Can a Texas city hire the county or the appraisal district to collect the special assessments it charges in a public improvement district?

TX AG Opinion GA-0724: Who can collect a city's public-improvement-district assessments?

Plain-English summary

State Senator Jeff Wentworth asked whether a central appraisal district or a local taxing unit, like a county, may contract to collect the special assessments a city imposes in a public improvement district. The Public Improvement District Assessment Act (Local Government Code chapter 372, subchapter A) lets a municipality create such a district to finance public improvements, apportion the cost against benefited property based on the special benefits accruing to it, and levy and collect "special assessments." Unpaid assessments become a first and prior lien enforceable like an ad valorem tax lien.

The first question was whether Tax Code section 6.24 authorizes a contract between a municipality and an appraisal district or another taxing unit to collect those assessments. Section 6.24 lets a taxing unit contract with another taxing unit or an appraisal district board to perform duties "relating to the assessment or collection of taxes," but, read in context, it relates to ad valorem property taxes. The opinion explained that a special assessment, while imposed under the taxing power, is not an ad valorem property tax: an ad valorem tax falls on all property in the jurisdiction for general government support, while a special assessment falls only on the specially benefited property and is measured by that benefit. Texas courts have long held that the word "taxes" in a statute does not include local assessments unless the statute shows that intent, and nothing in section 6.24 shows it. So section 6.24 does not authorize contracts to collect public-improvement special assessments.

The second question was whether some other authority would. The opinion pointed to the Interlocal Cooperation Act (Government Code chapter 791), which lets a local government contract with another local government to perform governmental functions and services. Collecting assessments, like the expressly mentioned tax collection, is an "administrative function" normally associated with the routine operation of government, and the Act's broad "other governmental functions in which the contracting parties are mutually interested" category could also reach it. Because an interlocal contract can cover only a function each party could perform individually, a city could not contract with an appraisal district board this way, but the opinion concluded a court would find the Act authorizes a city to contract with another local government, one that itself has authority to collect public-improvement assessments, to collect the special assessments the city imposes.

Currency note

This opinion was issued in 2009. 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 Public Improvement District Assessment Act, Tax Code section 6.24, and the Interlocal Cooperation Act may all have been amended since 2009. Confirm current law before relying on anything below.

Who this opinion affected (as of 2009)

Cities running public improvement districts: The opinion explained that they could not use Tax Code section 6.24 to outsource assessment collection, but could use the Interlocal Cooperation Act to contract with another local government that is authorized to collect public-improvement assessments.

Appraisal districts: The opinion explained that an appraisal district board could not collect special assessments under either route discussed, since section 6.24 reaches only ad valorem taxes and an interlocal contract covers only functions each party could perform itself.

Counties and other local taxing units: The opinion described the Interlocal Cooperation Act path, under which a county or similar entity with authority to collect public-improvement assessments could contract with a city to do so.

Common questions

Why can't the appraisal district just collect these like property taxes?
The opinion explained that Tax Code section 6.24 covers ad valorem tax assessment and collection, and a special assessment is not an ad valorem tax. So that contracting authority does not reach special assessments.

What is the difference between a special assessment and a property tax?
The opinion described an ad valorem tax as falling on all property in the jurisdiction for general government support, while a special assessment falls only on the property specially benefited by an improvement and is measured by that benefit.

So how can a city get help collecting these assessments?
Through the Interlocal Cooperation Act, the opinion said. A city may contract with another local government that itself has authority to collect public-improvement assessments to collect the special assessments the city imposes.

Could a city contract with the appraisal district under the Interlocal Cooperation Act instead?
No. The opinion explained that an interlocal contract can cover only a function each party could perform individually, so a city could not use it to hire an appraisal district board for this.

Background and statutory framework

Under the Public Improvement District Assessment Act, a municipality may create a district to finance public improvements (Tex. Loc. Gov't Code Ann. § 372.003 (Vernon 2005)), apportion costs against benefited property by special benefit (id. § 372.015(a)), and levy and collect special assessments enforceable as a first and prior lien (id. § 372.018(b)). Tax Code section 6.24 lets a taxing unit contract with another taxing unit or an appraisal district board to perform duties relating to the assessment or collection of taxes (Tex. Tax Code Ann. § 6.24(a), (b) (Vernon 2008)), but, read with the surrounding Property Tax Code provisions, relates to ad valorem taxes (id. §§ 1.04(12), 6.01(b)).

The opinion explained that a special assessment is imposed under the taxing power but is not an ad valorem property tax (City of Wichita Falls v. Williams, 26 S.W.2d 910, 911-13 (Tex. 1930); Henry v. Kaufman County Dev. Dist. No. 1, 150 S.W.3d 498, 504-05 (Tex. App.-Austin 2004, pet. dism'd by agr.); City of Houston v. Blackbird, 394 S.W.2d 159, 162 (Tex. 1965); Higgins v. Bordages, 31 S.W. 52, 54-55 (Tex. 1895)), and that "taxes" in a statute does not include local assessments absent contrary intent (City of Cisco v. Varner, 16 S.W.2d 265, 266 (Tex. Comm'n App. 1929, judgm't aff'd); Allen v. City of Galveston, 51 Tex. 302, 320 (1879)). It then read the Interlocal Cooperation Act (Tex. Gov't Code Ann. § 791.011(a), (c)(2); 791.003(1), (3), (4)(A) (Vernon Supp. 2008); Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self Ins. Fund, 212 S.W.3d 320 (Tex. 2006)) to authorize a city to contract with another local government, authorized to collect public-improvement assessments, for that collection.

Citations

Statutes:

• Tex. Loc. Gov't Code Ann. §§ 372.003, 372.015(a), 372.018(b) (Vernon 2005)
• Tex. Tax Code Ann. §§ 6.24(a), (b), 6.01(b), 1.04(12) (Vernon 2008)
• Tex. Gov't Code Ann. §§ 791.011(a), (c)(2), 791.003(1), (3), (4)(A) (Vernon Supp. 2008)

Cases:

• City of Wichita Falls v. Williams, 26 S.W.2d 910 (Tex. 1930)
• Henry v. Kaufman County Dev. Dist. No. 1, 150 S.W.3d 498 (Tex. App.-Austin 2004, pet. dism'd by agr.)
• City of Houston v. Blackbird, 394 S.W.2d 159 (Tex. 1965)
• Higgins v. Bordages, 31 S.W. 52 (Tex. 1895)
• City of Cisco v. Varner, 16 S.W.2d 265 (Tex. Comm'n App. 1929, judgm't aff'd)
• Allen v. City of Galveston, 51 Tex. 302 (1879)
• Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self Ins. Fund, 212 S.W.3d 320 (Tex. 2006)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0724
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2009/ga0724.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

June 29, 2009

The Honorable Jeff Wentworth
Chair, Committee on Jurisprudence
Texas State Senate
Post Office Box 12068
Austin, Texas 78711

Opinion No. GA-0724

Re: Authority of local taxing units or central appraisal districts to collect special assessments imposed in public improvement districts (RQ-0774-GA)

Dear Senator Wentworth:

You ask whether a central appraisal district or a local taxing unit, such as a county, may contract to collect assessments imposed by a public improvement district ("district").[1] The Public Improvement District Assessment Act (the "Act"),[2] Local Government Code chapter 372, subchapter A, authorizes a municipality to establish a district to help finance public improvements within the district's boundaries. See TEX. LOC. GOV'T CODE ANN. § 372.003 (Vernon 2005). The municipal governing body "shall apportion the cost of an improvement to be assessed against property" in the district "on the basis of special benefits accruing to the property because of the improvement." Id. § 372.015(a). The governing body levies and collects assessments, also known as "special assessments," on property within the district. See id. §§ 372.016, .017, .018(b). If a land owner in the district does not pay the assessment against his property, "[a]n assessment ..., with interest, the expense of collection, and reasonable attorney's fees, if incurred, is a first and prior lien against the property assessed, superior to all other liens and claims except liens or claims for state, county, school district, or municipality ad valorem taxes." Id. § 372.018(b). The lien "may be enforced by the governing body in the same manner that an ad valorem tax lien against real property may be enforced by the governing body," and "[d]elinquent installments of the assessment shall incur interest, penalties, and attorney's fees in the same manner as delinquent ad valorem taxes." Id.

You first inquire whether Tax Code section 6.24 authorizes a contract between a municipality and a central appraisal district or a local taxing unit to collect special assessments imposed in a public improvement district. See Request Letter at 1, 3. Section 6.24 is found in the Property Tax Code, Texas Tax Code title 1, which applies to local entities authorized to impose ad valorem taxes on property.[3] See TEX. TAX CODE ANN. §§ 1.01 (short title), 1.02 (applicability of title 1 to taxing units), 1.04(12) (defining "taxing unit" as a political unit of the state authorized to impose ad valorem taxes) (Vernon 2008). Section 6.24 of the Tax Code authorizes the governing body of a taxing unit to contract with another taxing unit or with an appraisal district board "to perform duties relating to the assessment[4] or collection of taxes." Id. § 6.24(a) (footnote added); see also id. § 6.24(b) (procedure for county contracts). Section 6.24, read in its statutory context, relates to the assessment and collection of ad valorem taxes. See TEX. GOV'T CODE ANN. § 311.011(a) (Vernon 2005) (words and phrases shall be read in context). An "appraisal district" appraises property in the district "for ad valorem tax purposes of each taxing unit that imposes ad valorem taxes on property in the district." TEX. TAX CODE ANN. § 6.01(b) (Vernon 2008). Accordingly, section 6.24 authorizes contracts to perform duties relating to the assessment or collection of ad valorem property taxes.

A special assessment, such as an assessment within the Act, is imposed under the taxing power, but it is not an ad valorem property tax. See City of Wichita Falls v. Williams, 26 S.W.2d 910, 911-13 (Tex. 1930). An ad valorem property tax is imposed throughout the taxing jurisdiction for the general support of its government, while a special assessment is imposed only upon the property that is specially benefitted by the improvement, and its amount is based on the special benefits accruing to the property. See id.; Henry v. Kaufman County Dev. Dist. No. 1, 150 S.W.3d 498, 504-05 (Tex. App.-Austin 2004, pet. dism'd by agr.); see also City of Houston v. Blackbird, 394 S.W.2d 159, 162 (Tex. 1965) (amount of assessment for paving improvements cannot exceed benefit to property owner). Special assessments are not ad valorem taxes within the Texas Constitution. See City of Wichita Falls, 26 S.W.2d at 915; Higgins v. Bordages, 31 S.W. 52, 54-55 (Tex. 1895). Moreover, "it has been uniformly held that the word taxes, whether used in an act of the legislature, or the charter of a company exempting it from taxation, does not embrace such local assessments, unless there be something in the statute or charter to indicate such an intention." City of Cisco v. Varner, 16 S.W.2d 265, 266 (Tex. Comm'n App. 1929, judgm't aff'd); see Allen v. City of Galveston, 51 Tex. 302, 320 (1879). Nothing in section 6.24 indicates that the Legislature intended it to encompass special assessments. An assessment imposed under the Act is accordingly not a tax within Tax Code section 6.24. Based on the plain language of section 6.24, we conclude that section 6.24 does not authorize contracts between a municipal governing body and another taxing unit or an appraisal district board to collect special assessments imposed under the Act.[5]

You also ask whether authority other than Tax Code section 6.24 would permit a central appraisal district or a local taxing unit to collect assessments imposed by a municipality on property in a public improvement district. See Request Letter at 1, 2. Government Code chapter 791, the Interlocal Cooperation Act, authorizes a local government to contract with another local government "to perform governmental functions and services in accordance with this chapter." TEX. GOV'T CODE ANN. § 791.011(a) (Vernon Supp. 2008), see id. §§ 791.001-.033 (Vernon 2004 & Supp. 2008); Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self Ins. Fund, 212 S.W.3d 320 (Tex. 2006) (addressing self insurance pools authorized by chapter 791 and other statutes). A local government includes a "county, municipality, special district, junior college district, or other political subdivision of this state or another state." TEX. GOV'T CODE ANN. § 791.003(4)(A) (Vernon Supp. 2008). The term "[g]overnmental functions and services" is defined as "all or part of a function or service" in any of several areas listed in section 791.003(3). Id. § 791.003(3). The list does not expressly include collecting assessments, and no judicial decision or attorney general opinion has considered whether chapter 791 authorizes contracts for collecting special assessments. The language of chapter 791 is, however, broad enough to include contracts to collect assessments. The statute authorizes contracts for "administrative functions," defined as "functions normally associated with the routine operation of government, including tax ... collection." Id. § 791.003(1); see also id. § 791.003(1) (defining "administrative functions"); see also id. § 791.003(3)(K) (administrative functions are governmental functions). In our opinion, the collection of assessments, like the expressly-mentioned tax collection, is a function "normally associated with the routine operation of government." Id. § 791.003(1). In addition, the statute authorizes local governments to contract for "other governmental functions in which the contracting parties are mutually interested." Id. § 791.003(3)(N). This broad category could include the collection of special assessments.

An interlocal contract under chapter 791 may "provide a governmental function or service that each party to the contract is authorized to perform individually." Id. § 791.011(c)(2); see Tex. Att'y Gen. Op. No. GA-0150 (2004) at 2 (Interlocal Cooperation Act permits an agreement whereby the peace officers of one local government serve as law enforcement officers of another local government that has law enforcement authority). Thus, a municipality could not contract with an appraisal district board for collection of assessments. We believe, however, that a court would find that the Interlocal Cooperation Act authorizes a municipality to contract with another local government for collecting special assessments imposed in a public improvement district. The local government must also have authority to collect assessments for public improvements. Whether a particular local governmental entity has the required authority may be determined by examining the applicable law.

SUMMARY

A special assessment to finance a public improvement is imposed only upon the property that is specially benefitted by the improvement, and its amount is based on the special benefits accruing to the property. A special assessment is imposed under the taxing power, but it is not an ad valorem property tax within the Texas Constitution, nor does the term "taxation" in statutes ordinarily include special assessments.

Tax Code section 6.24 authorizes contracts between a municipal governing body and another taxing unit or an appraisal district board to collect ad valorem taxes, but it does not authorize contracts to collect special assessments imposed under the Public Improvement District Assessment Act, Local Government Code chapter 372, subchapter A.

Pursuant to the Interlocal Cooperation Act, a municipal governing body may contract for the collection of a special assessment it imposes in a public improvement district with another local governmental entity that is authorized to collect assessments for public improvements.

ANDREW WEBER
First Assistant Attorney General

JONATHAN K. FRELS
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Susan L. Garrison
Assistant Attorney General, Opinion Committee

[Footnote 1: Request Letter at 1 (available at http://www.texasattorneygeneral.gov).]

[Footnote 2: TEX. LOC. GOV'T CODE ANN. § 372.001 (Vernon 2005).]

[Footnote 3: "An ad valorem tax is levied against property on its value." State v. Wynne, 133 S.W.2d 951, 957 (Tex. 1939).]

[Footnote 4: The Legislature has defined the term "assessment" in the Property Tax Code as "a function described by Chapter 26, Tax Code, performed by an employee of a political subdivision or by a person acting on behalf of a political subdivision to determine an amount of ad valorem tax for the political subdivision." TEX. OCC. CODE ANN. § 1151.002(2) (Vernon 2004) (defining "assessment" for purposes of the Property Taxation Professional Certification Act, id. § 1151.001-.253 (Vernon 2004 & Supp. 2008)). See also Bexar County v. Connell Leasing Co., 611 S.W.2d 496, 498 (Tex. Civ. App.-San Antonio 1981, no writ) (defining "assessment" in Texas Constitution article VIII, section 15 as "the sum that has been ascertained as the apportioned part of the tax to be charged against the particular piece of property," and that it "includes the procedure on the part of officials by which the property is listed, valued, and finally the pro rata tax declared").]

[Footnote 5: You also ask if a contract under Tax Code section 6.24 for collection of special assessments would have to be approved by the comptroller. See Request Letter at 5. In view of our answer to your first question, we need not address this question.]