                               QlXficeof tfie !&tornep QiSeneral
                                       &,tate of Zltexae’
DAN MORALES
 ATTORNEY
      GENERAL                                  November 7,1997


  The Honorable Steven D. Wolens                          Opinion No. DM-453
  Chair, State Affairs Committee
  Texas House of Representatives                          Re: Whether Harris County must hold a referendum
  P.O. Box 2910                                           election before imposing certain taxes authorized by
  Austin, Texas 78768-2910                                House Bill 92, Act of May 22,1997,75th Leg., RS.,
                                                          ch. 551, 1997 Tex. Sess. Law Serv. 1929, 1929
  The Honorable Senfkonia Thompson                        (RQ-1002)
  Chair, Judiciary Committee
  Texas House of Representatives
  P.O. Box 2910
  Austin, Texas 78768-2910



  Dear Representatives Wolens and Thompson:

           You have requested our opinion regarding House Bill 92, Act of May 22, 1997, 75th
  bg., RS., ch. 551, 1997 Tex. Sess. Law Serv. 1929, 1929. That bill authorized certain political
  subdivisions to create “venue districta” to “plan, acquire, establish, develop, construct, or renovate.
  . . . venue projects.” Local Gov’t Code ch. 335. Pursuant to that authority, Harris County and the
  City of Houston established the Harris County-Houston Sports Authority (the “authority’7 as of
  September 1, 1997. The authority is about to begin construction of its first “‘venue project,” the
  Ballpark at Union Station, a facility for major league baseball.

         House Bill 92 authorized municipalities and counties to impose, inter &a, a short-term rental
  tax on motor vehicles of Local Government Code section 334.102,’ and a special hotel occupancy
  tax, Local Gov’t Code 5 334.252: as a moans of financing “venue projects.” The provisions of
  House Bill 92 permitting these taxes were made contingent upon their approval by the voters:

                  A municipality or county may impose a tax under this subchapter [short-
              term motor vehicle rental tax] only iE

                 (1) an approved venue project is or is planned to be located in the
              municipality or county; and




          ‘LocalGov’t Code § 334.103 (tax not to exceed 5 percent).

          =ld. $ 334.254 (tax not to exceed 2 percent).
The Honorable Steven D. Wolens - Page 2                (DM-453)
The Honorable Sent?onia Thompson



                (2) the tax is approved at an election held under Section 334.024.)

Id. $ 334.102(c). House Bill 92 also contained a grandfather clause that obviated the need for a
second election to impose these taxes in certain situations:

           SECTION 7. Notwithstanding any other provision of Chapter 334 or 335,
           Local Govemment Code, as added by this Act, au election to approve a sports
           and community venue project, to approve a method of financing for the
           venue project, other than the imposition of a sales and use tax or a facility use
           tax, or to create a sports and community venue district in a specific county or
           municipality is not necessary if, at an election held before the effective date
           of this Act, the voters of that county, or of the county in which the
           municipality or district is primarily located, authorized the establishment and
           operation of new or renovated stadiums, arenas, or other facilities for
           professional sports teams. This section:

                   (1) negates the necessity of an election only for the type of venue
                 project approved at the previous election; and

                   (2) does not negate the necessity of au election for approval of the
                 imposition of a sales and use tax or a facility use tax to fmance a venue
                 project.

       An election to which section 7 clearly refers was held in the City of Houston and Harris
County on November 5,1996. A majority of the voters appmved the following ballot proposition:

           Authorizing Harris County to establish and operate new or renovated
           stadimns, arenas, and other facilities for professional baseball and football
           teams, provided that no county real or personal property taxes are spent to
           acquire, construct or equip these facilities.

You first ask whether Houston and Harris County must hold another referendum election prior to
imposing the taxes authorized by House Bill 92. You suggest that, since the ballot proposition did
not disclose that the special hotel occupancy tax and the short-term car rental tax would be used as
a method of funding, those taxes may not be levied without a second election. In addition, you
contend that, to the extent that section 7 purports to authorize such taxes without a second election,
it contravenes the due process clauses of the state and federal constitutions.




       ‘Section 334.252(b) of the LocalGovemmentCode uses identicallanguagewith regardto the specialhotel
occupancytax.
                                                       p. 2538
The Honorable Steven D. Wolens - Page 3                    (DM-453)
The Honorable Senfmnia Thompson



        We note initially that, in Attorney General Letter Opinion 96-120, we approved the specific
ballot proposition at issue here, tinding that it “contains a fair description of the proposition
submitted such that it can be understood by those entitled to vote and submits the question
authorized by section 323.0035 with such definiteness and certainty that the voters will not be
misled.” Letter Opinion No. 96-120 (1996) at 4.

         Except for the special requirements of House Bill 92, neither hotel occupancy taxes nor car
rental taxes require a referendum before they may be imposed. Section 35 1.002 of the Tax Code
permits a municipality to levy a hotel occupancy tax to be used for certain purposes specified in
section 35 1.101, and section 352.002 authorizes certain counties to adopt such a tsx for the purposes
listed in subchapter B of chapter 352, Tax Code. A statewide car rental tax has long been imposed
by section 152.026 of the Tax Code. Neither the state nor federal constitutions require an election
prior to the imposition of either kind of tax. See, e.g., Kelly v. Macon-Bibb County Bd. of Elections,
608 F. Supp. 1036 (M.D. Ga. 1985); People ex rel. Stamos v. Public Bldg. Comm ‘n,238 N.E.2d 390,
398 (Ill. 1968). Thus, although the legislature chose in House Bill 92 to require an election in most
counties to levy the special taxes authorized thereby, it was under no obligation to do so.

         Nor does the imposition of a hotel occupancy or car rental tax without an election have due
process implications. Taxation does not constitute a taking of property without just compensation
under article I, section 17, of the Texas Constitution. State ex rel. Pun Am Products Co. v. Texas
City, 303 S.W.2d 780,782 (Tex. 1957), appeaZdism’d, 355 U.S. 603 (1958). A reasonable exercise
of the power of taxation does not constitute a denial of property without due course of law under
article 5 section 19, of the Texas Constitution. Phillips Chem. Co. v. Dumas Zndep. Sch. Dist., 3 16
S.W.2d 382,385 (Tex. 1958), rev’d on other grounds, 361 U.S. 376 (1960).

         You suggest that the case of City ofHouston v. Fore, 412 S.W.2d 35 (Tex. 1967), stands for
the proposition that due process requirea the disclosure to referendum voters of “the method and rate
of taxation.” In that case, the city failed to notify a pmperty owner of a hearing at which he could
have challenged certain street paving assessments. Under the situation described in Fore, the
legislature, in article 1105b, V.T.C.S., had permitted an administrative determination of the
assessment rate rather than prescribing a fixed formula Thus, due process required that rm individual
pmperty owner be afforded the opportunity to contest his assessment. In House Bill 92, on the other
hand, the legislature has set a fixed maximum rate for the hotel occupancy and car rental taxes
imposed thereby. The taxes are of general applicability and do not vary on the basis of the benefit



        ‘The ballotpropositionreads:

            AuthorizingHarrisCountyto establishandoperatenew or renovatedstadiums,arenas,and
            otherfacilitiesforprofessionalbaseballand footballteams,providedthatno countyreal or
            personalpropay taxes arespentto acquire,comet, or equip these facilities.

        ?-he statuteunderwhich tie referendum    eledion was held, Local Gov’tCode 5 332.003, authorizesa county
to “submitin an electionof its qualiied votersthe questionof whetherit shouldexercisethe powersconferredby tbis
subchapter..”Section332.002 autborizma countyto “establish,provide,acquire,maintain,construct,equip, operate,
and superviserecreotionalfociliries andprograms. . . .”

                                                          p. 2539
The Honorable Steven D. Wolens - Page 4                  (DM-453)
The Honorable Senfronia Thompson



received by the taxpayer. As the court said in Fore: ‘TA]n owner ordinarily is not entitled to notice
or hearing before assessment of the cost of public improvements in accordance with an inflexible
legislative formula” Id. at 37. We conclude that the imposition of the hotel occupancy and car rental
taxes imposed by House Bill 92 does not, in the absence of an election, contravene the due process
clauses of the United States and Texas Constitutions.

        You also ask whether section 7 of House Bill 92 discriminates against the voters of Harris
County, in that it generally requires a referendum election prior to the imposition of the special hotel
occupancy and car rental taxes, but provides that an election “is not necessaty” in counties that have
previously held an election to approve a venue project. In PZyler v. Doe, 457 U.S. 202 (1982), the
United States Supreme Court declared:

                 The Equal Protection Clause directs that “all persons similarly
            circumstanced shall be treated alike.“. . The initial discretion to determine
            what is “different” and what is “the same” resides in the legislatures of the
            States. A legislature must have sub&&al latitude to establish classifications
            that roughly approximate the nature of the problem perceived, that
            accommodate competing concerns both public and private, and that account
            for limitations on the practical ability of the State to remedy every ill. In
            applymg the wual Protection Clause to most forms of state action, we thus.
            seek only the assurance that the classification at issue bears some fair
            relationship to a legitimate public purpose.

Id. at 216. Furthermore,

            where individuals in the group affected by a law have distinguishing
            characteristics relevant to interests State has the authority to implement, the
            courts have been very reluctant . . . to closely scrutinize legtslative choices
            as to whether, how, and to what extent those interests should be pursued. In
            such cases, the Equal Protection Clause requirea only a rational means to
            serve a legitimate end.

Ci@ of Clebume, Texas v. CkbumeLiting Ctr., 473 U.S. 432,441 (1985). While it may readily be
acknowledged that House Bill 92 treats Harris County residents different from residents of many
other counties, it is also the case that residents of Harris County, for purposes of the purposes sought
to be achieved by that legislation, are not similarly situated to those of other counties. Harris County
had previously held a referendum election only months before the enactment of House Bill 92. The
legislature might have determined that the residents of Harris County were in fact adequately
informed of the funding sources for the pmject6 For this reason, and because the cost of holding an


         ‘Althoughthe ballotpropositiondid not statethathotel occupancyandcarrentaltaxes were to be employed
as a fimdingme&a&m, theirprobableUSC     was widely reportedin the media:

            Themajorsourceof publicfundingfortbeballparkwill be $180 millionfromthreesources:
                                                                                                (coatblued...)

                                                         p. 2540
The Honorable Steven D. Wolens - Page 5                    (DM-453)
The Honorable Senfronia Thompson



election and the need to maintain public confidence in the Snality of election results, the legislature
may well have concluded that wunties that had so recently held a referendum election on a venue
project did not need to repeat the procedure. We believe a court would conclude that the
classification scheme of House Bill 92, by obviating the need for an election in certain counties that
had recently held a referendum election, sought to accomplish a “legitimate public purpose” by a
“rational means,” and that, as a result, House Bill 92 does not unwnstitutionahy discriminate against
residents of Harris County on equal protection grounds.

         Finally, you ask whether section 7 of House Bill 92 is a “local or special law,” in
contravention of article III, section 56 of the Texas Constitution. That provision states: “The
Legislature shah not, except as otherwise provided in this Constitution, pass any local or special
law . . . regulating the atfairs of counties, cities, towns, wards, or school districts . . _.” The Texas
Supreme Court has stated that “[t]he primary and ultimate test of whether a law is general or special
is whether there is a reasonable basis for the classification made by the law, and whether the law
operates equally on all within the class.” Maple Run at Austin Mm. Util. Dist. v. Monaghan, 931
S.W.2d 941,945 (Tex. 1996); see also, Rodriguez v. Gonzales, 227 S.W.2d 791,793.



            a cm@wide mtal cartax,a limiteddowntownparkingtaxandstakesales and liquortaxes
            generatedin and aroundthe stadium Public dollam for the Astrodomewill be hotel
            occupancytax revewes and statesales and liquortax dollarsgeneratedin and aroundthe
            dome. JohnWilliams, Astms to Keep Home Base in Houston/Backers Face Uphill Fight
            in Winning Vote, Poll Shows, HOUSTON CfiRONICLS, Sept. 15,1996, at Al, A19.

           The questionon the ballotcarriessome complicatedand vague language,but the issue is
           fairly direct:Shouldthe powers-that-beuse a car-rentaltax, a downtownparkingtax, the
           hotelmom tax andstatesalesandliqucwtaxesto foot the w~nstmction  bii? AlanBemstein,
           HOusmN CHRONICLE,       Candidates Playbook May Include Signals an Stadium Issue,
           Sept. 22, 1996, at A38.

           Imead, they intendto relyon hotel occupancytaxes, some stateSalesand liquortaxes and
           proposedtaxescmrentalCBIS  anddowntownparking.JohnWilliam, OnDeck/lhe Stadium
           Vote/Stadium Vote Crucial to City, Advocate Says, HOUSTON CHRONICLE,  Sept. 22, 1996,
           &Al, A27.

            A final fnancing plan is not in place, but EckeLsin countingon hotel occupancytaxes, a
            proposedrentalcartax anda downtownparkingtax amongpublicrevenuesneededfor the
            two proposedprojects. John Williams, $20 Million in Proper@ Taxes Spent on Dome,
            HOUSTON   CHRONICLE,   Oct.22, 1996, at Al, A8.

            Bunchalso saidbe opposesusingpublicmoney--includinghotel/motelorcarrentaltaxes-to
            fund a downtown stadium. RA. Dyer, Voter’s Guide, Texas House of Representatives-
            DUbict 145, HOUSTON  CHRONICLE, Oct. 27, 1996, at 18.

            “Butbecause stadiumconstmctionwould be paid for with otherrevenuesthatconsumers
            have discretionever paying, such as rental-carand hotel-occupancytaxes, no vote is
            needed.” JohnWilliams andDan Feldstein,On Declu7’heStadium Vote/Questions Abound
            Regarding Vote on Stidium Proposal, HOUSTON  CHRONICLE,  Nov. 3, 1996, at Al, A22.


                                                          p. 2541
The Honorable Steven D. Wolens - Page 6                    (DM-453)
The Honorable Sentionia Thompson



        For purposes of article III, section 56, analysis of the reasonableness of the classification
imposed by section 7 is similar to the analysis applied to section 7 for purposes of equal protection
and we therefore reach the Same conclusion. J.naddition, section 7 operates equally upon all counties
within the class described, i.e., those counties which had held, or could have held, the requisite
election prior to the effective date of House Bill 92. In our opinion, a court would probably conclude
that section 7 is not a “local or special law” in contravention ofthe prohibition of article III, section
56 of the Texas Constitution.’

                                           SUMMARY

                Hsrris County is not required to hold an election under the provisions of
            House Bill 92, Act of May 22, 1997, 75th Leg., RX, ch. 551, 1997 Tex.
            Sess. Law Serv. 1929,1929. The imposition of hotel occupancy and short-
            term car rental taxes does not, in the absence of a second election, contravene
            the due process clauses of the federal or state constitutions. Neither does
            House Bill 92 unconstitutionally discriminate against residents of Harris
            County on equal protection grounds. Section 7 of the bill is not a “local or
            special law” in contravention of article III, section 56, Texas Constitution.




                                                  DAN MORALES
                                                  Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Rick Gilpin
Assistant Attorney General




        ‘Because we believe thata courtwould find thatsection 7 is not a local or special law, we do not need to
considerthe relevanceof articleIII, section 57 of the Texas Constih~tion.
                                                           p. 2542
