Does a Texas home-rule city have to pay impact fees charged by another local government?

Plain-English summary

Texas lets local governments charge "impact fees," one-time charges on new development that pay for the roads, water lines, and other capital improvements the new growth makes necessary. Chapter 395 of the Local Government Code sets the rules. The Guadalupe County Attorney asked a pointed question: when one local government imposes an impact fee, does another local government, including a home-rule city, actually have to pay it, or can it decline? The concern was real on the ground. A conservation and reclamation district had assessed impact fees on new development by the City of Schertz, a home-rule city, and similar fees might hit planned county development.

The hook for the question was a single word. Section 395.022(a) says political subdivisions and other governmental entities "may pay impact fees imposed under this chapter." The County Attorney argued that "may" signals a choice, especially after the Code Construction Act added a definition of "may" in 1997, and that home-rule cities' broad powers should keep them from being forced to pay. The Attorney General disagreed.

The opinion concluded that chapter 395 does not give political subdivisions or other governmental entities the discretion to refuse properly imposed impact fees, with a narrow exception for certain school districts. A 1993 letter opinion had already read "may pay" as authorizing payment, not creating an opt-out. When the Legislature amended section 395.022 in 2007, it left that language alone and instead added a separate exemption for some school districts. A 2008 opinion repeated that payment is mandatory except for those exempted school districts. And chapter 395's own definition of "political subdivision" includes municipalities, which includes home-rule cities. Put together, the opinion concluded a home-rule city has to pay.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

Home-rule cities and counties (as the opinion held for them): The opinion concluded that a political subdivision, including a home-rule city, must pay impact fees properly imposed by another political subdivision under chapter 395, and has no discretion to refuse them.

School districts (the one exception the opinion noted): The opinion described the 2007 amendment as creating an exception, applicable only to certain school districts, from the requirement to pay an impact fee.

On the "may pay" argument (what the opinion rejected): The opinion explained why "may pay" in section 395.022(a) did not create a choice, relying on its 1993 letter opinion, the Legislature's decision to leave that language untouched in 2007, and a 2008 opinion reaffirming that payment is mandatory.

Common questions

Does a home-rule city have to pay another local government's impact fees in Texas?
The opinion concluded yes. Chapter 395 gives political subdivisions no discretion to refuse properly imposed impact fees, except for certain school districts.

Doesn't the statute say cities "may pay," which sounds optional?
The opinion read "may pay" in section 395.022(a) as authorizing payment, not as granting a choice to refuse. It relied on a 1993 letter opinion (LO-93-060) reaching the same conclusion.

Did the 2007 amendment change that?
The opinion concluded it did not. The Legislature left the "may pay" language in place and added only a narrow exemption for certain school districts in section 395.022(b).

Are home-rule cities covered even with their broad home-rule powers?
The opinion concluded they are. Chapter 395 defines "political subdivision" to include municipalities, which by definition includes home-rule municipalities.

Background and statutory framework

A chapter 395 impact fee is a charge a political subdivision imposes against new development for capital improvement or facility expansion necessitated by and attributable to that development. Tex. Loc. Gov't Code Ann. § 395.001(4) (West 2005). Section 395.022(a) provides that political subdivisions and other governmental entities "may pay impact fees imposed under this chapter." Id. § 395.022(a) (West Supp. 2010). In 1993, the office determined that this language authorizes payment but does not grant a choice to pay or not pay. Tex. Att'y Gen. LO-93-060. The County Attorney questioned whether that conclusion survived the Code Construction Act's 1997 definition of "may" and argued home-rule cities' broad powers should exempt them. Tex. Gov't Code Ann. § 311.016(1)-(2).

The opinion disagreed on several grounds. When the Legislature amended section 395.022 in 2007, it did not alter the language construed in LO-93-060 but instead created an exception, applicable only to certain school districts, from the requirement to pay. Id. § 395.022(b) (West Supp. 2010); Tex. S.B. 883, 80th Leg., R.S. (2007). In a 2008 opinion, the office reiterated that a political subdivision's payment of properly imposed impact fees is mandatory except for the school districts exempted by statute. Tex. Att'y Gen. Op. No. GA-0637 (2008). And chapter 395 defines "political subdivision" to include municipalities, which in turn includes home-rule municipalities. Id. § 395.001(7) (West 2005); id. § 1.005(3) (West 2008). The opinion assumed without deciding that the fees described were governed exclusively by chapter 395, noting the interplay with Tex. Loc. Gov't Code Ann. § 395.080(a)(2) (West 2005) and Tex. Water Code Ann. § 49.212(d) (West Supp. 2010). It concluded that chapter 395 gives political subdivisions and other governmental entities, other than school districts in some instances, no discretion to refuse to pay impact fees required under the chapter.

Citations

Statutes, bills, and opinions:

• Tex. Loc. Gov't Code Ann. § 395.001(4) (West 2005)
• Tex. Loc. Gov't Code Ann. § 395.022(a) (West Supp. 2010)
• Tex. Loc. Gov't Code Ann. § 395.022(b) (West Supp. 2010)
• Tex. Loc. Gov't Code Ann. § 395.001(7) (West 2005)
• Tex. Loc. Gov't Code Ann. § 1.005(3) (West 2008)
• Tex. Loc. Gov't Code Ann. § 395.080(a)(2) (West 2005)
• Tex. Water Code Ann. § 49.212(d) (West Supp. 2010)
• Tex. Gov't Code Ann. § 311.016(1)-(2)
• Tex. S.B. 883, 80th Leg., R.S. (2007)
• Tex. Att'y Gen. LO-93-060
• Tex. Att'y Gen. Op. No. GA-0637 (2008)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0821
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2010/ga0821.pdf

Original opinion text

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

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

November 19, 2010

The Honorable Elizabeth Murray-Kolb Opinion No. GA-0821
Guadalupe County Attorney
101 East Court Street, Suite 104 Re: Whether a political subdivision, including a
Seguin, Texas 78155-5779 home-rule city, is required to pay impact fees imposed
by another political subdivision under chapter 395,
Local Government Code (RQ-0885-GA)

Dear Ms. Murray-Kolb:

You ask whether a political subdivision, including a home-rule city, is required to pay impact fees imposed by another political subdivision under chapter 395, Local Government Code.[1] A chapter 395 impact fee is "a charge or assessment imposed by a political subdivision against new development" for capital improvement or facility expansion "necessitated by and attributable to the new development." TEX. LOC. GOV'T CODE ANN. § 395.001(4) (West 2005). You are concerned about impact fees that a conservation and reclamation district has assessed on new development by the City of Schertz, a home-rule city, and which may be imposed on planned new development by Guadalupe County. Request Letter at 1-2.

Local Government Code section 395.022(a) provides that "[p]olitical subdivisions and other governmental entities may pay impact fees imposed under this chapter." TEX. LOC. GOV'T CODE ANN. § 395.022(a) (West Supp. 2010) (emphasis added). In 1993, this office determined that this language authorizes political subdivisions to pay impact fees, but does not grant them the choice to pay or not pay such fees. Tex. Att'y Gen. LO-93-060, at 2-3. You question the continued viability of the opinion's conclusion because of the Code Construction Act's definition of the word "may," added in 1997. Request Letter at 2-6 (citing Texas Government Code section 311.016(1)-(2)). You also contend that chapter 395 should not be construed as requiring home-rule cities to pay impact fees in light of home-rule cities' broad powers.[2] Id. at 4-5. We disagree for several reasons.

First, when the Legislature amended section 395.022 in 2007, it did not alter the language construed in Attorney General Letter Opinion LO-93-060 but, rather, created an exception, applicable only to certain school districts, from the requirement to pay an impact fee. TEX. LOC. GOV'T CODE ANN. § 395.022(b) (West Supp. 2010); SENATE RESEARCH CTR., BILL ANALYSIS, Tex. S.B. 883, 80th Leg., R.S. (2007) (Statement of Intent). Second, in a 2008 opinion, we reiterated that a political subdivision's payment of properly imposed impact fees is mandatory except for the school districts exempted by statute. Tex. Att'y Gen. Op. No. GA-0637 (2008) at 3. Finally, chapter 395 expressly defines "political subdivision" to include municipalities which, in turn, includes home-rule municipalities. See TEX. LOC. GOV'T CODE ANN. § 395.001(7) (West 2005); id. § 1.005(3) (West 2008). We conclude that chapter 395 does not give political subdivisions or governmental entities, other than school districts in some instances, the discretion to not pay impact fees as required under the chapter.

SUMMARY

Local Government Code chapter 395 does not give political subdivisions or governmental entities, other than school districts in some instances, the discretion to not pay impact fees as required under the chapter.

Very truly yours,

DANIEL T. HODGE
First Assistant Attorney General

DAVID J. SCHENCK
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

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

[2] We assume without deciding that the particular impact fees you describe are exclusively governed by Local Government Code chapter 395. Compare TEX. LOC. GOV'T CODE ANN. § 395.080(a)(2) (West 2005) (stating that chapter 395 does not apply to impact fees approved by the Texas Natural Resource Conservation Commission (now renamed the Texas Commission on Environmental Quality)), with TEX. WATER CODE ANN. § 49.212(d) (West Supp. 2010) (stating that "[n]otwithstanding any provision of law to the contrary, a [chapter 49] district that charges a fee that is an impact fee as described in Section 395.001(4), Local Government Code, must comply with Chapter 395, Local Government Code").