Untitled Texas Attorney General Opinion ( 2006 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
October 30,2006
The Honorable Robert R. Puente Opinion No. GA:0474
Chair, Committee on Natural Resources
Texas House of Representatives Re: Appropriate construction of Local Government
Post Office Box 2910 Code chapter 373A authorizing a city to establish
Austin, Texas 78768-2910 homestead preservation districts and reinvestment
zones (RQ-0471 -GA)
Dear Representative Puente:
You ask about chapter 373A of the Local Government Code (the “Act”), which the Texas
Legislature enacted in 2005 to increase home ownership and prevent the involuntary loss of existing
homesteads by low- and moderate-income homeowners living in disadvantaged neighborhoods
adjacentto central business districts.’ See Act of May 19,2005,~79th Leg., RX, ch. 495, § 1,2005
Tex. Gen. Laws 1359, 1359. Because the Act is a new statutory scheme, “there is concern about
possible adverse legal effects on existing operations of land trusts that own land located within the
possible boundaries of any new [homestead preservation] district and on the current operations of
municipal programs if a district is created.” Request Letter, supra note 1, at 1. Thus you ask the
following four questions regarding the appropriate construction of the Act:
1. If a municipality creates a homestead preservation district under
[the Act], and a community housing development organization or a
housing finance corporation operates in that district, does the tax
exemption in Section 373A.108 apply to all the real property owned
by a community housing development organization or a housing
finance corporation, including land trust property and other real
property located both inside or outside the district?
2. May an ordinance creating a. reinvestment zone under Section
373A.l52(a) include aprovision that establishes atermination date for
the zone, and may a municipality and a county enter into an
agreement under Section 373A.l55(d) that requires the county to pay
into the tax increment fund of the zone for a period exceeding one
‘See Letter from Honorable Robert R. Puente, Chair, Committee on Natural Resources, Texas House of
Representatives,to Honorable Greg Abbott, Attorney General of Texas (Mar. 22, 2006) (on file with the Opinion
Committee, also mdable af http:iiwww.oag.state.tx.us)[hereinafterRequest Letter].
The Honorable Robert R. Puente - Page 2 (GA-0474)
year without its right to reconsider its decision under Section 373A.
152(f)?
3. If a. reinvestment zone is created under Section 373A.l52(a),
may the tax increment fund expend funds for public works or
public improvements similar to those defined as “project costs” under
Section 3 11.002(1)(A), Tax Code, or is the use of the fund under
Section 373A. 157 restricted only to the purchase of real property,
the construction or rehabilitation of housing units in the zone, and
zone administrative expenses?
4. May a family’s income-eligibility to receive a benefit from the .
reinvestment [zone] tax increment fond be determined in accordance
with the U.S. Department of Housing and Urban Development’s
eligibility rules at 24 Code of Federal Regulations Part 5, and is the
family’s income eligibility determination only required for the year
in which the family receives the benefit or are annual recertifications
of income required over the 30-year affordability period under
Section 373A.l57(g)?
Id. at 2.
I. Chapter 373A
The Act authorizes a qualifying city to designate, by ordinance, as a “homestead preservation
district” (the “district”) an area in the city that meets the statutory criteria. See TEX. LOC. GOV’T
CODE ANN. 5s 373A.O51(a), ,052 (Vernon 2005); see also id 5 373A.003 (stating that the Act
applies to a city with a population of more than 650,000 in a uniform state service region with fewer
than 550,000 occupied housing units). A qualifying city may “create or designate . one or more
homestead land trusts, including a land trust operated by a community housing development
organization [“CHDCY] certified by the municipality, to operate in an area that includes a district.”
Id. 5 373A.101.’ The homestead land trusts may own and retain title to the land and lease or sell
housing units on that land to families at or below seventy percent of the area median income. Id. ($5
373A.105, .106(a)? Section 373A.108 generally exempts from city and county taxes but not school
‘See also TEX. Lot. GOV’T CODE ANN. 5 373A.002(2) (Vernon 2005) (providing that a CHDO “has the
meaning assignedby 42 U.S.C. Section 12704”);42 U.S.C. 5 12704(6)(2000) (statingthat a CHDOmeans a nonprofit
organizationthat has among its purposes the provision of affordablehousing, that maintains accountabilityto the low-
income community residents, that has demonstrated ability to provide affordable housing, and that has a history of
serving the local community).
‘Whena “communityland trust”(“CLT”)sells homes, it leases the underlying land to the homeownersunder
a long-term renewable lease. See INSTITUTE FORCOMMUWTYECONOMICS,THE COMMUNITYLAND TRUSTMODEL,
available atwww.iceclt.org/clt/cltmodel.html(last visited Oct. 17,2006). “CLTs control housing costs by permanently
limiting land costs and ‘locking in’subsidies so that they benefit one homeowner after another. .” Id.
The Honorable Robert R. Puente - Page 3 (GA-0474)
district taxes the real property owned by a homestead land trust (or a land trust created under another
statute but operating iti the district). See id. 5 373A.108.
Additionally, the Act authorizes a city to create within the district a homestead preservation
reinvestment zone (the “homestead zone”). A city may designate by ordinance as a homestead zone
an area in the district that is unproductive, underdeveloped, or blighted, as provided by article VIII,
section l-g(b) ofthe Texas Constitution. Id. $373A.l52(a)-(b). Before adopting the ordinance, the
city must prepare a preliminary homestead zone financing plan and send it to the county that will
contain all or the greatest part of the homestead zone, and hold a public hearing on the creation of
the zone. Id. 5 373A.l52(c)-(d). After reviewing this and other information provided by the city,
if the county decides to participate in the zone, “the governing body of the county on an annual basis
may reconsider its decision to participate.” Id, tj 373A. 152(f).
If a city creates a homestead zone, it must establish a tax increment fund, and each
participating taxing unit that taxes real property in the homestead zone, must deposit its “tax
increment” into the fund. Id. 5s 373A.154, .155(a). In general, the “tax increments” are taxes
derived by a taxing unit from the difference between the appraised value of all taxable real property
located in the homestead zone for that year less all the property’s appraised value when the zone was
created. See id. 5 373A.153 (determination of amount of tax increment). In other words, they are
taxes attributable to the increased value of the real property in the zone presumably due to its
development. C’ Tex. Att’y Gen. Op. No. JC-0300 (2000) at 8 n.8 (describing a similar statute).
The tax increment fund is “dedicated . to the development and preservation of affordable housing
in the zone.” TEX. LOC. GOV’T CODEANN. 5 373A.l57(a) (Vernon 2005). Chapter 3 11 of the Tax
Code, which provides for and governs tax increment reinvestment zones, does not apply to the
homesteadzone. Id. 5 373A.151; see also TEX. TAXCODEANX $5 311.001-,020 (Vernon 2002 &
Supp. 2006).
II. Analysis
A. Application of section 373A.108’~ tax exemption to real property inside
and outside the district
You first ask whether section 373A.108’~ tax exemption applies to all real property owned
by a CHDO or a housing finance corporation (“HFC”) ‘operating in the district as a land trust,.
including property that is not land trust property ~(“non-land-trust property”) and property that is
outside the district. See Request Letter, supra note 1, at 2. To provide a context for your question,
we note that based on its population, housing, and uniform state service region requirement, the Act
applies only to the City of Austin (the “City”). See TEX. LOC. GOV’T CODE ANN. tj 373A.003
(Vernon 2005); HOUSERESEARCHORG., BILL ANALYSIS, Tex. H.B. 525,79th Leg., R.S. (2005)4
(“Creation of homestead preservation district fin Austin”) ,(subject); FISCAL NOTE, Tex.
H.B. 525,79th Leg., R.S. (2005) (“The applicability criteria would apply only to the City of Austin
``Avai/ableafh~p://www.hro.house.state.hc.us/~ameZ.htm(HouseResearch
Organization
website)(lastvisited
Oct. 17, 2006).
The Honorable Robert R. Puente - Page 4 (GA-0474)
. ‘3. As we understand it, if the City creates a district, it will likely designate a CHDO or a
CHDO-controlled entity as a homestead land trust to operate in the district.’ Additionally, as we
understand it, the City would also want its existing HFC established under chapter394 of the LoCal
Government Code to operate as a land trust in the district. See City Brief, supra note 5, at 2.
Significantly, for the purposes of the City, section 373A.108 does not exempt a land trust’s real
property from school district taxes. See TEX. LOC. GOV’T CODE ANN. 3 373A.108 (Vernon 2005).
Section 373A.108 exempts from taxation real property owned by homestead land trusts
created or designated under the Act and by land trusts created under other statutes but operating in
the district. See id. § 373A. 108. The statute does not expressly limit its application to land trust real
property inside the district. Subsection (a) provides that “[a] trust’s real property is exempt from
property taxation by this state or a political subdivision of this state, other than a school district.”
Id. 5 373A.l08(a) (emphasis added). And subsection (b) provides that, if approved by the city or
the county, “the real property of any land trust operating in the district under other law is exempt
from property taxation by the municipality or county if the land trust is exempt from federal income
taxation”under Internal Revenue Code sections 501(a) and 501(c)(3). Id. § 373A.l08(b) (emphasis
added).
While section 373A.108 should be read according to its plain language, it must also be read
consistent with the Act as a whole. See Tex Dep’t. of Transp. v. City ofSunset Valley, 146 S.W.3d
637,642 (Tex. 2004) (“If the statutory language is unambiguous, we must interpret it according to
its terms, giving meaning to the language consistent withthe other provisions in the statute.“); Lubin
v. Farmers Group, Inc., 157 S.W.3d 113; 120 (Tex. App.-Austin 2005, pet. filed) (citing Burr v.
Bernhard, 562 S.W.2d 844,849 (Tex. 1978)) (“[WI e must consider the statute as a whole rather than
as isolated provisions and should not give one provision a meaning inconsistent with other
provisions, although it might be susceptible to such a construction standing alone.“). The Act’s
scope and operation are limited to land,trust real property inside thedistrict. See TEX. Lot. GOV’T
CODE ANN. 5s 373A.051, ,053, .lOl-,102 (Vernon 2005); see also HOUSE RESEARCHORG., BILL
ANALYSIS,Tex. H.B. 525,79th Leg., R.S. (2005)6 (“The city would,be able to provide tax-exempt
bond financing, density bonuses, and other incentives in the district.“) (digest). For instance, the Act
authorizes the creation of a district to promote and expand home ownership in a particular area of
a city. See TEX. Lot. GOV’T CODEANN. 3 373A.05 1 (Vernon 2005). Additionally, it authorizes the
creation and operation of land trusts to operate in and for the benefit of the district to promote these
purposes, See id. § 373A.101 (authorizing a city to create a homestead land~trust to “operate in an
area that includes a district”); id. 5 373A. 102(a) (stating that a land trust is “created to acquire and
hold land for the benefit’of developing and preserving long-term affordable housing in the district”)
(emphasis added). By definition, real property owned by a land trust must be land trust property.
Finally, the,Act authorizes compiling a list of properties in the district owned by a cityor county
that may become available as land trust properties. See id. § 373A.053 (inventory ofproperties); id
‘See Brief from David Allan Smith, City Attorney,Austin, TX, to HonorableGreg Abbott, Attorney General
of Texas, at l-2 (Apr. 21, 2006) (on file with the Opinion Committee) [hereinafterCity Briefl.
The Honorable Robert R. Puente - Page 5 (GA-0474)
5 373A. 107 (providing for transfer of governmental property to land trust). The Act does not
mention or,address non-land-trust property or property outside the district.
And because section 373A.108 grants tax exemptions, it must be read narrowly: “It is a
long-standing rule of construction in Texas that language granting exemptions from taxation must
be construed strictly.” Bexur Appraisal Dist. v. Incarnate Word Coil., 824 S.W.2d 295,297 (Tex.
App.-San Antonio 1992, writ denied) (citing Bullockv. Nat’1 Bancshares Corp., 584 S.W.2d 268,
271-72 (Tex. 1979), Hilltop Village, Inc. v. Kerrville Indep. Sch. Dist., 426 S.W,2d943,948 (Tex.
1968), River Oaks Garden Club v. City ofHouston, 370 S.W.2d 851,855 (Tex. 1963)). “Statutory
exemptions from taxation are subject to strict construction because they undermine equality and
uniformity by placing a greater burden on some taxpaying businesses and individuals rather than
placing the burden on all taxpayers equally.” N. Alamo Wuter Supply Corp. v. Willacy County
Appraisal Dist., 804 S.W.2d 894,899 (Tex. 1991). Reading the statute’s tax exemption to apply to
land trust real property inside the district-rather than all real property irrespective of its use or
location-and thus limiting its application comports with this well-established rule.
The City suggests that section 373A.l08(a) does not apply to the real property of a CHDO,
designated as a homestead land trust under the Act, and located inside the district. See City Brief,
supra note 5, at 2-3. Rather, the City argues, the provisions of Tax Code sections 11.182 and
11 .1825 apply, and consequently the CHDO’s real property inside the district is also exempt from
school district taxes. See id at 2. Generally, under sections 11.182 and 11.1825 of the Tax Code,
a CHDO’s real property is eligible for exemption from all property taxes, including school district
taxes. See TEX. TAX CODE ANN. $5 11.182, .1825 Vernon Supp. 2006). But, while Tax Code
sections 11.182 and 11 .1825 apply to all CHDOs, section 373A.l08(a) applies specifically to a
homestead preservation district and real property owned by a homestead land trust, including a
CHDO, located inside the district. And section 373A. 108 is the later-enacted statute? “[A] specific
act is properly regarded as an exception to, or qualification of, a general law on the same subject
previously enacted. In such a case both statutes are permitted to stand, the general one being
applicable to all cases except the particular one embraced in the specific act.” Taub v. Aquila SW.
Pipeline Corp., 93 S.W.3d 45 1,457 (Tex. App.-Houston [ 14th Dist.] 2002, no pet.) (quoting Sam
Bassett Lumber Co. v. City of Houston, 198 S.W.2d 879, 881 (Tex. 1947)); see also TEX. GOV’T
CODE ANN. $ 3 11.026(b) (Vernon 2005) (directing that if conflict between a special and general
provision is irreconcilable, the special provision prevails as an exception to the general provision
unless the general provision is the later enactment and~is intended to prevail). Effect can be given
to both sets of statutes by reading section 373A.108 as an exception to sections 11.182 and 11.1825
with respect to a CHDO’s land trust properties inside a district.
Similarly, the City suggests that Local Government Code section 394.905, which exempts
an HFC’s property from all taxes including school district taxes, applies to an HFC’s real property
‘SeeAct ofMay 19,2005,79th Leg., R.S., ch. 495, 5 1, 2005 Tex. Gen. Laws 1359, 1361 (enacting section
373A.108);Act of June 1,2003, 78th Leg., RX, ch. 1156, $5 2-3, 2003 Tex. Gen. Laws 3256, 3256 (amendingTax
Code section 11.182and enactingsection 11.1825);Act ofMay 23, 1997,75tb Leg.,RX, ch. 715,s 2, 1997Tex. Gen
Laws 2358, 2360-61 (enactingTax Code section 11.182).
The Honorable Robert R. Puente - Page 6 (GA-0474)
inside the district rather than section 373A.l08(b). City Brief, supru note 5, at 2-3; see also TEX.
Lot. GOV’T CODE ANN. § 394.905 (Vernon 2005). Again, while section 394.905 applies to all
housing finance corporations, section 373A.108 is the later-enacted statute8 and applies specifically
to real property inside a homestead preservation district, including real property owned by an HFC
operating as a land trust inside the district. Effect can be given to both statutes by reading section
373A.108 as an exception to section 394.905 with respect to an HFC’s real property inside the
district. See TEX. GOV’T CODE ANN. 5 3 11.026(b) (Vernon 2005); Taub, 93 S.W.3d at 457.
A strict reading of section 373A.108 consistent with the Act’s scope and operation requires
us to conclude that it applies only to land trust real property located inside the district. See Sunset
Valley, 146 S.W.3d at 642; Lubin, 157 S.W.3d at 120; Bexur Appraisal Dist., 824 S.W.2d at 297.
The exemptions provided by Tax Code sections 11.182 and 11.1825 and by Local Government Code
section 394.905’do not apply to such property inside the district. See TEX. GOV’T CODE ANN.
5 311.026(b) (Vernon 2005); Taub,~93 S.W.3d at 457.
B. Providing reinvestment zone termination date and county payment of tax
increments beyond one year
In your second question, you initially ask whether under section 373A.l52(a) a city may, in
the ordinance creating the homestead zone, establish a terminations date for the zone. See Request
Letter, supra note 1, at 2.
By its terms, the Act neither authorizes nor requires that a homestead zone have a termination
date. See Sunset Valley, 146 S.W.3d at 642 (stating that unambiguous statutory language must be
interpreted according to its terms and consistent with other statutory provisions). We believe the
omission here is significant. First, a perpetual homestead zone seems consistent with the other long-
term provisions of the Act and, in particular, the inability of the creating city, unlike other taxing
units, to limit or stop making payments into the homestead zone’s tax increment fund. See TEX.
Lot. GOV’T CODE ANN. 5 373A. 102(l) (Vernon 2005) (stating that a land trust must be created to
preserve and develop “long-term affordable housing in the district”); id 5 373A.103(5) (stating that
land trust’s purpose is to “capture the value of public investment for long-term community benefit”);
id. 5 373A.l55(d) (providing that “[a] taxing unit other than the municipality is not required to pay
into the tax increment fund any of its tax increment” unless it has entered into an agreement and that
the agreement may specify the amount and duration of the payments). Next, chapter 3 11 of the Tax
Code is instructive on this issue. Chapter ‘31 i authorizes the creation of tax increment financing
reinvestment zones and specifically requires the ordinance designating an area as a reinvestment
zone “to provide a date for termination ofthe zone.” TEX. TAX CODEANN. 5 3 11.004(a)(4) (vemon
Supp. 2006). And chapter 3 11 specifically addresses the termination process. See id. § 3 11.017
(providing for an applicable termination date and for discharge of outstanding bonds). Unlike
‘See Act of May 19,2005,79th Leg., R.S., ch. 495, 5 1, 2,005Tex. Gen. Laws 1359, 1361 (enacting section
373A.108);Act of May 1, 1987,7OthLeg., RX, ch. 149,s 1, sec. 394.905,1987 Tex. Gen. Laws 707, 1236(enacting
Local GovernmentCode section394.905,formerlyTexasRevised CivilStatutesart. 1269l-7, sec. 2 1 originallyenacted
by Act of May 22, 1979,66th Leg., R.S., ch. 835, 3 21, 1979 Tex. Gen. Laws 2186,219X).
TheHonorableRobert R. Puente - Page 7 (GA-0474)
chapter 311, neither section 373A.152, which authorizes a city to create a homestead zone by
ordinance, nor any other provision in the Act addresses the zone’s termination. Moreover, section
373A. 151 specifically provides that “[clhapter 311, Tax Code, does not apply to a homestead
preservation reinvestment zone created under this subchapter [D].” TEX. Lot. GOV’T CODE ANN.
§ 373A.151 (Vernon 2005). On its face, section 373A.15 1 evidences the legislature’s awareness of
chapter 3 11 and its provision as well as the legislature’s express rejection of the application of
chapter 3 11 provisions to the Act. If the legislature had intended homestead zones to exist for a
predefined period, it would have expressly so provided as it did in~chapter 3 11. We cannot insert
into the statute what the legislature has omitted. See RepublicBank Dallas v. Interkal, Inc., 691
S.W.2d 605, 607 (Tex. 1985) (stating that we must take a statute as we find it); In re S.H.A., 728
S.W.2d 73, 83 (Tex. App.-Dallas 1987, writ ref d n.r.e.) (stating that we must avoid “under the
guise of construction,” amending a statute by adding words to it). Construing the Act to permit a
homestead zone ordinance to include a termination date would be tantamount to amending the
statute. See Bolton v. Sparks, 362 S.W.2d 946, 950 (Tex. 1962) (“Municipal ordinances must
conform to the limitations imposed by the superior statutes, and only where the ordinance is
consistent with them will it be enforced.“); In re S.H.A., 728 S.W.2d at 83. Because it would
conflict with the apparent legislative intent of the Act, we conclude that a city creating a homestead
zone is not authorized to establish a termination date for the zone.
In your second question, you also ask whether a city and a county may enter into an
agreement that requires the county to make tax increment payments beyond one year without the
county having the right to reconsider its decision to make the payments. See Request Letter, supra
note 1, at 2.
A participating county retains discretion to annually reconsider its participation in a
homestead zone. See TEX. LOC. GOV’T CODE ANN. 5 373A.l52(f) (Vernon 2005). A taxing unit,
other than the city establishing the homestead zone, that levies taxes on property in the zone is not
required to participate in the reinvestment zone and deposit its tax increments into the tax increment
fund unless it has entered into an agreement with the city to do so. See~id 5 373A.l55(d). In the
agreement, the taxing unit can specify the amount and the years for which it will make the tax
increment deposits. See id. But the Act also provides that a participating county’s “governing body
. on an annual basis may reconsider its decision to participate” in the zone. Id. 5 373A. 152(f).
The county’s governing body cannot by agreement cede or bind its statutory discretion to terminate
the county’s participation-which essentially means transferring the county’s tax increments into
the homestead zone tax increment fund rather than retaining them for general county purposes-if
it should so desire. See, e.g., City of Corpus Christi v. BayfrontAssocs., Ltd., 814 S.W.2d 98,107
(Tex. App.-Corpus Christi 1991, writ denied) (“No governmental agency can, by contract or
otherwise, suspend or surrender its functions, nor can it legally enter into any contract which will
embarrass or control its legislative powers and duties or which will amount to an abdication
thereof.“). In other words, in any homestead zone participation agreement a county must retain the
right to annually reconsider its participation.
We conclude that a city and a participating county are not authorized to execute an agreement
that requires the county to deposit its tax increments into a homestead zone tax increment fund for
The Honorable Robert R. Puente - Page 8 (GA-0474)
a period exceeding one year and under which the county does not have the right to annually
reconsider its participation in the zone.
C. Authorized tax increment fund expenditures
You next ask whether homestead preservation district reinvestment zone tax increments may
be spent for public works or public improvements similar to those defined as “project costs” under
Tax Code section 311.002(1)(A), or whether their use is limited under section 373A.157 of the Act
to the purchase of real property, the construction or rehabilitation of housing units in the zone, and
payment of zone administrative expenses. Request Letter, supra note 1, at 2.
Section 373A. 157 expressly authorizes a city to expend the tax increment funds to buy land,
build or rehabilitate housing, and pay zone and housing administration expenses. TEX. LOC. GOV’T
CODE ANN. 5 373A.l57(e)-(f) (Vernon 2005). The Act provides that a city must spend at least
eighty percent~of the tax increment fund revenues expended annually to buy land and construct or
rehabilitate affordable housing in the zone and no more than ten percent for administering the zone.
Id. $373A.l57(e). A city may provide no more than ten percent of the revenues expended annually
to the designated land banks and CHDOs for administering housing-related activities in the zone.
Id 5 373A.1570. As the Act plainly and specifically names the purposes for which the tax
increment funds may be expended, any purpose not named is excluded. See id. 5 373A.l57(a)
(“Revenue from the tax increment fund must be dedicated as provided by this section. .“); Sunset
Valley, 146 S.W.3d at 642 (stating that unambiguous statutory language must be~interpreted
according to its terms and consistent with other statutory provisions); State v. Muuritz- Wells Co., 175
S.W.2d 238, 241 (Tex. 1943) (“[Tlhe express mention or enumeration of one person, thing,
consequence, or class is equivalent to an exclusion of all others.“). Moreover,~ as we have noted,
section 373A.151 expressly provides that chapter 311 of the Tax Code, which authorizes the use of
tax increments for a more expansive list of items than the Act, does not apply to the homestead zone.
See Supra p, 7 (discussing section 373A.151); TEX. Lot. GOV’T CODE ANN. 5 373A.151 (Vernon
‘2005); see also TEX. TAX CODEANN. $3 3 11.002( 1) (Vernon Supp. 2006) (defining “project costs”),
3 11 .O14 (authorizing use of tax increment fund for project costs). Accordingly, pursuant to the Act’s
plain language, we conclude that the homestead zone tax increment funds may be used only to
purchase real property, construct or rehabilitate housing units in the zone, and pay zone and housing-
related administrative expenses consistent with section 373A.157 of the Act.
D. Income eligibility determination and recertification
In your fourth question, you first ask whether a family’s income-eligibility to receive a
benefit from the tax increment fund for a homestead zone may be determined in accordance with the
United States Department of Housing and Urban Development’s (“HUD”) eligibility rules. Request
Letter, supra note 1, at 2.
While section 373A. 157, which you ask about, is silent on this issue, other provisions of the
Act specifically incorporate the HUD standards for calculating family median income. See TEX.
Lot. GOV’T CODE ANN. §§ 373A.157, ,203, ,210 (Vernon 2005). Section 373A.157 requires that
The Honorable Robert R. Puente - Page 9 (GA-0474)
all tax increment fund revenues “be expended to benefit families that have a yearly income at or
below 70 percent of the area median family income, adjusted for family size” but does not specify
the standard or methodology for determining the family income. Id. 3 373A.157@).9 HUD haas
promulgated detailed definitions and requirements to determine a family’s income eligibility for
various HUD and HUD-assisted housing programs. See 24 C.F.R 3s 5.601,-,609 (2006). Several
provisions of the Act incorporate the HUD standards. For instance, section 373A.210(b) requires
that certain percentages of homestead land bank properties in a district be sold to “households with
gross household incomes not greater than 60 percent of the area median family~income, adjusted for
household size, for the metropolitan statistical area. as determined annually by [HUD].” TEX.
Lot. GOV’TCODEANN. 5 373A.210(b) (Vernon2005); see also id. @373A.203(6) (defining“loti
income household”tithreference toareamedianincomedetermined by HUD), 373A.210(~)(1)-(3)
(requiring that certain percentages of rental units be occupied by families with a gross household
income not exceeding certain percentages of the area median family income as determined by
HUD).“’ Calculating family income eligibility under section 373A. 157 in accordance with the flUD
rules is,consistent with other provisions of the Act. See Lubin, 157 S.W.3d at 120 (stating that we
must consider a statute as a whole and should not give one provision a meaning inconsistent with
the other provisions, although it might be susceptible to such a construction standing alone).
We conclude that consistent with the Act as a whole, a family’s income eligibility to receive
a benefit from the homestead zone tax increment fund under section 373A. 157 may be determined
in accordance with the HUD’s eligibility rules codified at part 5 of title 24 of the Code of Federal
Regulations.
In your fourth Guestion you also ask whether a family’s income-eligibility determination is
only required for the year in which the family receives the benefit or whether annual recertifications
of income are required over the 30-year affordability period under Section 373A.l57(g). Request
Letter, supra note 1, at 2 (Section 373A.l57(g) of the Local Government Code provides that “[a]11
housing created or rehabilitated with revenue from the tax increment fund must have at least a 30-
year affordability period.“).
Again,~while section 373A.157 is silent on this issue, a related provision of the Act specifies
that a family’s income eligibility be determined when the benefit is granted. Section 373A.l57(b),
which requires that all tax increment fund revenues be spent to benefit families with a yearly income
?Seealso TEX.Lot. GOV’TCODEANN.9 373A.157(c)(VernonZOOS)(stating that at least fifty percent of the
revenues benefit families that have a yearly income at or below fifty percent of the area median family income), (d)
(stating that at least twenty-five percent of the revenues benefit families that have a yearly income at or below thirty
percent of the area median family income); id. 5 373A.106(stating that homestead land trusts must sell housing units
only to families with a yearly income at IXbelow seventy percent of the area median family income).
‘OTheHLJDstandardsare also used in other similar statutes providing for affordablehousing. See, e.g., id. $5
379C.O03(3)(Urban Land Bank DemonstrationProgramAct) (defining“lowincome household”with referenceto area
median income determined by HUD), 379C.OlO(b)(requiring that a percentage of land bank properties be sold to
familieswith a gross household incomenot exceedingsixty percent of the area median family income as determinedby
HUD).
The Honorable Robert R. Puente - Page 10 (GA-0474)
at or below seventy percent of the area median family income, does not specify whether the income
eligibility requirement applies only in the year the benefit is received or on an ongoing basis.
see TEX. Lot. GOV’T CODEANN. 5 373A.l57(b) (Vernon 2005). Section 373A.106, however,
provides that a land trust must sell or lease all housing units in a homestead preservation district “to
families with a yearly income tit the time ofpurchase or lease of the housing unit at or below 70
percent of the area median family income.” Id. § 373A.l06(a) (emphasis added); See also id
5 373A.l06(bHc). The reinvestment zone-to which section 373A.l57(b) relates-is contained
entirely within the district referenced in section 373A.106. See id. $5 373A.l52(b), .157(b). The
housing units sold or leased by the land trust under section 373A.106 will most likely be the same
units constructed or rehabilitated with tax increment funds under section 373A.157. It would be
unreasonable to have different and inconsistent eligibility criteria under sections 373A.157 and
373A. 106 for the occupation of the same properties. See TEX. GOV’T CODEANN. 5 3 11.021(3)
(Vernon 2005) (stating that we may presume that in enacting a statute, the legislature intended a just
and reasonable result). Thus, consistent with the Act as a whole, we conclude that the median family
income eligibility test under section 373A.l57(b) of the Act applies at the time the family receives
the housing benefit of the tax increment fund. See Lubin, 157 S.W.3d at 120 (stating that one
statutory provision should not be given a meaning inconsistent with the other provisions although
it might be susceptible to such a construction standing alone).
The Honorable Robert R. Puente - Page 11 (GA-0474)
SUMMARY
Local Government Code chapter 373A enacted in 2005 provides
for the creation of homestead preservation districts and homestead
reinvestment zones. Section 373A.108’~ tax exemption applies to land
trust real property owned by a community housing organization or a
housing finance corporation operating as a land trust in a homestead
preservation district only if the real property is inside the district. .The
exemptions provided by Tax Code sections 11.182 and 11.1825 and by
Local Government Code section 394.905 do not apply to such property
inside the district.
A city creating a homestead reinvestment zone is not authorized
to establish a termination date for the zone. Additionally, a city and a
participating county are not authorized to execute an agreement that
requires the county to deposit its tax increments into the zone’s tax
increment fund for a period exceeding one year and under which the
county does not have the right to annually reconsider its participation in
the zone. Finally, the tax increment fund revenues may be used only to
purchase real property, construct or rehabilitate housing units in the zone,
and pay zone and housing-related administrative expenses.
A family’s income eligibility to receive a benefit from a
homestead preservation reinvestment zone tax increment fund under
Local Government Code section 373A.l57(b) may be determined in
accordance with the United States Department of Housing and Urban
Development’s family income eligibility rules codified at part 5 of
title 24 of the Code of Federal Regulations. Additionally, the section
373A. 157(b) median family income eligibility determination is required
only for the year in which the family is granted a housing benefit from the
tax increment fund.
General of Texas
KENT C. SULLIVAN
First Assistant Attorney General
ELLEN L. WITT
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Sheela Rai
Assistant Attorney General, Opinion Committee