context, the opinion concluded that the statute did not allow the commissioners court any discretion as to the maximum tax rate and the election order must track the statutory language as to tax rate. See id. at 4. Attorney General Opinion JC-0392 also concluded that an election order to establish an ESD must strictly conform to statutory language stating the tax rate. See Tex. Att'y Gen. Op. No. JC-0392 at 4 (construing a prior version of Health and Safety Code section 776.019). More importantly, opinion JC-0392 determined that article III, section 48-e did not bar the legislature from adopting statutes authorizing the levy of a tax less than ten cents on the $100. See id. at 5.

Amendments to chapter 776 that became effective following the issuance of opinion JC-0392 allow the commissioners court to set the maximum property tax rate for an ESD at less than ten cents per $100 valuation. See Act of May 28, 2001, 77th Leg., R.S., ch. 1140, § 6, 2001 Tex. Gen. Laws 2542, 2543-44. Section 776.019(a) was amended to provide as follows: "On the granting of a petition, the commissioners court shall order an election to confirm the district's creation and authorize the levy of a tax not to exceed the rate allowed by Section 48-e, Article III, Texas Constitution." TEX. HEALTH & SAFETY CODE ANN. § 776.019(a) (Vernon 2003) (adopted by Act of May 28, 2001, 77th Leg., R.S., ch. 1140, § 6, 2001 Tex. Gen. Laws 2542, 2544) (language of amendment emphasized).

Although the amendment to section 776.019(a) does not expressly state that the election order may authorize a maximum tax rate of less than ten cents on the $100 property valuation, the legislative history is explicit on this point. A bill analysis states that the 2001 enactment amends the Health and Safety Code to provide that the tax rate of an ESD "is any rate allowed by the Texas Constitution." HOUSE COMM. ON COUNTY AFFAIRS, BILL ANALYSIS, Tex. H.B. 2744, 77th Leg., R.S. (2001). Moreover, the same 2001 enactment included another provision regarding the maximum tax rate for an ESD. Section 776.0755 provides as follows:

A board [of emergency commissioners][3] may order an election to increase the maximum tax rate of the district to any rate at or below the rate allowed by Section 48-e, article III, Texas Constitution. The proposition on the ballot must state the proposed maximum tax rate to be authorized at the election.

TEX. HEALTH & SAFETY CODE ANN. § 776.0755(a) (Vernon 2003) (adopted by Act of May 28, 2001, 77th Leg., R.S., ch. 1140, § 6, 2001 Tex. Gen. Laws 2542, 2544). This provision must mean that an ESD may be created with a maximum property tax rate of less than ten cents on the $100 valuation. Otherwise, the ESD board could not possibly seek to increase the maximum tax rate and the above provision would be meaningless. See TEX. GOV'T CODE ANN. § 311.021(2) (Vernon 1998) (presumption that the entire statute is intended to be effective). The commissioners court's election order may authorize a maximum property tax rate at any rate up to and including the ten cents on $100 valuation allowed by article III, section 48-e. Of course, once an ESD is established, it may tax in any year at less than the maximum rate that it has adopted. See Tex. Att'y Gen. Op. No. JM-1010 at 5; see also TEX. HEALTH & SAFETY CODE ANN. § 776.075(a) (Vernon 2003) (board shall annually impose an ad valorem tax on real and personal property in the district for the district's support and the purposes of chapter 776).

A tax rate of zero is not unprecedented. See N. Shore MRI Ctr. v. Ill. Dep't of Revenue, 723 N.E.2d 726, 728 (Ill. App. Ct. 1999) (zero percent tax rate for certain goods provided by statute); Op. Mo. Att'y Gen. No. 69-2004 (ambulance district set its property tax rate at zero in shifting to support by sales tax). We assume that the newly created ESD will not have any bonded indebtedness or obligations to third parties that will be jeopardized by the absence of any property tax support.

However, the commissioners court is not authorized to call an election to adopt a sales tax to support an ESD. No sales and use tax may be adopted until after a district has been confirmed and the commissioners court has appointed its board. See TEX. HEALTH & SAFETY CODE ANN. § 776.033(a) (Vernon Supp. 2004). "A district may adopt a sales and use tax . . . at an election held as provided by Section 776.0752." Id. § 776.0751(a) (Vernon 2003) (emphasis added). "An election [to adopt a sales and use tax] is called by the adoption of a resolution by the board." Id. § 776.0752(b) (emphasis added). At the election, the ballot shall permit voting "for or against the proposition: 'The adoption of a local sales and use tax in (name of district) at the rate of (proposed tax rate) percent.'" Id. § 776.0752(c).

We conclude in answer to your question that the commissioners court may not order an election to create an emergency service district and at the same time impose a sales and use tax within the proposed district's boundaries. If the election order sets the maximum property tax rate at zero, the board is unlikely to have the funds necessary to pay board members' expenses or the expenses of an election to adopt a sales and use tax. But see id. § 776.031(5) (district may accept and receive donations). Thus, while there may not be a legal impediment against setting the tax rate at zero, it may be impossible as a practical matter to establish an ESD with a zero tax rate.

You also ask whether Llano County may adopt a sales and use tax under Tax Code chapter 324, which authorizes a county with a population of 50,000 or less to adopt a one-half percent sales and use tax to provide health services in the county. See Request Letter, supra note 1, at 2; TEX. TAX CODE ANN. §§ 324.021-.022, .081 (Vernon 2002) (tax shall be adopted or abolished by election in the county). A county may not adopt the sales and use tax if as a result "the combined rate of all sales and use taxes imposed by the county and other political subdivisions having territory in the county would exceed two percent at any location in the county." TEX. TAX CODE ANN. § 324.021(b) (Vernon 2002) (emphasis added). You state that the one-half percent tax rate authorized by Tax Code chapter 324 combined with the rate of sales and use taxes established in the City of Llano would exceed a two percent tax rate within the city. See Request Letter, supra note 1, at 2.

Chapter 324 requires the sales and use tax to be established throughout the county. It must be approved "at an election held in the county," and the ballot shall permit adopting a "local sales and use tax in (name of county)." TEX. TAX CODE ANN. §§ 324.021(a), .061(b) (Vernon 2002). These chapter 324 provisions may be contrasted with Health and Safety Code section 776.013(3), which requires the petition to establish an ESD to describe the "proposed district's boundaries as designated by metes and bounds or other sufficient legal description," and section 776.020(d), requiring the commissioners courts' order recognizing the ESD's creation to "insert description [of district] unless the district is countywide." TEX. HEALTH & SAFETY CODE ANN. §§ 776.013(3), .020(d) (Vernon 2003). Nothing in chapter 324 provides for establishing the sales and use tax in an area less than the entire county. Llano County may not adopt the sales and use tax authorized by Tax Code chapter 324 if that tax, when combined with the rate of sales and use taxes imposed by the county and other political subdivisions having territory in the county, would exceed two percent anywhere in the county. See TEX. TAX CODE ANN. § 324.021(b) (Vernon 2002). See generally Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865-66 (Tex. 1999) (court construes a statute by looking to the plain meaning of its language). If the one-half percent tax rate authorized by Tax Code chapter 324 combined with the rate of sales and use taxes established in the City of Llano would exceed a two percent tax rate within the city, Llano County may not adopt the sales and use tax authorized by chapter 324.

SUMMARY

Health and Safety Code chapter 776 does not authorize a commissioners court to call an election to create an emergency service district and at the same time call for an election for a sales and use tax in the emergency service district boundaries. The election order must provide for an election to confirm the district's creation and authorize the levy of a property tax, setting the maximum tax rate at any rate that does not exceed the ten cents on the $100 valuation allowed by Texas Constitution article III, section 48-e. Only the district board may call an election to adopt a sales and use tax.

Tax Code chapter 324 provides for a county-wide sales and use tax to fund county health services. A county may not adopt the chapter 324 tax if the tax rate authorized by that chapter combined with the rate of all sales and use taxes imposed in any city within the county exceeds two percent in that city.

Very truly yours,

Attorney General of Texas

BARRY R. MCBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Susan L. Garrison
Assistant Attorney General, Opinion Committee

Footnotes

[1] Letter from Honorable Cheryll Mabray, Llano County Attorney, to Honorable Greg Abbott, Texas Attorney General (Mar. 1, 2004) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] See U.S. Census Bureau, Texas QuickFacts Llano County, available at http://quickfacts.census.gov/qfd/states/48/48299.html (visited July 29, 2004).

[3] "Board" means the board of emergency commissioners. See TEX. HEALTH & SAFETY CODE ANN. § 776.001(1) (Vernon 2003).