                                ATTORNEY GENERAL                       OF   TEXAS
                                              GREG        ABBOTT




                                                February 16,2005



The Honorable Will Hartnett                                 Opinion No. GA-0304
Chair, Committee on Judiciary
Texas House of Representatives                              Re: Whether a municipality may grant a tax
Post Office Box 29 10                                       abatement under the Property Redevelopment and
Austin, Texas 78768-2910                                    Tax Abatement Act for business personal property
                                                            newly added to a site where previously existing
                                                            personal property was subject to a ten-year tax
                                                            abatement agreement    (RQ-0261-GA)

Dear Representative      Hartnett:

        You ask about a municipality’s authority to grant a tax abatement for business personal
property newly added to a site where previously existing personal property was subject to a ten-year
tax abatement agreement.’

         The Property Redevelopment and Tax Abatement Act (the “Act”), chapter 3 12 of the Tax
Code, authorizes the governing body of a municipality to grant a property tax abatement by
executing an agreement limited in duration to ten years. See TEX. TAX CODE ANN. 55 312.001
(Vernon 2002) (short title of chapter 312 of the Tax Code), 3 12.204(a) (Vernon Supp. 2004-05)
(limiting agreements to exempt a portion of property value from taxation to a period not to exceed
ten years). Based in part on the ten-year limitation in section 3 12.204(a), this office concluded in
Attorney General Opinion JC-0133 that a “governmental entity [such as a municipality] may not
grant a tax abatement for property that previously received a ten-year tax abatement” under chapter
312. See Tex. Att’y Gen. Op. No. K-0133 (1999) at 6. You understand the opinion as pertaining
only to real property and ask whether new business personal property should be treated differently
even though it is placed on real property where other personal property had previously received an
abatement under the Act. Specifically, you ask:

                  1.    Do Section 312.204(a) of the Act and JC-0133 prohibit a city
                        from granting tax abatements for newly added business personal
                        property if there was an earlier ten-year tax abatement at that site
                        on previously existing persona1 property?


         ‘See Letter fromHonorable     Will Hartnett, Chair, Committee on Judiciary, Texas House ofRepresentatives,   to
Honorable Greg Abbott, Texas Attorney General (Aug. 23,2004) (on file with Opinion Committee, also avaikbk            01
h~:liwww.oag.state.tx.us)   [hereinafter Request Letter].
The Honorable Will Hartnett           - Page 2          (GA-0304)




                  2.    Can a city provide incentives to a manufacturing            facility
                        investing within an existing site for the expansion, replacement,
                        or installation ofnew, separately defined personal property ifthe
                        manufacturer     received a prior, ten-year tangible personal
                        property tax abatement at that site?

                  3.    Would such a tax abatement for new business personal property
                        be disallowed at the site because ofthe prior tax abatement at the
                        site on entirely different business personal property?

Request Letter, supra note 1, at l-2.

        Before we review the basis for the opinion in JC-0133, we must consider the Act’s language.
The goal in statutory construction is to determine and give effect to the legislature’s intent. Mclntyre
Y. Ramirez, 109 S.W.3d 741, 745 (Tex. 2003). We begin by considering the plain and common
meaningofthe     statute’s words. Tex. Dep’tof Tramp. v. Needham, 82 S.W.3d 314,318 (Tex. 2002).
Ifunambiguous,     a statute will generally be construed as written. State Y. Gonzalez, 82 S.W.3d 322,
327 (Tex. 2002). However, legislative intent must be derived from an examination of an act as a
whole, not just isolated portions. Id. Additionally, the objective of a law, its legislative history, and
the consequences of a particular construction may be considered for its insight into legislative intent.
See TEX. GOV’T CODE ANN. 3 311.023(l), (3), (5) (Vernon 1998); McZnryre, 109 S.W.3d at 745.

         Generally, all real property and tangible personal property taxed in the state must be taxed
in proportion to its value. See TEX. CONST. art. VIII, 5 l-b. Article VIII, section l-g(a) of the Texas
Constitution was adopted, however, to permit cities, towns, or other taxing units, as the legislature
may authorize, to grant exemptions or other relief from ad valorem taxes on property located in a
reinvestment zone “for the purpose of development or redevelopment and improvement of the
property.” Id. 3 l-g(a). Chapter 312 was enacted as enabling legislation for article VIII, section
I-g(a). See Act of Aug. 10, 1981, 67th Leg., 1st C.S., ch. 5, 3 9, 1981 Tex. Gen. Laws 53, 57
(making the Act effective on the constitutional amendment’s adoption date); see nlso Tex. Att’y Gen.
Op. No. GA-0134 (2004) at 3.’

         Subchapter A of chapter 312 contains tax abatement provisions applicable to taxing units
generally. TEX. TAX CODE ANN. §§ 312.001-,006 (Vernon 2002 & Supp. 2004.05). A taxing unit
such as a municipality wishing to grant an abatement under the chapter must adopt a resolution
stating that the taxing unit elects to become eligible to participate in tax abatement, Id. 5 312.002(a)
(Vernon Supp. 2004-05). The taxing unit must also establish “guidelines and criteria” for tax
abatement agreements. Id. The guidelines and criteria must make abatement available both for
creating new facilities and structures and for expanding or modernizing existing facilities and
structures. Id. Once adopted, the guidelines and criteria are generally effective for two years. Id.
5 312.002(c).


         %ction 3 12.006     provides for chapter 3 12 to expire if not continued in effect. The section was amended twice
in 2001, one act providing    for an expiration date of September 1,2005, see Act of May 24,2001, 77th Leg., R.S., ch.
1505, 5 5,200l Tex. Gen.     Laws 5362, 5373, the other providing for expiration on September 1,2009, see Act ofMay
25,2001,77th   Leg., RX,     ch. 1029, 4 1,200l Tex. Gen. Laws 2278,2278.
The Honorable Will Hartnett            - Page 3              (GA-0304)




         Subchapter B specifically concerns tax abatements in municipal reinvestment zones. Id.
$3 312.201-,211 (Vernon 2002 & Supp. 2004-05) (subchapter B, entitled “Tax Abatement in
Municipal Reinvestment Zone”). A municipal governing body may promulgate an ordinance
designating an area in the municipality’s taxing jurisdiction or extraterritorial jurisdiction as a
reinvestment zone if the municipal governing body finds that the area satisfies section 3 12.202’s
requirements. Id. $ 312.201(a) (Vernon 2002). Section 312.202 specifies criteria for designating
an area as a reinvestment zone. An area may be designated as a reinvestment zone if it is subject to
certain conditions that “substantially arrest or impair the sound growth of the municipality creating
the zone, retard the provision of housing accommodations,        or constitute an economic or social
liability and [are] a menace to the public health, safety, morals, or welfare in its present condition
and use.“3 Also, areas in or immediately adjacent to an area or community receiving or qualifying
for certain federal assistance may be designated as a reinvestment zone. Id. 5 312.202(3)-(4). An
area encompassing outdoor advertising structures slated for relocation, reconstruction, or removal
may meet the criteria for a municipal reinvestment zone. Id. 5 3 12.202(5). Finally, section 3 12.202
allows designating an area as a municipal reinvestment zone if it is:

                   reasonably likely as a result of the designation                           to contribute to the
                   retention or expansion of primary employment                                or to attract major
                   investment in the zone that would be a benefit to                         the property and that
                   would contribute to the economic development                               of the municipality.

Id. 5 312.202(6).



         ‘The specific detrimental   conditions   are:

                        (A) a substantial     number       of substandard,          slum      deteriorated,    OI
                        deteriorating structur,es;

                        (B) the predominance       of defective or inadequate          sidewalks      or streets;

                        (C) faulty size, adequacy,       accessibility,   or usefnlness        of lots;

                        (D) unsanitary    or unsafe conditions;

                        (E) the deterioration     of site or other improvements;

                        (F) tax or special assessment        delinquency         exceeding     the fair value of
                        the land;

                        (G) defective or unusual conditions          of title;

                        (H) conditions    that endanger life or property by fire or other cause; or

                        (I)   any combination     of these factors[.]

TEX. TAX CODE ANN. $ 3 12.202(l)(A)-(I)      (V emon 2002). Additionally, an area may be designated as a reinvestment
zone if it is: “predomin~tly    open and, because of obsolete platting, deterioration of stroctues or site improvements,
or other factors, substantially impair[s] or arrest[s] the sound growth ofthe municipality.”    Id. 5 312.202(2).
The Honorable Will Hartnett          - Page 4           (GA-0304)




         A governing body may designate a reinvestment zone only after giving notice and conducting
a public hearing on the designation and after finding “that the improvements sought are feasible and
practical and would be a benefit to the land to be included in the zone and to the municipality after
the expiration of an agreement entered into under Section 312.204.” Id. 4 312.201(a), (d). The
designation is made by an ordinance describing the zone’s boundaries and its eligibility for
residential or commercial-industrial tax abatement (or for tax increment financing under chapter 3 11
ofthe Tax Code). Id. 5 312.201(b). The designation expires after five years, and “may be renewed
for periods not to exceed five years.” Id. 5 312.203.

        Once a municipality has properly adopted a resolution electing to be eligible to grant
abatements, established guidelines and criteria, and designated an area as a reinvestment zone, the
governing body may then execute written tax abatement agreements with owners of taxable real
property or certain leasehold interests located in the reinvestment zone. See id. $5 3 12.002, .204(a)-
(g) (Vernon 2002 & Supp. 2004-05): The municipal governing body must “find[] that the terms of
the agreement and the property subject to the agreement meet the applicable guidelines and criteria
adopted by the governing body.” Id. 5 3 12.002(b) (Vernon 2002); see also id. § 3 12.204(a) (Vernon
Supp. 2004-05) (authorizing municipalities       eligible under section 312.002 to enter into a tax
abatement agreement). The agreement may grant a tax abatement only “on the condition that the
owner of the property make specific improvements or repairs to the property.” Id. 4 3 12.204(a)
(Vernon Supp. 2004-05). The agreement must, among other things, list the proposed improvements,
authorize the municipality to inspect the property to ensure that the improvements or repairs are
made as agreed, limit the property to uses consistent with the general purpose of encouraging
development or redevelopment of the zone, and require the property owner to certify annually to
the governing body of each taxing unit that the owner is in compliance with the agreement. Id.
5 312.205(a)(1)-(3), (6) (Vemon2002).      See&o Tex. Att’yGen. Op. No. JC-0106 (1999) at 5 (“not
only must the subject of a tax abatement agreement be an improvement or repair in the ordinary
sense, it must also serve the economic development purposes of the reinvestment zone, and benefit
the public as well as the property owner”).

         An eligible municipality may agree to exempt from taxation a portion of the value of the real
property or of tangible personal property located on the real property, or both, for a period not to
exceed ten years. Id. 5 312.204(a) (Vernon Supp. 2004-05). An agreement may exempt a portion
of real property value to the extent that in future years it exceeds its value for the year in which the
agreement is executed. Id. With respect to personal property:


          ‘The principal requirementsof a municipal tax abatementagreement are specified in section 3 12.204(a), which
was amended by three different acts in 2001. See Act ofMay 22,2001,77tb            Leg., R.S., ch. 560, 5 I,2001 Tex. Gen.
Laws 1077 (House Bill 3001); Act ofMay 23, 2001,77tb Leg., R.S., ch. 640, $1,2001               Tex. Gen. Laws 1205, 1206
(House Bill 1448); Act ofMay27,2001,77th         Leg., R.S., ch. 1258, $I,2001 Tex. Gen. Laws 2984,2985 (Senate Bill
985). Under the Code Construction Act, we must attempt to harmonize and give effect to all three amendments. TEX.
GOV’TCODEANN. Q 311.025(b) (Vernon 1998). In doing so, we are not to construe the reenactment of statutory text,
as required by article III, section 36 of the Texas Constitution, “to be irreconcilable with additions OI omissions in the
same text made by another amendment.” Id. 5 3 11.025(c). Should the amendments prove to be irreconcilable, the latest
enactment will prevail. Id. 9 311.025(b).

         Applying these mles, we conclude that the amendments, as they peltain to the issues presented      here, may   be
harmonized and given effect as described in the above accompanying text.
The Honorable Will Hartnett    - Page 5        (GA-0304)




               An agreement exempting taxable personal property located on taxable
               or tax-exempt real property may provide for the exemption of
               tangible personal property located on the real property in each year
               covered by the agreement other than tangible personal property that
               was located on the real property at any time before the period covered
               by the agreement with the municipality

Id.

       The parties may modify a chapter 3 12, subchapter B’tax abatement agreement by following
the same procedures they used to approve and execute the original agreement. Id. 5 312.208(a)
(Vernon 2002). They may not, however, modify the original agreement to extend beyond ten years
from the date of the original agreement. Id.

         You ask whether the execution of a tax abatement agreement concerning specific personal
property disqualifies the real property owner from executing another abatement agreement
concerning different personal property to be located at the same site. In Attorney General Opinion
JC-0133, a city’s abatement agreement with a property owner concerned “permanently affixed
improvements to real property in the reinvestment zone.” See Letter from Honorable Sonya Letson,
Potter County Attorney, to Honorable John Comyn, Texas Attorney General (June 10, 1999) (RQ-
0077-JC) (on tile with Opinion Committee, also available at http://www.oag.state.tx.us).        One of
the questions posed in the request was “Can a subsequent tax abatement be given on property
that has already been the subject of a tax abatement for the ten-year period designated in Tax Code
5 312.204?” Id. at 2. This oftice rejected a construction of the statute that “would allow ten-year
agreements to be entered into one after the other, potentially resulting in taxes being abated on a
piece of property for an unlimited length of time.” Tex. Att’y Gen. Op. No. JC-0133 (1999) at 2.
The opinion observed that the Act’s ultimate goal is to increase the tax base, and discerned “no
purpose for the ten-year limit other than to make certain that the property is returned to the tax
rolls. Allowing successive ten-year agreements on the same property would defeat this purpose.”
Id. at 3 (emphasis added) (citing Calhoun County Indep. Sch. Dist. v. Meno, 902 S.W.2d 748, 749
(Tex. App.-Austin 1995, writ denied) for its description of the Act as “increasing the local tax base
in the long run and decreasing tax revenue only in the short run”). The opinion determined that a
change ofproperty ownership would not change the answer, because it “could result in successive
abatement agreements on the samepiece ofproperty,” and would have “the potential of forestalling
indefinitely the return ofproperty to the tax rolls.” Id. (emphasis added). In the opinion’s summary,
this office concluded that a “governmental entity may not grant a tax abatementfirproperty        that
previously received a ten-year tax abatement.” Id. at 6 (emphasis added).

         Thus, Attorney General Opinion JC-0133 did not interpret the Act to allow a municipality
to grant only one abatement per location. Rather, this oftice determined that the purpose ofthe Act,
as manifested in the ten-year limit on abatement agreements in section 3 12.204(a), would not permit
a construction that allowed the taxes on the same property to be abated in successive agreements,
thereby abating the taxes on the property indefinitely. Whether a municipality could agree to abate
the taxes on different property was not considered.
The Honorable Will Hartnett    - Page 6        (GA-0304)




         The Act does not expressly or implicitly suggest that once a municipality has granted a
property owner a tax abatement for improving property or expanding its facilities, the municipality
cannot induce an owner to make further improvements or expansions by abating the taxes on the new
property or improvements.      The Act establishes a tax exemption, and tax exemptions are to be
strictly construed. SeeN. Alamo WaterSupply Corp. v. Willucy CountyAppraisalDist.,        804 S.W.2d
894, 899 (Tex. 1991). However, the rule of strict construction does not warrant unreasonably
interpreting an exemption so as to deny its plain effect. Sharp v. F. W. Garfner Co., 971 S.W.2d 707,
709 (Tex. App.-Austin 1998, no pet.); Tex. Att’y Gen. Gp. No. JC-0372 (2001) at 3 (rule of strict
construction “should not be employed to construe a tax exemption provision contrary to its plain
meaning”).     Courts will not “write special exceptions into a statute so as to make it inapplicable
under certain circumstances not mentioned in the statute.” Pub. Util. Comm ‘n Y. Gofer, 754 S.W.2d
 121, 124 (Tex. 1988); see also Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864,
867 (Tex. 1999) (rejecting construction that would “judicially amend the statute to add an exception
not implicitly contained in the language of the statute”).

         Abatement agreements are authorized not only for creating new facilities, but also “for the
expansionormodemizationofexistingfacilities         and structures.” TEX.TAXCODEANN. 5 312.002(a)
(Vernon Supp. 2004-05). Section 312.204(a) authorizes an eligible municipality to “exempt from
taxation a portion of the value of the real property or oftangible personal property located on the real
property, or both.” Id. 5 3 12.204(a). That section further specifies that the agreement may exempt
a portion of the value of personal property located on real property within the reinvestment zone,
other than personal property “that was located on the real property at any time before the period
covered by the agreement with the municipality.”         Id. We conclude that a prior tax abatement
agreement under chapter 312 of the Tax Code concerning specific property does not preclude a
municipality from agreeing to abate taxes on different personal property at the same location.
Rather, chapter 312 specifically authorizes an eligible municipality to enter into an abatement
agreement that fully complies with chapter 3 12 requirements. Of course, whether a municipality is
eligible to enter into tax abatement agreements and whether chapter 312 authorizes a particular
agreement depends on currently applicable circumstances.              See, e.g., id. $5 312.002(b)-(c)
(governing body may not enter into an abatement agreement unless the agreement’s terms and the
subject property meet applicable guidelines and criteria; guidelines and criteria are effective for two
years); 3 12.201 (d) (Vernon 2002) (designation ofreinvestment zone requires governing body to find
that improvements      sought would be a benefit “to the municipality after the expiration of an
agreement entered into under Section 3 12.204”); 3 12.203 (designation ofreinvestment zone expires
after five years and may be renewed for periods not to exceed five years); 3 12.204(a) (Vernon Supp.
2004-05) (governing body of eligible municipality may enter into tax abatement agreement on
condition that owner make specific improvements or repairs to the property). See also McCormick
Marketing, Inc. Y. City of Colorado City, 42 S.W.3d 162,164-65 (Tex. App.-Eastland2001,         no pet.)
 (city council that voted for tax abatement but did not formally designate a reinvestment zone and
 execute an abatement agreement in compliance with the Act lacked authority to grant tax abatement).
The Honorable Will Hartnett   - Page 7        (GA-0304)




                                       SUMMARY

                       Under the Property Redevelopment        and Tax Abatement
               Act, chapter 3 12 of the Tax Code, a prior tax abatement agreement
               concerning specific property does not preclude a municipality from
               agreeing to abate taxes on different business personal property at the
               same location. A new abatement agreement must fully comply with
               chapter 312 requirements.

                                              Very truly yours,




BARRY R. MCBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee
