Honorable Robert S. Calvert              Opinion No. M-310
Comptroller of Public Accounts
State of Texas                           Re:   Whether property of
State Capitol Rullding                         the Housing Authority
Austin, Texas 78711                            of the City of Harlln-
                                               gen would be subject
                                               to ad valorem taxes In
                                               view of the fact that
                                               a small portion of
                                               said property    will be
                                               let to concessionaires
                                               who would operate the
                                               facilities    to serve
Dear Mr. Calvert:                              the residents.
     You recently requested   the oplnlon       of this   department on
the following  question:
          “Whether any part of a five story hotel
     purchased by the Housing Authority of the
     City of Harllngen to be utilized   as low Income
     housing for the elderly,  would be subject to
     ad valorem taxes, If a small portion of the
     lower floor of such hotel be let to concesslon-
     sires who would operate facilities   to serve the
     residents. ”
      The Housing Authority of the City of Rarllngen is
authorized by Article  1269k of Vernon’s Civil Statutes.
Section 22 of said Article  provides:
         “The property of an authority   Is declared
     to be public property used for essential    public
     and governmental purposes and such property
     and an authority  shall be exempt from all taxes
     and special assessments of the city,   the county,

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    Hon. Robert S. Calvert,     Page 2        (M-310)


          the State or any political      subdivision    there-
          of; provided,     however, that In lieu of such
          taxes or special assessments,        an authority
          may agree to make payments to the city or the
          county or any such political       subdivision    for
          Improvements, services,      and ‘facilities   furnlsh-
          ed by such city,     county, or political     sub-
          division    for the benefit   of a housing project,
          but In no event shall such payments exceed the
          estlmated cost to such city,       county, or political
          subdivision     of the Improvements, services,       or
          facilities     to be so furnlshed.“~
          In Attorney Qeneral Opinion No. O-1921 (1940), the
    Attorney   General’s   Department ruled that the statutory
    exemption given In Section 22 of Article     1269k, supra, was
    a constitutional     exercise of power by the legislature.  In
    conclusion    this opinion provided:
                 “In our opinion,   Section 22 of Article     1269k,
          Vernon’s Annotated Civil Statutes,       commonly known
          and cited as the ‘Housing Authorities        Law’ is a
          constitutional     exemption from taxation,     and
          property owned by the Housing Authority of Browns-
          ville,    Texas, duly created under sald Act as a
          public body corporate and politic,       and an agency
          or Instrumentality      of the State of Texas, under
          its police     power, is ‘public property used for
          public purposes, ’ entitled      to exemption from State
          and County ad valorem taxes under said ‘Housing
          Authorities     Law’ and controlling   constitutional
          provisions.    ”
          The controlling     constitutional     provision   referred  to in
    that opinion is Article      VIII, Section 2, Constitution        of
    Texas, which provides,      in part:
               11      the Legislature       may, by general
          laws,‘e;empt    from taxation public property used
          for public purposes.       . .”
          Although the result reached in that opinion is still
    correct,   the Supreme Court of Texas In City of Beaumont v.
i
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Hon. Robert        S. Calvert,     Page 3       (M- 310)

Fertitta,   415 S.W.2d 902 (Tex.Sup. 1967)~ has held
that Article   VIII, Section 2, supra, did not apply to
publicly  owned property, and accordingly   Attorney General
Opinion No. O-1921 (1940) is modified to the extent of
such holding and any conflict    with this opinion.  Regard-
ing lands owned by the City of Beaumont, the Court stated
at page 909:
          Respondents          contend that since
     this property is public property not used
     for public purposes the Leglslature     is
     prohibited  from exempting It from taxation
     by Article  VIII, Section 2, of the Consti-
     tution.    While property owned by cities    Is
     public property,   It is not the type of
     public property to which Article VIII,
     Section 2 is applicable     . . .'
      In   the course of its opinion.  the Court reaffirmed its
holding    In Daugherty v. Thompson,-71 Tex. 192, 9 S.W. 99,
wherein    it -what                   by the words "public proper-
ty used    for public purposes   as used in Article  VIII, Sec-
tion 2,    in these words:
             -That section
                        of the constitution
      seems    to    apply   to    owned bye
                                  property
     persons or corporations    in private  right,
     but which, from the use to which it is
     applied,  Is, in a qualified    sense, deemed
     public property.
     This construction    does not allow any application      of
said provision  to property    of a Housing Authority.     Further-
more, the Court in City of .Beaumsnt v. Fertitta,      supra,
held in effect,   that publicly   owned property was not required
to be taxed by the Constitution:
             "Itcan be readily seen that the
      only    propertyrequired to be taxed by
      the Constitution    Is private property
      held by natural persons or private
      corporations.      (Emphasls ours.

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Hon. Robert   S. Calvert,   Page 4       (M-310)

     Since publicly    owned property is not required to
be taxed, the Legislature    may tax or choose not to tax
such property.    By exempting the property of Housing
Authorities   in Section 22, of Article  1269k, the Legislature
has clearly   chosen not to tax such property.    City of Beau-
mont v. Fertltta,   supra.
      This opinion does not purport to pass on any question
of whether taxes can be lawfully assessed against the lease-
hold interest   of a lessee of the Housing Authority,    as where
the property is held under a lease for a term of three vears
or mbre‘under the provisions   of Article   7173, Vernon's &Gil
Statutes.    See City of Beaumont v. Fertltta,   supbra, holding
that a tax on t'he leasehold was assessable    not against the
City but against its lessees.
                            SUMMARY
               .There is no constitutional      pro-
         hibition    against a complete exemption
         from taxation of property of a Housing
         Authority and such an exemption is
         clearly    given In Article   1269k, Section 22,
         Vernon's Civil Statutes.       The Legislature
         in said exemption chose not to tax the
         property of a Housing Authority;        there-
         fore, the property of the Housing Authority
         of the City of Harllngen is not taxable,
         even though a portion of the property is
         let to concessionaires      operating   the
         facilities     to serve the residents.      Attorney
         General Opinion No. O-1921 (1940) Is
         modified to the extent that Article         VIII,
         Section 2 of the Constitution       of Texas
         does not apply to publicly       owned property,
         as determined In City of Beaumont v. Fertitta,
         415 S.W.2d 902 (Tex.Sup. 1967)          Thi       I i
         does not pass on the taxability        of l~a~~h%~
         interests     of lessees of the Housing Authority
         and arising under a lease for a term of three

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     Hon. Robert S. Calvert,   Page 5          (M- 310 1

              years or more pursuant to the provisions
              of Article 7173, Vernon's Civil Statutes.

                                            Yours very truly,



                                            AtFrney   General of Texas

     Prepared by Wardlow Lane
     Assistant Attorney General
     APPROVED:
     OPINION COMMITTEE
     Kerns B. Taylor,   Chairman
     Alfred Walker
     Bill Allen
     Harold Kennedy
     Arthur Sandlin
     A. J. CARUBBI, JR.
     Executive Assistant




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