Attorney General Opinion
Ruling Addresses Emergency Service District
On August 31 in Opinion No. GA-0242, Texas Attorney General Greg Abbott ruled that a commissioners court may call an election to create an emergency service district (ESD) but may not call an election for a sales and use tax in the ESD.
He held that the commissioners court must provide for an election to create the ESD and authorize a property tax at a maximum tax rate that does not exceed $0.10 on the $100 of value. Only the ESD board may call an election to adopt the sales and use tax.
He also stated that a county may not adopt the sales and use tax if the combined rate of all sales and use taxes imposed in any city within the county exceeds 2 percent in that city.
Llano County Attorney Cheryll Mabray asked if Llano County citizens may consider adopting a county health services sales and use tax and an ESD with a zero property tax rate in the same election.
Llano County called for an election to create an ESD in 2002, but voters did not approve it because they didn’t want more property taxes. Many voters stated that they would vote for an ESD funded with a one cent sales and use tax because everyone pays it, unlike a property tax.
The attorney general reviewed Health and Safety Code Chapter 776 that allows the commissioners court to set the maximum property tax rate for an ESD at less than $0.10 cents.
He found that a tax rate of zero is not unprecedented. A newly created ESD has no bonds or obligations to third parties jeopardized by the absence of any property tax support.
The opinion held, however, that the commissioners court was not authorized to call an election to adopt a sales tax to support an ESD. It said that no sales and use tax may be adopted until after an ESD has been confirmed and the commissioners court has appointed its board.
The opinion concluded that if the election order sets the maximum property tax rate at zero, the ESD is unlikely to have the funds necessary to pay board members' expenses or election expenses to adopt a sales and use tax. It said: “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.”
The opinion also found that a county may not adopt the sales and use tax if "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."
The one-half percent tax rate allowed by Tax Code Chapter 324 combined with the rate of sales and use taxes in the City of Llano would exceed a 2 percent tax rate within the city.