Untitled Texas Attorney General Opinion ( 1964 )

March 30, 1964 Honorable J. W. Edgar Opinion No. C- 232 Commissionerof Education Texas Education Agency Re: Whether the Texas Education Austin, Texas Agency should, in determining the economic Index and in calculatingthe amount of local funds to be charged to each scho,oldistrict in Harrison County, remove from the total ‘value added by manufacture"the value of products manufactured on federally-ownedmilitary reservations in Harrison Dear Mr. Edgar: County. Your office has requested an opinion on the following question: 'In determiningthe economic index and in calculating the amount of local funds to be charged to each school district In Harrison County, legally may and should the Texas Educa- tion Agency remove from the total ‘value added by manufacture' for Harrison County the value of p~roductsmanufacturedat Longhorn Ordnance Works?" The facts contained in your statementare the following: "Located within the Karnack Independent School District in Harrison County Is a govern- ment-owned and controlled installationknown as 'LonghornOrdnance Works.' It reportedly com- prises (8,50~ acres) 13.32 square miles of area in the Karnack district which has 114 square miles of territory. For purposes of Section 5 of Article 2922-16, the Longhorn Ordnance Works installationis recognizedby this Agency as a Federal-ownedmilitary reservationwithin the -1124- Hon. J. W. Edgar, page 2 (C-232) confines of the Karnack district; the school district enjoys an adjusted reduction in its local fund assignment therefor as prescribed and provided Sn the law. "This reservation (LonghornOrdnance Works) and its facilities are not assessed for taxes; it does not comprise any portion of the assessed valuation in or for Harrison County. The reserva- tion is under the direct control of the United States Army, Ordnance Corps; all its lands and facilities sre owned by the Government. 'The Governmenthas contractedwith a corporation (Thlokol Chemical Corporation)for the manufacture and sale of certain rocket fuels. All,paymentsare made to Thlokol by the United States Army; all its products are sold exclusively to the Qovernment. All expendituresof every kind including payrolls and manufacturemade by Thlokol are reimbursed to Thiokol by the Government, sub- ject to approval and acquiescenceof the ffovernment. Located upon the reservationare reservation em- ployees of the Government,under the direction of its CommandingOfficer. 'In determinationof the economic index for Harrison County, there has been included~the factor, 'value added by manufacture',for Harrison County pursuant to subdivisionc.(Artlcle2922-16, Section 3). The total value added by manufacture for Harrison County encompassesthe value of pro- ducts manufacturedat the reservationby Thiokol which are rocket fuels, their value being collec- tively reported under the broad category, trans- portation equipment, in Department of Commerce Reports. The economic index calculatedby this Agency for Harrison County does not include nor add a value for 'payrolls'at Thlokol; this be- cause the reservationor Thlokol is not recognized as a retail, wholesale or service establishment referred to in subdivisionc for payroll factor purposes. "A school district in Harrison County. . . vigorously complains and contends that value of manufacture of products manufacturedat Thlokol legally should not have come Into the -1125- Hon. J. W. Edgar, page 3 (C- 232) calculationsof the economic Index for Harrison County, that such value should have been ascer- tained from proper Governmentreporting agencies and deducted from the total 'value added by man- ufacture,'determined for Harrison County In ar- riving at that county's economic index. Further, that not to deduct such 'value'results in an Improper and unfair charging of higher local fund assignments against the local school dis- tricts of Harrison County and particularlythe Marshall district; that the law itself contem- plates that value of manufacture of tax exempt reservationsor corporations,such as Thlokol, should not be used In arrlvlng at the economic index.' Section 3 of Article 2922-16, In so far as pertinent to the presentationherein, prescribes as follows: 'In determiningthe taxpaying ability of each school district, the State Commissioner of Education, subject to the approval of the State Board of Education, shall calculate an economic index of the financial ability of- each county to support th F d tl School Program. The economic inzex"xy E c&ty shall be calculated to approximate the =$%%%ich the total taxpaying ability in the is in a given county, and shall constitute for the purpose of thisAct a measure of one county's ability to support schools in relation to the ability of other counties of the State. .Theeconomic index for each county shall be ,based upon and determined by the following weighted factors: a. Assessed valuation of the county, weighted by. . .(20); b. Scholasticpopulation of the county, weighted by. . .(8); c. Income for the county measured by: Value added by manufacture, value of minerals produced, value of agri- cultural products, payrolls for retail establishments,payrolls for wholesale establishments,payrolls for service establishments,weighted collectively by. . .(72). -1126- - . Hon. J. W. Edgar, page 4 (C-232) !I ‘I . . . Se&Ion 5 of Article 2922-16 recites the formula for determination(annually)of the amount of local funds to be charged to each school district in support of its local school operation as follows: "Divide the State and county assessed valuation of all property in the count ject to school district taxation I53%e%&t preceding school year Into the State and county assessed valuation of the district for the next preceding school year, findlng the district's percentage of the county valuation. Multiply the district'spercentage of the county valua- tion by the amount of funds assigned to all of the districts in the county. The product shall be the amount of local funds that the district shall be assigned to raise toward the financing of its foundation school program. "Provided,however, that in any district containing. . ., Federal-ownedmilitary reser- vations. .'.the amount assigned to such school district shall be reduced In proportion that the area included in the above-named classifi- bears to the total area of the district. catiol;f. . . . Section 3 of Article 2922-16 of Vernon's Civil Statutes provides that the Texas Education Agency shall cal- culate an economic index of the financial ability of each county to support the Foundation School Program. It further provides three guides to measure the wealth of a county: land value, (2) scholasticpopulation and (3) Income. In(%.s instance we are concernedwith the third, i.e., Income, specifi- cally, income for the county measured by value added by manu- facturing within that county. Although there is a specific exclusion of federally- owned military reservationareas in the county, this office can find no extilusionsin the statutes or cases which would support a contention that income created ,bythe manufacturingof trans- portation equipment (rocket fuel) on a federal reservation by an independentcontractor should not be included In determining the economic index of a county. Furthermore,we cannot conceive of any reason why, from an economic standpoint,the income from a manufacturing -1127- Hon. J. W. Edgar, page 5 (C- 232) independentcontractor,who sells all of his manufactured products to the Federal Government, is not the same and should not stand on the same footing as other manufacturingconcerns in arriving at the economic index of a county. SUMMARY In determiningthe economic index and In calculatingthe amount of funds to be charged to each county, the Texas Education Agency should include the income for the county using the "value added by manufacturing"of an independ- ent contractor on a federally-ownedmilitary reservation. Yours very truly, WAQQONER CARH Attorney General BY'B&r!!%?~ BMjr:sj:mkh Assistant ' * APPROVED: OPINION COMMITTEE W. V. Geppert, Chairman Pat Bailey Paul Phy Paul Robertson Gordon Appleman APPROVED FOR THE ATTORNEY GENERAL BY: H. Grady Chandler -1128-