Attorney General OpinionsAbbott addresses property tax questions and records
Texas Attorney General Greg Abbott issued three opinions that discussed school tax rates, Veteran’s Land Board foreclosed property, and the appraisal district budget. He issued one open records decision on delinquent taxpayers’ names.
School wealth-reduction provision
On January 10, Opinion No. GA-0009 addressed the wealth reduction provisions of Education Code Chapter 41 that apply to property tax revenues for a local school tax rate in excess of $1.50 per $100 valuation.
The question to the attorney general dealt with the Deer Park Independent School District (ISD) in Harris County. It asked whether the Chapter 41 provisions on wealth-reduction "apply to that portion of a public school district's local property tax revenues" attributable to application of a tax rate for maintenance and operations in excess of $1.50 per $100 valuation.
The facts presented were that, under Article 2784g of the Texas Education Code Auxiliary Laws (a special law enacted for certain metropolitan counties), Deer Park ISD had been authorized by its voters to set its tax rate for maintenance tax and the interest and sinking fund combined not to exceed $2.00 per $100 valuation of taxable property. The Education Code authorizes school districts to set a tax rate for maintenance and operations (M&O) not to exceed $1.50 per $100 valuation. Deer Park ISD considered raising its M&O tax above $1.50. Deer Park ISD, which has a "wealth per student" in excess of the statutory cap provided by Education Code Section 41.002(a), is required by Education Code Chapter 41 to reduce its wealth by reducing its taxable property or by increasing its student count.
The opinion held: “If the Deer Park Independent School District reduces its wealth per student by increasing the student count, the adoption of a maintenance and operations tax rate under article 2784g in excess of $1.50 per $100 valuation would affect its wealth reduction. The actual increase in outlay resulting from a particular tax rate may be computed by applying the relevant formulas set out in Education Code, chapter 41. The statutory methods that achieve wealth equalization by reducing taxable property would not be affected by revenues generated by a tax rate in excess of $1.50 per $100 valuation.”
Background. Texas school districts rely on local property taxes for a significant level of funding. Differences in the value of taxable property within different school districts raised constitutional questions addressed by the Texas Supreme Court in the Edgewood cases.
The opinion explained that current Education Code Chapter 41 imposes a cap on a school district's "wealth per student," defined as the taxable value of property divided by the number of students in weighted average daily attendance. As of September 1, 2002, "[a] school district may not have a wealth per student that exceeds $305,000." School districts that have a "wealth per student" in excess of the statutory amount have five voluntary options under Education Code Section 41.003 to reduce their wealth per student.
Further, the opinion said that school districts are subject to Education Code Section 45.003 to levy annual ad valorem taxes to pay the principal of and interest on bonds and to provide "for the further maintenance of public schools," if authorized to do so by an election held for that purpose. The rate of tax for paying the principal and interest on bonds may not exceed $.50 per $100 valuation of taxable property in the district, while the rate for maintenance taxes may not exceed $1.50 per $100 of valuation.
Finally, the opinion reviewed Section 2784g, providing a school district with all or the major portion of its territory located within a county of a population of 700,000 or more shall have the power, when authorized by election, to levy an ad valorem tax to pay debt and for maintenance not to exceed $2.00 per $100 valuation.
Wealth reduction options. The opinion found that three of the five methods for reducing taxable wealth in excess of $305,000 per student are not affected by the school district's tax rate. These are the options that affect the district's property value: consolidation with another district, detachment of territory, or tax base consolidation with another district. The opinion stated that the options that increase a district's student count – purchasing attendance credits and educating students from outside the district – do consider the tax rate.
The opinion held that if Deer Park ISD adopts a M&O tax rate in excess of $1.50 per $100 valuation, it must use the total amount of tax revenue produced by its tax rate, not merely the revenue generated by a rate of up to $1.50, to compute the cost of an attendance credit. Thus, increases in the tax rate over $1.50 will be reflected in the cost per credit, and Deer Park ISD will not be able to keep all of the revenues generated by the part of its tax rate in excess of $1.50 .
It also held that if Deer Park ISD chose to reduce its wealth per student by educating students from other school districts, adopting a M&O rate in excess of $1.50 would also mean that some of the additional tax revenues would be allocated to educating these students. Under Section 41.121 of the Education Code, the board of trustees of a district with a per-student wealth that exceeds the statutory cap may agree with another district to educate its students in a number sufficient, when combined with any other action taken by the school district, "to reduce the district's wealth per student to a level that is equal to or less than the equalized wealth level."
Veterans’ Land Board
Opinion No. GA-0026, issued March 4, responded to whether or not foreclosed properties in the Veterans' Housing Assistance Program are exempt from property taxes.
The opinion held that foreclosed properties held by the Veterans' Land Board under the Veterans' Housing Assistance Program are exempt from property taxes while they are owned and held by the Board pending resale.
The Veterans' Land Board (the "Board") administers the constitutionally established Veterans' Housing Assistance Fund (the "Fund"). The Fund is established for the purpose of making home mortgage loans to veterans for housing located within the state. When a borrower defaults on a home mortgage loan acquired or made under the Board, the Board acquires full title to the property and holds the property pending its resale.
The question was whether the holding of the foreclosed property by the Board pending the property's resale constitutes a "public purpose" under Texas Constitution Article VIII, Section 2 and Tax Code Section 11.11(a). For tax-exemption purposes, the Texas Supreme Court has said that public property is used for public purposes if it is used primarily "for the health, comfort, and welfare of the public."
The opinion referred to Attorney General Opinion DM-187 (1992). That opinion said that, in general, "where the state or its political subdivisions are authorized to acquire and dispose of property pursuant to express statutory authorization, the acquisition and use of the property pending its disposal is prima facie a public purpose." The opinion relied on Texas case law uniformly holding that property acquired by political subdivisions through tax foreclosures or tax sales and held for resale constitutes a public purpose--collection of taxes--under the constitutional and statutory tests for tax exemption.
The opinion also relied on Attorney General Opinion JM-1085 (1989). That opinion concluded land forfeited to the Board under the Veterans' Land Program was tax-exempt. The Board, under this program, uses public funds to purchase land and then resells the land to veterans under a contract for deed. The contract delivers equitable title and possession to the veteran, but the state retains legal title until the contract is paid in full. If a purchaser defaults on a contract, the Board may declare forfeiture and take possession of the property. The opinion refuted the suggestion that the forfeited land was taxable because it was used for a non-public purpose.
The opinion noted that Texas Constitution Article III, Section 49-b, exempts real property comprising the Veterans' Land Fund from property taxation after the purchaser of the land defaults and title to the property reverts to the state.
Appraisal district budget
On March 6, the Attorney General responded to a request from The Honorable Randal Lee, Cass County Criminal District Attorney, about allocating appraisal district's expenses between its appraisal and collection functions.
In Opinion No. GA-0030, the Attorney General held that a tax appraisal district may allocate to the taxing units within the district only the costs of operating the appraisal district for its appraisal purposes. The costs of tax assessment or collection, which the appraisal district may opt to perform for taxing units under contract, are paid for by the taxing units that have contracted with the district for those services and are not allocated to taxing units within the district.
The issues were that the Cass County Appraisal District had historically maintained two budgets: one for costs related to appraising property and one for costs related to collecting property taxes. Labor costs were traditionally divided between the two budgets depending upon the estimated time spent on each function. This year, the appraisal district moved all labor expenses to the appraisal budget, causing a substantial increase in the costs allocated to the county and other taxing units in the district. The question to the attorney general was what costs an appraisal district may allocate to the taxing units within its boundaries, and in particular whether the taxing units must finance the appraisal district's costs for assessing and collecting the taxes of all taxing units, whether or not a particular taxing unit uses those services.
The opinion reviewed the provisions on funding for appraisal districts. The appraisal district is funded by the taxing units that participate in it. Each year the chief appraiser prepares a proposed budget "for the operations of the district for the following tax year," showing each proposed position of employment and the associated salary and benefits, proposed capital expenditures, and an estimate of the amount of the budget that will be allocated to each taxing unit. Each taxing unit is allocated a portion of the appraisal district budget proportionate to the dollar amount of property taxes that the unit imposed in the district in the year when the budget is proposed.
The opinion noted that Tax Code Chapter 5 requires the Texas Comptroller of Public Accounts to adopt rules establishing minimum standards for the administration and operation of an appraisal district, to prepare appraisal manuals and other materials to assist the appraisal districts, to administer performance audits of appraisal districts, and to provide other kinds of assistance and oversight to the appraisal district boards. With this authority, the Comptroller issued an Appraisal District Director's Manual explaining the laws applicable to the districts. The opinion stated that the courts will generally defer to the construction of a statute by the administrative agency charged with its enforcement. The Appraisal District Director's Manual issued by the Comptroller describes the budget as follows:
“Collection or assessment services are a separate budget from the main appraisal district budget. Only units using these services pay for them, so the chief appraiser should budget separately for these services. This separation permits allocating costs to the responsible taxing units.”
Tax Code Chapter 6 was analyzed, showing how the Comptroller developed the language in the Manual. Subchapter A of Chapter 6 establishes and governs the appraisal district and provides that all local taxing entities must use the appraisal services of the district. Subchapter B identifies the assessors and collectors. The county assessor-collector "shall assess and collect taxes on property in the county for the county." Tax Code Section 6.24 allows the appraisal district to perform assessment or collection services for a taxing unit, including a county, if it contracts with the unit as provided by the Interlocal Cooperation Act, Texas Government Code Chapter 791. The taxing unit's use of the district for tax assessment or collection is optional, unlike its use of the district's appraisal services.
Open records ruling
Attorney General Abbott responded to an open records ruling to Hitchcock Independent School District (ISD) in OR 2003-1283, dated February 28, 2003.
The school district had received a request for a list of delinquent taxpayers who fall within the district's taxing boundaries. The request did not seek the amount of taxes owed. The district’s attorney believed that the requested information was excepted from public disclosure under Government Code Section 552.101 in conjunction with common-law privacy.
The ruling looked at Section 552.101 that excepts "information considered to be confidential by law, either constitutional, statutory, or by judicial decision." It found that Section 552.101 also encompasses the doctrine of common-law privacy. Common-law privacy protects information if (1) the information contains highly intimate or embarrassing facts the publication of which would be highly objectionable to a reasonable person, and (2) the information is not of legitimate concern to the public.
The ruling said that some personal financial information is highly intimate or embarrassing and thus it meets the first part of the test. The ruling noted such things as federal tax Form W-4, Employee's Withholding Allowance Certificate; designation of beneficiary of employee's retirement benefits; direct deposit authorization; forms allowing employee to allocate pretax compensation to group insurance, health care or dependent care; deferred compensation information; mortgage payments; assets; bills; and credit history.
However, it found that information concerning financial transactions between an individual and a governmental body is of legitimate public interest. The requested information concerns taxpayers' debts to a governmental entity. Thus, there is a legitimate public interest in the information. Accordingly, the information is not protected under common-law privacy and must be released.