Untitled Texas Attorney General Opinion ( 1989 )

March 30, 1989
Mr. Perry L. Adkisson Opinion No. JM-1035
Chancellor
Texas A h M University System Re: Assessment of Capital
219 Systems Administration Bldg. Recovery Fees by the city
College Station, Texas 77843 of Houston against Texas
A & M University for waste
water services (RQ-1533)
Dear Mr. Adkisson:
you inform us that the city of Houston is seeking to
collect a capital recovery fee for the use of the city's
waste water system, and ask the following question:
Can the City of Houston legally assess the
capital recovery fees set out herein against
a state agency for utilizing its waste water
system?
Texas A 6rM University is building an Institute of
Biosciences and Technology in the Texas Medical Center in
Houston. In conjunction with the actual cost of connecting
with Andy using the city's waste water system, the city is
attempting to assess a capital recovery fee in accordance
with a city ordinance. The ordinance provides that amounts
collected as capital recovery charges shall be used solely
to pay or reimburse all or part of "the capital cost of
constructing specific facilities comprising or to comprise a
portion of the system and designed to increase the waste-
water capacity of the system," excluding repairs and
replacements of existing facilities, and extensions or
enlargements to certain sewer mains or laterals. Houston,
Tex., Code of Ordinances S 47-323 (1968).
You do not express any objection to paying other
charges of providing sewer service, such as connection fees
or monthly service charges. A city may make a reasonable
charge to a public entity for the provision of sewer
Service. BeXar Countv v. Citv of San Ant nio 352 S.W.2d
905 (Tex. Civ. App. - San Antonio 1961, wryt dism#d). See
oenerally Attorney General Opinions R-1289, Ii-1265 (1978)
p. 5352
Mr. Perry L. Adkisson - Page 2 (JR-1035)
(charges includible in rates charged the state for electric
utility service and telephone service).
you argue that the "capital recovery fee" is actually a
special assessment and therefore cannot be imposed on a
public entity in the absence of express legislative author-
ity. Maverick Countv Water Contra Imnrovement D ist.. N 1
Y. Stat e, 456 S.W.ld 204, 207 (Tex. Civ. App. - San An&o
1970, writ ref*d); Attorney General Opinions JW-523 (1986);
WW-551 (1982). A brief submitted in connection with your
request agrees that capital recovery fees are special
assessments and argues that article XI, section 9, of the
Texas Constitution exempts public property from them.
The Texas Supreme Court has defined special assessments
as follows:
Special assessments . . . are those special
and local impositions upon the property in
the immediate vicinity of municipal improve-
ments which are necessary to pay for the
improvements, and are laid with reference to
the special benefit which the property is
supposed to have derived therefrom.
Citv of Wichita Falls v . Williij@S, 26cS.t:2d 910, 911 (Tex.
1930). See a lso Conlen Grain and Wer an ile I c T
Grain Sorahum Producers Board 519 S.W.2d 62:;6;3 (;:::
1975) (distinguishing assessm&t on grain processors from
special assessments on land).
Other briefs argue that these fees are not special
assessments, but usage fees charged as a cost of providing
the service, so that the arguments relevant to the
imposition of special assessments do not apply to capital
recovery fees. See aeneru Bexar Countv v. Citv of San
Antonio, a (sewer charges were not assessments, even
though rates include costs of making replacements and
extending and improving system). The capital recovery fees
are assessed against users of a sewage disposal and treat-
ment system to pay for improvements necessary to provide
sewer disposal services. The traditional special assess-
ment, a charge against landowners for the costs of building
a street bordering on their property, is not connected
with the delivery of municipal services. Thus, the capital
recovery fee may not fit easily into the category of
special assessment.
. . See aenerally San Marco6 Water D ist.
v. San M~L~CO -fled School Di t, Rptr.
(Cal. App. lz85) (sewer fee used tg d;f:iG c% of capi:::
improvements was not a special assessment but a usage fee),
P- 5353
Wr. Perry L. Adkisson - Page 3 (JM-1035)
g erru&$ 720 P.2d 935 (Cal. 1986) (such sewer fee was a
szecial a&essment).
However, there are Texas cases dealing with special
assessments for irrigation improvements which are necessary
to the provision of irrigation services to the land-
owner. See. e.a., Maverick Countv Water Control Imnrovement
Dist . a v. St&g , m; State v. Bexar- dina-Atascosa
Counties Water Imvro ement Dist. Wo. 1 310 S.W.Zd 641 (Tex.
Civ. App. - San AntoEio 1958, writ ref:d). See also Attorney
General Opinions JW-523 (1986) (capital recovery fee for
water services treated as a special assessment); WW-551
(1982) (drainage fee treated as a special assessment). We
will not attempt to determine whether the capital recovery
fee is more properly characterized as a *user fee" than a
"special assessmentOV but will assume for purposes of this
opinion that the capital recovery fees are special assess-
ments. Since we conclude #at the city of Houston may
collect the capital recovery fee in this case, the answer to
your question does not depend on the name we use to identify
the fee.
The authorities have generally stated that special
assessments are levied as an exercise of the power of taxa-
tion. Citv of Wichita Falls v. Will- *, at 911;
see alw 14 McQuillin, Municipal CorporaCions 8 38.01 (3d.
ed. 1987) (special assessments are sometimes held.to be an
exercise of the police power). However, they are not taxes
as that word is generally understood. Citv of Wichita Falls
v. Williams, sunra. Taxes are charges imposed by the legis-
lative power of the state to raise revenue for the general
purposes of government and are not related to any special
benefit to the taxpayer from the expenditure of the funds.
!&&en Grain and Mercantile. Inc. v. Texas Grain Sorahum
reducers Board, !sulazar at 623; see also Wichita County
2 v - I 323
S.W.2d 298 (Tex. Civ. App. - Fort Worth 1959, writ ref'd
n.r.e.).
Since special assessments are levied as an exercise of
the taxing power, questions arise as to the application
of constitutional and statutory provisions on taxation.
Some states have concluded that constitutional provisions
exempting publicly owned and used property from taxes do not
apply to special assessments, but such assessments may be
imposed on public property only under express legislative
authorization. The California Supreme Court has stated as
follows:
p. 5354
Wr. Perry L. Adkisson - Page 4 (JM-1035)
While publicly owned and used property is
not exempt from special assessments under the
constitution or statutory law of this state,
there is an implied exemption of such
property from burdens of that nature. . . .
The principle which makes property of the
state . . . nontaxable . . . also precludes
the imposition of a special assessment for a
street or other local improvement upon such
property, unless there is a positive
legislative authority therefor. . . .
The rationale behind a public entity's
exemption from property taxes and special
assessments is to prevent one tax-supported
entity from siphoning tax money from another
such entity: the end result of such a process
could be unnecessary administrative costs and
no actual gain in tax revenues. . . . On the
other hand, when one tax-supported entity
provides goods or services to another,
neither the California Constitution nor
decisional law exempts the public entity from
paying for these goods or services.
# t
720 P.2d 935 (Cal: 1986) (citations omitted): Citv ii
Inalewood v. Los Anaeles County, 280 P: 360, 363 (Cal.
1929).
The Texas courts also recognize the principle that
ordinarily the legislature does not intend to tax property
of the state. The Texas Supreme Court has said that this
would involve the state in "the senseless process of taxing
itself," the net result of which would be to take money
out of one pocket to put it into another, less assessment
and collection costs. &ower Colorado Ri er Aut&ritv
Chemical Bank 8 Tru t Co 190 S.W.Zd 4av 51 (Tex. 1945;.
The principle applizs to &itical subdivi;ions supported by
taxation, as well as to the state. Citv f Wa.rlin v. State
205 S.W.2d 809 (Tex. Civ. App. - Waco lZ47, no writ). 1;
the absence of a constitutional prohibition, however, the
legislature may subject the state and political subdivisions
to taxation. sler: Attorney General Opinion WW-1502 (1962)
(state purchases of motor fuel subject to excise tax): a
8&~ Attorney General Opinions JW-987 (limited sales and use
tax law applies to state, its agencies, and political .sub-
divisions): JW-972 (1988) (state employees traveling at
state expense on state business are not exempt from hotel
occupancy tax).
p. 5355
.
Mr. Perry L. Adkisson - Page 5 (JM-1035)
The Texas Supreme Court has held that special assess-
ments are not ntaxesn within article VIII of the Texas
Constitution, within sections 4 and 5 of article XI, and
within section 50 of article XVI, pertaining to the protec-
tion of homesteads from forced sale for debt. Citv of
Falls v. Williams rE!uRcar and authorities cited
therein: )&rris Countv v. Bovd, 7 S.W. 713 (Tex. 1888) and
authorities cited therein.
The supreme court has also stated, however, that article
XI, section 9, of the Texas Constitution prohibited a city
from imposing a special assessment on a county for improving
the street bordering the courthouse site. Harris Countv V.
BQYa suR.a. This provision states as follows:
The property of counties, cities and
towns, owned and held only for public
purposes, such as public buildings and the
sites therefor . . . public grounds and all
other property devoted exclusively to the use
and benefit of the public shall be exempt
from forced sale and from taxation . . . .
Tex. Const. art. XI, 5 9. Article XI, section 9 also
applies to state-owned property. Lower Colorado River
8 Trust Co<, m.
The supreme court's conclusion in mris Coun v f
&y& sunrg, that the city could not impose a paving azsesz-
ment on the county, was based partly on the absence of
statutory authority for this charge. The legislature did
not intend the city's charter provision authorizing
assessments to interfere With governmental functions
committed to the county commissioners, or .to impose
additional financial burdens upon~ the county against the
orders of the commissioners. 7 S.W. at 715. The court went
on to find the county exempt from the assessment under
article XI, section 9, of the constitution, stating as
follows:
[Tlhere is no apparent reason why the exemp-
tions in the constitution should not be taken
in the ordinary and more comprehensive sense,
so as to include all taxation, special as
well as general.
& The court also noted that this question had been
decided differently by other courts, and "there is great
conflict in the decisions.W & Subsequent Texas cases
p. 5356
Mr. Perry L. Adkisson - Page 6 (JM-1035)
have cast doubt on the constitutionally-based holding of
BS?El.
In rify of Wichita Falls v. Wiw the supreme court
construed article XVI, section 50, of de Texas Constitu-
tion, which exempts homesteads from forced sale for debts,
except for taxes and certain other debts, and determined
that special assessments were not "taxes" within that
provision. The court distinguished the w case as
follows:
It is true that the Commission of Appeals
in the case of Countv of I&&.s v. Bovd 70
Tex. 237, 7 S.W. 713, stated there wa; no
apparent reason why the exceptions from
'taxation, in the Constitution should not
be taken to include special assessments.
However, the constitutional provision before
the court in that case was section 9 of
article 8 [sic], which contains other words
coupled with the word *taxation,, which
warranted the interpretation given. Besides,
the decision in the Bovd Case was obvioa
correct on other arounds some of which were
stated in the opinion, a;d some of which are
found in the general rules of law applicable
to the taxation of public property. WcQuillin
on Municipal Corporations (2d Ed.) vol. 5,
9 2212. (Emphasis added.)
& at 914; ~&8 14 McQuillin, Municipal Corporations 5 38.73
(3d ed. 1987).
The court in Wichita Countv Water Imnro e ent Dist.
No. 2 Citv of Wichita FaJ,& , m, held tha: i city was
liablevto a water improvement district for "benefit assess-
mentsw levied against city-owned land within the district's
boundaries. The water district,6 taxes were levied by the
benefit assessment plan rather than upon an ad valorem
basis. See aen- Water Code 8 51.512. The court
reviewed case law and treatises stating that tax exemptions
apply only to ordinary taxes for the general purposes of
government and not to special assessments for local improve-
ments. S e. e.a State v. Citv of El P~SQ, 143 S.W.2d 366
(Tex. 194:) (citi;s are exempt from only three classes of
taxes: ad valorem, occupation, and income taxes); fitv of
Ci co . Var er 16 S.W.2d 265 (Tex. Comm,n App. 1929,
j&u,: adopEed; (special assessment is not tax within
constitution, thus defense of limitation was available). It
concluded that article XI, section 9, of the Texas
p. 5357
Mr. Perry L. Adkisson - page 7 (JM-1035)
Constitution did not exempt the city from payment of the
assessments.
Attorney General Opinion No. WW-786 (1960)' issued
shortly after Wichita
v. Citv of Wichita p8,J.l~was decided, relied on that case to
hold that a hospital district was liable to a city for
paving assessments. After pointing out that the applica-
tion for writ of error was refused with the notation %o
reversible error," the opinion stated as follows:
Though this docket notation may have cast
certain doubt (the extent of which has never
been satisfactorily defined) upon the reason-
ing of the Fort Worth Court, the Supreme
Court's refusal to entertain the writ of
error laid to rest any question as to the
continued vitality of the early case of
y:;,;rtv v. Bovd, 7 S.W. 713 (Tex. Sup.
. 1 which reached a directly contrary
result.
Attorney General Opinion WW-786 (1960).
However, m was relied upon in Citv of Garland
Garland Indeo. School Dist. 468 S.W.Zd 110 (Tex. Ci::
APP. - Dallas 1971, writ ref,; n.r.e.), in which the court
held that a city could not compel a school district to pay
special assessments for paving streets ,next to school
property. The court first determined that section 20.48 of
the Education Code did not permit the expenditure of school
funds for street improvement unless the trustees of the
district first determined that the expenditure was
,,necessary in the conduct of the public schools.~, XL at
112.
. . This was the 'primary ground" of the court's decision
of rland and it was supported by the holding *
& that tE city,charter provision authorizing the asses::
ment was not intended to impose additional financial burdens
on the county.
The !&X&B.& court also concluded that article XI,
section 9, exempted a political subdivision from assessments
for street improvements and that Barris C untv v. Bovd stood
as authoritative on this issue. && atO114. In reaching
this alternative ground for its decision,
sought to distinguish Wichita Co- Water ‘::D%%% :::it
No. 2 v. Citv of Wicbjta Fu by stating that zheecity had
used the district's irrigatio;. services on the land, and
thus impliedly consented to pay reasonable charges for those
services. This distinction, however, appears to confuse
p. 5358
Mr. Perry L. Adkisson - Page 8 (JM-1035)
benefit assessments with charges for providing water to
irrigate the land. The city of Wichita Falls was subject to
an assessment for each acre of irrigable land and had used
irrigation services on warnall areas" of its tract. Wichita
Countv ater Imvrovement Dist. No. 2 v. Citv of Wichita
lzauil LRa. Water improvement districts impose benefit
assessments to finance the construction of improvements
necessary to irrigate the land. &,f& Water Code 55 51.125,
51.502, 51.512, 51.516, 51.518. In addition, the landowner
must pay a separate water charge or assessment for receiving
water to irrigate his land. Water Code Sf 51.301-51.321,
51.508, 51.509. The supreme court designated the Citv of
Garland case "writ refused, no reversible error."
The most recent Texas decision on the payment of
special assessments by governmental bodies is Kgverick
Countv Water Control & Imorovement Dist. No. 1 v. State
EW2?2. The court noted that the Texas Supreme Court had
held in Bsyg that article XI, section 9, of the Texas
Constitution applied to special assessments, but that
subsequent decisions had reached a contrary result. 456
S.W.2d at 206-07, n. 5. The Wav;~i~o~;~w~;termined that
land owned by the Veterans* exempted by
statute from ad valorem taxation and was not subject to
special assessments because no statute imposed them on the
state. & at 206. .The court stated as follows:
Although the power of a governmental agency
to levy special assessments for local improve-
ments is generally recognized to be an
exercise of the taxing power, there are
numerous decisions holding that a special
assessment is not a 'tax, in the sense in
which that word is ordinarily used. We do not
think it necessary to consider the question
whether such an assessment is a tax within the
meaning of constitutional provisions exempting
property from taxation in a case where, as
here, a political subdivision created by the
sovereign is attempting to impose a monetary
exaction upon its creator.
Even if it be assumed that a county or
municipality is subject to special assessments
levied by another political subdivision of the
State, it does not necessarily follow that a
subordinate political subdivision can impose
an involuntary monetary obligation on the
sovereign. It is generally held that, in the
absence of clear legislative authorization, a
p. 5359
Mr. Perry L. Adkisson - Page 9 (JM-1035)
political subdivision of the State has no
power to levy a special assessment against
State property. We adopt this view at least
in a case where, as here, the sovereign is
neither making nor contemplating any use of
the allegedly benefitted land and has neither
received nor requested the services rendered
by the assessing agency. (Footnotes omitted.)
& at 206-07.
The Maverick case did not need to determine whether a
special assessment is a tax within article XI, section 9, of
the constitution. See also Attorney General Opinions JM-523
(1986); WW-551 (1982) (did not reach question because no
statutory authority for assessment). Nonetheless, its
references to this issue suggest that we cannot confidently
rely on the holding in m that article XI, section 9, of
the Texas Constitution, exempts publicly-owned property used
for public purposes from special assessments. The mverick
decision actually rests on the absence of legislative
authorization for imposing the special assessment on the
state. The decisions in both && and in Citv of Garland
are also supported by this non-constitutional ground -- the
absence of express statutory authority for imposing the
special assessments on a political subdivision -- as well as
their interpretation of article XI, section 9.
The atv of Garlti.case, which saidw~~u~;~ri~;:;;;-
1_tutional holding in -1s Countv v. Bovd
was designated "writ refused, no reversible errorH by th6
supreme court. The m crick questioned the
holding in &y& and was ~esignat~?writ refused.,, AlthlttE
the supreme court has not explicitly reconsidered &y& yours
question requires us to form an opinion on how the supreme
court might rule on it in the future. In the more than one
hundred years since Harris Countv v. Bovd was issued, Texas
courts, except for the Citv of Gaw court, have dis-
regarded its constitutional holding or emphasized the
alternative basis for the decision. These courts have had
the benefit of legal scholarship and judicial decisions on
special assessments which did not exist when m was
decided. We believe the supreme court, if it were to
consider this question again, would rule that the article
XI, section 9 tax exemption does not encompass special
assessments. Accordingly, article XI, section 9, of the
Texas Constitution does not bar the city of Houston from
imposing capital recovery fees on a state agency for using
its waste water system.
p. 5360
Mr. Perry L. Adkisson - Page 10 (JM-1035)
We also conclude that the legislature has authorized
the city to impose such fees on state agencies that use its
waste water system. Statutory authority for charging the
fees is found in chapter 26 of the Water Code, which was
enacted as part of the Texas Water Quality Act of 1967 and
codified in the Texas Water Code. m Acts 1967, 60th Leg.,
ch. 313, at 745 (adopting Texas Water Quality Act of 1967);
Acts 1971, 62d Leg., ch. 933, at 2850 (amending Texas Water
Quality Act to include predecessor of section 26.176(b));
Acts 1971, 62d Leg., ch. 612, at 1978, 1985 (repealing
chapter 933 of Acts 1971 and incorporating predecessor of
section 26.176(b) into Texas Water Code).
Local governments are granted certain authority under
chapter 26 to provide for water quality within their area.
Water Code fS 26.171-26.177. Section 26.176 authorizes
every local government which owns or operates a sewage
disposal system to adopt rules to control the discharge of
waste into the system. In the event of any conflict between
its provisions and any other laws, the provisions of section
26.176 shall control. Water Code 5 26.176(e). Section
26.176(b) provides as follows:
(b) The local government in its rulethE;
establish the charges and assessments
may be made to and collected from U nersons
who discharge waste to the disposal system or
who have conduits or other facilities for
discharging waste connected to the disposal
system, referred to in this subsection as
*users. * The charges and assessments shall
be equitable as between all users and shall
correspond as near as can be practically
determined to the cost of making the waste
disposal services available to all users and
of treating the waste of each user or class
of users. The charges and assessments may
include user charges, connection fees, or any
other methods of obtaining revenue from the
disposal system available to the local
government. In establishing the charges and
assessments, the local government shall take
into account:
(1) the volume, type character, and gua-
lity of the waste of each user or class of
users ;
(2) the techniques of treatment required;
p. 5361
Mr. Perry L. Adkisson - Page 11 (JM-1035)
(3) W debt-r.&irement
exnenses of the disposal svstem reouired to
raes w assegsments:
(4) ,the costs of operating and main-
taining the system to comply with this
chapter and the permits, rules, and orders of
the commission: and
(5) ~othertaattributable
Water Code 5 26.176(b).
This statute expressly authorizes the local government
to take into account capital cost of the disposal system in
establishing charges and assessments, such as the capital
recovery costs in question. Moreover, these charges and
assessments are to be collected from ,,a11 persons,, using the
disposal system. In the context of section 26.176(b), "all
personaH includes state agencies.
The language of section 26.176(b) was adopted in 1971,
as an amendment to the Texas Water Quality Act of 1967.
Acts 1971, 62d Leg., ch. 933, at 2850. The Water Quality
Act defined ,,personw to mean "individual, corporation,
organization, government or governmental subdivision or
agency, business trust . . . or any other legal entity,,
unless the context required a different result. Acts 1969,
61st Leg., ch. 760, at 2229 (amending Water Quality Act of
1967). The legislature intended npersonn in section
26.176(b) and its predecessors to include governmental
agencies in order to enable local governments to qualify for
federal grant funds under the federal Water Pollution
Control Act. The provisions of the Water Quality Act
demonstrate the legislature,6 intent to enable state and
local governments to receive grants under federal water
pollution control legislation. &9 Water Code S 26.035
(Water Commission may receive federal assistance, grants, or
loans for water quality control activities including waste
disposal facilities); S 26.175 (local government
contract with commission for transfer of money for waZ
quality control functions and for construction, purchase,
maintenance, and operation of sewage disposal systems).
See also Attorney General Opinions M-1069 (1972);' M-894,
M-822 (1971); M-32 (1967) (discussing state authority under
Texas Water Quality Act to contract for federal grants for
p. 5362
Mr. Perry L. Adkisson - Page 12 (JM-1035)
local governments under federal Water Pollution Control
Act).
The Environmental Protection Agency has authority to
make grants to states and municipalities to build publicly
owned treatment works. 33 U.S.C. 5 1281(g)(l). However, an
applicant may not receive a grant unless he has adopted or
will adopt a system of charges designed to assure that each
recipient of waste treatment services will pay its propor-
tionate share "of the costs of operation and maintenance
(including replacement) of any waste treatment services
provided by the applicant . . . .w 33 U.S.C. 5 1284(b)(l).
Federal regulations adopted under this provision further
describe the user charges which must be collected from
recipients of waste treatment services and demonstrate
that governmental agencies must pay such charges. & 40
C.F.R. 5 35.905 (definitions of "industrial user' and "user
charge"); f 35.929-1(b) (4) (iii).
Section 26.176(b) of the Water Code authorizes a local
government to establish the 'user charges,w which it must
adopt to qualify for a federal grant for sewage treatment
works. The purpose underlying this section shows that it
must be read to apply to governmental as well as private
entities.
When the Texas Water Quality Act was codified in the
Water Code, the definition of wpersonw was deleted from its
list of definitions. However, the language of section
26.176(b) was incorporated into the Water Code by an
enactment which included a provision making it expressly
subject to all provisions of the Code Construction Act.
Acts 1971, 62d Leg., ch. 612, S 2, at 1985. See also Water
Code S 1.002 (application of Code Construction Act to code).
The Code Construction Act defines "person" as follows,
unless the context requires a different definition:
\Person* includes corporation, organization,
nt or aovernmW subdi ision or
aQencY.. . and any other legal en:ity.
Gov't Code 5 311.005(2).
As shown by our discussion of the history of section
26.176(b) of the Water Code, in the context of that pro-
vision, ,,persoM must be defined to include governmental
agencies. Accordingly, section 26.176(b) of~the Water Code
expressly authori~xes a local government to require users of
its sewage disposal system, including a state agency, to pay
charges based in part on the capital costs of the system.
p. 5363
m. Perry L. AdkiSSon - Page 13 (JM-1035)
The city of Houston may collect a capital recovery fee from
a state agency for the use of its waste water system.
SUMMARY
A special assessment is not a tax within
article XI, section 9, of the Texas Constitu-
tion, which exempts property owned and held -
for public purposes from taxation. Thus,
this provision of the constitution does not
prohibit the imposition of a special assess-
ment on a state agency.
In the absence of express statutory
authority, a city may not impose a special
assessment on .a state agency. Section
26.176(b) of the Water Code provides express
authority for the city of Houston to charge
users of its sewage disposal system, includ-
ing a state agency, a "capital recovery fee,,
for certain capital costs of the sewage
disposal and treatment system.
JIM MATTOX
Attorney General of Texas
WARYKELLER
First Assistant Attorney General
IOU MCCRBARY
Executive Assistant Attorney General
JUUGE ZOLLIE STEAXLF.Y
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
p. 5364