Opinion No. KP-0444
The Honorable Paul Bettencourt
Chair, Senate Committee on Local Government
Texas State Senate
Post Office Box 12068
Austin, Texas 78711-2068
Re: Whether a tax rate increase election under Tax Code section 26.07 authorizes a municipality to "earmark" use of a voter-approved increase in its Maintenance and Operation property tax revenue for purposes other than maintenance or operations; and if not, may an increase in a municipality's Maintenance and Operation property tax be transferred to a local government corporation (created pursuant to Transportation Code chapter 431, subchapter D) to be used for debt service on debt issued by the local government corporation (RQ-0508-KP)
S U M M A R Y
A truth-in-taxation provision, Texas Tax Code section 26.07 requires a municipality to hold an automatic election if it seeks to increase its tax rates above a specified amount. It does not authorize a municipality to "earmark" use of a voter-approved increase in its maintenance and operation property tax revenue for debt service.
A court would likely conclude that an agreement wherein a municipality binds itself to transfer in perpetuity an increase in its maintenance and operations property tax and is not subject to an annual appropriation and is prohibited by article XI, section 5 as a pecuniary obligation imposed by contract with no right to terminate at the end of each budget period.
For further information, please access the website at www.texasattorneygeneral.gov or call the Opinion Committee at (512) 463-2110.
TRD-202301897
Austin Kinghorn
General Counsel
Office of the Attorney General
Filed: May 23, 2023