   OFFICE   OP THE ATTORNEY   GENERhL    STATE   OF TEXAS

   JOHN     CORNYN




                                              February 24, 1999




The Honorable Carole Keeton Rylander                        Opinion No. JC-0002
Comptroller of Public Accounts
Office of the Comptroller                                   Re: Comptroller’s adjustment of property tax
LBJ State Office Building                                   findings for a school district pursuant to section
Austin, Texas 78774                                         42.257 of the Education Code (RQ-1194)


Dear Ms. Rylander:

        Your predecessor in office’ requested an opinion on how your office should adjust taxable
property values for property in the Dickinson Independent School District (“the Dickinson ISD”)
pursuant to section 42.257 of the Education Code. In the event that the final determination of an
appeal of tax liability results in the reduction of the taxable property value for a school district,
section 42.257 of the Education Code requires the Comptroller to adjust taxable property values
reported to the Commissioner of Education for purposes of allocating the Foundation School Fund
to school districts. Because the final determination of an appeal of tax liability for the Dickinson
ISD did not result in the reduction of its taxable property values, section 42.257 of the Education
Code does not apply, and the Comptroller has no duty to adjust taxable property values for that
school district.

        As State Comptroller of Public Accounts, you have many responsibilities relating to local
property taxation that were formerly assigned to the State Property Tax Board (“the SPTB”). See
TEX. GOV’T CODE ANN. ch. 403, subch. M (Vernon 1998) (study of school district property values);
TEX. TAX CODE ANN. ch. 5 (Vernon 1992 & Supp. 1999) (state property tax administration).          That
agency was abolished in 1991 and its authority was transferred to your office.2 Although the SPTB
no longer exists, this opinion will refer to actions it took and authority it exercised before 1991.




        ‘The request letter was signed by the Deputy Comptmller.    Letter from Dovie Ellis, Deputy Comptroller,   to
Dan Morales, Attorney General (Sept. 11, 1998) (on file with Opinion Committee).

         ‘Act of May 24,1991,72d   Leg., RX, ch. 843,199l      Tex. Gen. Laws 2905; Act of Aug. 25, 1991,72d   Leg.,
2d C.S., ch. 6, 1991 Tex. Gen. Laws 26.
The Honorable       Carole Keeton Rylander         - Page 2       (JC-0002)




         Your predecessor in office asked about the Comptroller’s duty to adjust the value of taxable
school district property pursuant to section 42.257 of the Education Code. This provision states as
follows:

                   (a) If the final determination of an appeal under Chapter 42, Tax Code,’
               results in a reduction in the taxable value of property that exceeds five
               percent of the total taxable value of property in the school district for the
               same tax year determined under Subchapter M, Chapter 403, Government
               Code, the commissioner [of education] shall request the comptroller to adjust
               its taxable property value findings for that year consistent with the final
               determination of the appraisal appeal.

                   (b) If the district would have received a greater amount from the
               foundation school fund for the applicable school year using the adjusted
               value, the commissioner shall add the difference to subsequent distributions
               to the district from the foundation school fund. An adjustment does not
               affect the local fund assignment of any other district.

         The purpose of subchapter M of chapter 403, Government Code, is to promote “equity
among taxpayers in the burden of school district taxes and among school districts in the payment of
state financial aid to schools,” in part “by providing for uniformity in the tax appraisal and
assessment practices and procedures of school district tax offices.” TEX. GOV’T CODE ANN.
$403.301 (Vernon 1998): The Comptroller is required to conduct an annual study to determine the
total taxable value of all property in each school district. Id. 5 403.302. The determinations of total
taxable property values are based on the appraisal districts’ appraised values and the Comptroller’s
estimate of market value. The Comptroller calculates the ratio of local appraised value to market
value of representative properties, and divides the local appraised values by the ratio to determine
the total taxable value of property in the school district. Id. 5 403.302(b); 34 TEX. ADMIN. CODE
$ 9.101(j) (1998) (Conduct of the Property Value Study). These determinations of total taxable
value are reported to the Commissioner of Education and used to calculate each school district’s
share ofthe foundation school program. TEX. EDUC. CODE ANN. 55 42.252, .253(a)(4) (Vernon 1996
& Supp. 1999). The taxable value estimates prepared by the Comptroller and formerly prepared by




            ‘Chapter42 offhe Tax Code provides forjudicial review ofappraisal   review board orders determining   taxpayer
protests.    TEX. TAX CODE ANN. g 42.01(l) (Vernon Supp. 1999).

          ‘The SPTB carried out property value studies under former section 11.86, Education Code (Vernon 1969.
 1995), the predecessor statute to subchapter M of Government Code, chapter 403. Consistent with chapter 41 of the
 Education Code, providing for “equalized wealth level” for school districts, section 403.302(a) requires the Comptroller
 to “make appropriate adjustments in the study to account for actions taken under Chapter 41.” Act of May 27, 1995,
 74th Leg., R.S., ch. 260, 9 26, 1995 Tex. Gen. Laws 2207,2482.
     The Honorable      Carole Keeton Rylander         - Page 3           (JC-0002)




     the SPTB “provide state government with a uniform standard to use in distributing education aid.“’
     “Using the values on school district tax rolls would result in inequities since values in some districts
     are closer to market value than in others.“6

             Your office requested    advice because of the resolution of a lawsuit brought by Houston
     Lighting &Power Co. to contest the valuation of a power plant located in the Dickinson ISD. In this
     suit, styled Houston Lighting & Power Co. Y. Dickinson Indep. Sch. Dist., No. 92-CV-0127 (122d
     Judicial Dist. Ct., Galveston County, Tex. Dec. 1, 1994), the plaintiff contested the appraisal
     district’s valuations of the power plant for 1981 through 1989.’ According to information you
     provide, the court rendered a final judgment in 1994 setting the value of the power plant at $215
     million for most of the years in question. The appraisal district had appraised the power plant at
     significantly more than $2 15 million for each year in question, and the Dickinson ISD had collected
     property taxes from Houston Lighting & Power Co. on the appraised value.* It has now arranged
     to pay approximately $8,700,000 to Houston Lighting & Power Co. in reimbursement for the excess
     taxes it collected. In each year in question, SPTB gave the power plant values lower than the court-
     ordered value.” The Commissioner of Education has asked the Comptroller’s office to adjust the
     taxable wealth of the Dickinson ISD as determined by the SPTB for the years 1981 through 1989.

             Section42.257 ofthe Education Code requires the Comptroller “to adjust its taxable property
     value findings for that year consistent with the final determination of the appraisal appeal” only if
     the final determination of the appeal “results in a reduction in the taxable value of property that
     exceeds five percent ofthe total taxable value ofproperty in the school district for the same tax year
     determined under Subchapter M, chapter 403, Government Code.” TEX. EDUC. CODE ANN. § 42.257
     (Vernon 1996). Thus, you have a duty to adjust the taxable property value findings for the
     Dickinson ISD only for those years where the described reduction in values resulted from the appeal.
     This legislative purpose is shown in the fiscal note attached to the bill that adopted section 16.258
     of the former Education Code,‘(’ the predecessor of subchapter M, chapter 403, Government Code:

                         The Education Code sets out funding requirements and formulas for the
                     foundation school program. The taxable value of property in a school district



              %TATE PROPERTY TAX BOARD, ANNUAL REPORT FOR TAX YEAR 1985 5 (1985).

              ‘Id.

              ‘See also Houston Lighting & Power Co. v. Dickinson Indep. Sch. Dist., 794 S.W.2d 402 (Tex.
     App.-Texarkana   1990, writ denied); HoustonLighting & Power Co. Y. Dickinson hdep. Sch. Dist., 641 S.W.Zd 302
     (Tex. Civ; App.-Houston    [ 14th Dist.] 1982, writ ref d n.r.e.) (related cases on valuation   of power plant).

              *Letter from Dovie Ellis, Deputy Comptroller,     to Dan Morales, Attorney     General 2 (Sept. 11, 1998).
-.
              ‘Id.

              “Act of May 29,1987,7Oth      Leg., R.S., ch. 849, $ 1,1987 Tex. Gen. Laws 2909
    The Honorable   Carole Keeton Rylander      - Page 4        (JC-0002)


-


                --as determined by the State Property Tax Board (SPTB)--is one factor used
                in the funding formulas.




                     The bill would provide that the Commissioner of Education adjust a
                school district’s foundation school fund distribution ifthe final determination
                of an appeal for a property owner resulted in a reduction of the school
                district’s taxable value exceeding five percent of the total.




                     School districts that could take advantage of the bill’s proposals would
                realize additional revenue from State funding.”

            Accordingly, if the newly established taxable property value for the Dickinson ISD is in fact
    greater than the values reported by the SPTB to the Commissioner for the years in question, you
    have no duty to adjust taxable property values for those years or to report adjustments to the
    Commissioner.      The $2 15 million figure for the taxable value ofthe power plant entered by the court
    represents a reduction from the value determined by the local appraisal district. However, the
    appraisal district’s value is not the relevant figure for determining whether the Comptroller has a
    duty under section 42.257 of the Education Code to provide adjusted property values for the
    Dickinson ISD. Instead, it is the taxable property value calculated by the SPTB under the
    predecessor of Government Code, chapter 403, subchapter M, and reported to the Commissioner of
    Education.

             The request letter shows that the taxable property value for the utility category reported by
     the SPTB to the Commissioner of Education was less than $215 million for the years in question.
     Thus, the final determination of the Houston Lighting & Power Co. appeal did not result in a
     reduction in the taxable value of property in the school district found by the SPTB and reported to
     the Commissioner     of Education.    Accordingly, section 42.257 of the Education Code does not
     require the Comptroller to adjust its taxable property value findings for the Dickinson ISD. Because
     no adjustments to the SPTB’s taxable property value findings are necessary, we need not determine
     how the Comptroller should “adjust its taxable property value findings         consistent with the final
     determination of the appraisal appeal” pursuant to section 42.257 of the Education Code.




             “FISCALNOTE,T~X.   H.B. 1650,70thLe&   R.S. (May 13, 1987).
        The Honorable   Carole Keeton Rylander   - Page 5       (JC-0002)




                                              SUMMARY

                      Pursuant to section 42.257 of the Education Code, the Commissioner of
                  Education shall request the Comptroller to adjust taxable property values for
                  a school district that were reported to the Commissioner          for purposes
                  of allocating the foundation school fund if a final determination of an appeal
                  oftax liability under Tax Code chapter 42 results in a reduction in the taxable
                  value of property exceeding five percent of the total taxable value ofproperty
                  in the school district for that tax year as determined under subchapter M,
                  chapter 403, Government Code. Because the final determination of an appeal
                  by Houston Lighting & Power Co. of its tax liability to the Dickinson In-
                  dependent School District did not result in a reduction of taxable value of
                  property in the school district as reported to the Commissioner of Education,
                  the Comptroller has no duty under section 42.257 of the Education Code to
                  adjust the taxable property values for the district that were reported to the
                  Commissioner of Education.




-




                                                      Atiomey General of Texas

        ANDY TAYLOR
        First Assistant Attorney General

        CLARK KENT ERVIN
        Deputy Attorney General-General    Counsel

        ELIZABETH ROBINSON
        Chair, Opinion Committee

        Prepared by Susan L. Garrison
        Assistant Attorney General




    -
