Untitled Texas Attorney General Opinion ( 2014 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
September 22, 2014
The Honorable Royce West Opinion No. GA-1080
Chair, Committee on Jurisprudence
Texas State Senate Re: Whether school districts are exempt from the
Post Office Box 12068 municipal drainage charge under the Municipal
Austin, Texas 78711-2068 Drainage Utility Systems Act (RQ-1192-GA)
Dear Senator West:
You ask whether school districts are exempt from the municipal drainage charge under the
Municipal Drainage Utility Systems Act (the "Act"), chapter 552, subchapter C, of the Local
Government Code. 1
A municipality may adopt the Act in an ordinance declaring municipal drainage to be a
public utility. TEX. Loc. Gov'T CoDE ANN. § 552.045(a) ·(West Supp. 2013). The Act authorizes
such a municipality to "charge a lot or tract of benefitted property for drainage service." !d.
§ 552.047(a). A "drainage charge" is a "levy imposed to recover the cost of the service of the
municipality in furnishing drainage for any benefitted property" and certain other costs. !d.
§ 552.044(4). A person must pay the drainage charge to use the municipal drainage system for a lot
or tract unless the Act exempts the person's lot or tract. !d.§ 552.047(d). You ask whether section
552.053 of the Act necessarily exempts school districts from paying the municipal drainage fee or
allows a municipality to decide in its discretion whether to exempt school districts from the fee.
Request Letter at 4.
Subsections 552.053(a) and (b) provide that designated governmental entities, including
school districts, and their freehold interests in lots or tracts "may be exempt" from the Act and
"ordinances, resolutions, and rules" adopted under the Act. TEX. Loc. Gov'r CODE ANN.
§ 552.053(a), (b) (West Supp. 2013). Subsection (c) provides that certain property "shall be
exempt" from such municipal rules or ordinances, including property that has a "wholly sufficient
and privately owned drainage system," and unimproved property under particular circumstances.
!d. § 552.053(c). Under subsection (e)(2), property owned by a school district located in a
municipality with a population of more than 500,000 and within 50 miles of an international border
1
See Letter from Honorable Royce West, Chair, Senate Comm. on Jurisprudence, to Honorable Greg Abbott,
Tex. Att'y Gen. (Mar. 26, 2014), http://www.texasattomeygeneral.gov/opin.
The Honorable Royce West - Page 2 (GA-1080)
"is exempt from drainage charges under Section 552.047." !d. § 552.053(e)(2); see also id.
§ 552.044(8)(A).
The exemptions in section 552.053 from "ordinances, resolutions, and rules" adopted under
the Act could include an exemption from a municipality's ordinance adopting a drainage charge.
By using the words "may" and "shall" in the same statute, the Legislature indicated that "may be
exempt in subsections (a) and (b) refers to permissive, not mandatory exemptions. Id.
§ 552.053(a) b); see also TEX. GoV 'T CODE AN . § 311.016(1)-(2) (West 20 13) (providing the
ordinary definitions of '·may' and 'shall")· Valles v. Tex. Comm 'non Jail Standard , 845 S.W.2d
284, 288 (Tex. App.- Austin 1992 wiit denied) (stating that the use of "may" and "shall" in the
same statute evidences legislative intent that the words have their ordinary meaning). Moreover,
subsection 552.053(e) creates a mandatory exemption for property owned by a narrow class of
school districts, which would be unnecessary if the property of all school districts were exempt
under subse~tions (a) and (b). See TEX. Loc. Gov'T CoDE ANN. § 552.053(e) (West .Supp. 2013).
Courts do not construe one provision of a statute in a manner that renders another provision
meaningless or superfluous. Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238,
256 (Tex. 2008). Under standard rules of construction, subsections 552.053(a) and (b) provide a
permissive, not a mandatory or automatic, exemption from the Act for school districts.
Section 552.053 does not expressly state how the exemption in subsections (a) and (b)
comes into effect-whether the municipality may grant an exception to a school district or whether
a school district may claim the right to an exemption. See TEX. Loc. Gov'T CODE ANN.
§ 552.053(a), (b) (West Supp. 2013). The Legislature stated in the Act's findings that
municipalities need the authority to "prescribe bases on which a municipal drainage utility system
may be funded and fees in support of the system may be assessed, levied, and collected," to
"provide exemptions" from the Act, and to prescribe other rules related to the subject of municipal
drainage." !d. § 552.042(a)(5), (6), (7). To address these needs, the Act grants broad discretion to
municipalities to establish the basis for their drainage services and to classify benefi tted propeliy.
Id. § 552.047(a). These broad powers, when read in light of the legislative findings, imply that
municipalities have discretion to decide whether to grant permissive exemptions according to law.
By contrast, the Act does not grant authority to school districts from which it may be inferred that
the school districts may decide whether to claim a permissive exemption. The Legislature could
easily have authorized a school di trict to decide for itself whether it will be subject to municipal
drainage chm·ges, as exemplified by the authority the Legislature has granted school districts in
other law respecting impact fees. Compare id. §§ 552 .041- .054 (West Supp. 2013) (chapter 552,
subchapter C), with id. § 395.022(b) (providing that school district are not required to pay impact
fees unless the district's trustees consent). 2 Construing the Act as a whole, a court would likely
2
An " impact fee" is a charge "against new deve lopment' to pay fo r ' capital improvements or fac ility
expans ions necess itated by and attributable to Lhe new developmen . ' TEX. L ·. Gov 'T CODE ANN . 395.00 I (4) (West
2005). The authority to create a municipal drainage ut iJ ity sy tem a nd charge for its services does not "preclude a
municipality from imposing impac t fees o r other charges fo r drainage authorized by law. ' /d. § 552.054(c) (West Supp.
20 13) . • Whether any particular fee cons ·tutes an ' impacl fee ' under chapter 395 would requi re the reso luli on of [factual
question ] and as a result, cannot b determi ned in an att omey general op inion ." Tex. Att'y Gen . Op. No. GA-0850
(2011) at 2.
The Honorable Royce West - Page 3 (GA-1080)
conclude that section 552.053's exemption from the Act for school districts is permissive and that a
municipality has the discretion to decide whether to grant such an exemption, subject to limitations
in the Act or other law.
Your second question is whether the drainage charges under the Act constitute a tax, such
that a school district is exempt from paying the charges. Request Letter at 4. School district
property is generally exempt from taxation by other political subdivisions. See, e.g., TEX. CONST.
art. XI, § 9 (exempting certain "property devoted exclusively to the use and benefit of the public");
id. art. VIII, § 2 (authorizing the Legislature to "exempt from taxation public property used for
public purposes"); TEX. TAX CODE ANN. §§ 11.11, 11.21 (West 2008 & Supp. 2013) (exemptions
for public property of political subdivisions, including school districts). The nature of a
governmental tax or fee will determine if a political subdivision such as a school district is exempt
from the tax or fee. See State v. City ofEl Paso, 143 S.W.2d 366,368-69 (Tex. 1940) (stating that
article XI, section 9 of the Constitution creates an exemption from ad valorem, income, and
occupation taxes but not from excise or user taxes); City of Garland v. Garland Indep. Sch. Dist.,
468 S.W.2d 110, 111-14 (Tex. Civ. App.-Dallas 1971, writ refd n.r.e.) (determining that article
XI, section 9 exempts a school district from a special assessment for paving a street abutting its
property, distinguishing a special assessment from a reasonable charge for services of another
public agency).
A municipality "which owns and operates its own public utility does so in its proprietary
capacity." San Antonio Indep. Sch. Dist. v. City of San Antonio, 550 S.W.2d 262,264 (Tex. 1976).
A reasonable charge for city-owned utility service is not a tax, and therefore a school district's tax
exemption does not apply to such charges. See City of San Antonio v. San Antonio Indep. Sch.
Dist., 535 S.W.2d 671, 675-76 (Tex. Civ. App.-El Paso) (determining that certain charges for
city-owned gas and electric services were not a tax from which the school district was exempt),
aff'd, 550 S.W.2d 262 (Tex. 1976); see also Bexar Cnty. v. City of San Antonio, 352 S.W.2d 905,
907-08 (Tex. Civ. App.-San Antonio 1961, writ dism'd) (determining that a city's reasonable
charge for sewer services was not a tax and could be imposed on the county).
Under the Act, a municipality provides drainage services as a public utility. TEX. Loc.
Gov'T CoDE ANN. § 552.045(a) (West Supp. 2013). The Act authorizes a municipality to require
payment of a "drainage charge" for its services. !d. § 552.047(a). The purpose of the charge is "to
recover the cost of the service of the municipality in furnishing drainage for any benefitted
property," and certain other costs. !d. § 552.044(4)(A). The Act allows the municipality to charge
"on any basis" provided the charge (1) is not based on the value of property and (2) the basis is
directly related to drainage. !d. § 552.047(a). Accordingly, a court would likely conclude that a
reasonable drainage charge conforming to the Act is not a tax and therefore a school district is not
exempt from reasonable drainage charges.
The Honorable Royce West - Page 4 (GA-1080)
SUMMARY
A court would likely conclude that the exemption for school
districts from the Municipal Drainage Utility Systems Act (the "Act")
in subsections 552.053(a) and (b) of the Local Government Code is
permissive and that a municipality has the discretion, within the
limitations of the Act, to decide whether to grant such an exemption.
A court would likely conclude that a reasonable drainage
charge under the Act is not a tax from which a school district is
exempt.
DANIEL T. HODGE
First Assistant Attorney General
JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel
VIRGINIA K. HOELSCHER
Chair, Opinion Committee
William A. Hill
Assistant Attorney General, Opinion Committee