Gilbert v. El Paso Hosp. Dist.
| Citation | 38 S.W.3d 85 |
| Decision Date | 18 January 2001 |
| Docket Number | No. 99-1100,99-1100 |
| Parties | (Tex. 2001) Ray E. Gilbert, Jr., Mario Melgar, Richard Montez and Bill Newkirk, Petitioners v. El Paso County Hospital District, County of El Paso, and Charles W. "Chuck" Mattox, Charles Hooten, Carlos Aguilar, Daniel Haggerty, and Miguel Teran as the governing board of El Paso County Hospital District, Respondents |
| Court | Supreme Court of Texas |
On Petition for Review from the Court of Appeals for the Eighth District of Texas
The Texas Constitution and the Texas Tax Code contain truth-in-taxation provisions that require local government units to tell their taxpayers each year how the next year's property tax rates will compare with the current year's. See Tex. Const. art. VIII, § 21; Tex. Tax Code § 26.04. As part of this taxpayer notice, taxing units must show how much money, if any, they estimate that they will have left over from previous years' maintenance and operations and debt service funds. See Tex. Tax Code § 26.04(e)(2). We must decide whether this disclosure requirement covers only property taxes left over in these funds, or whether it also covers revenues accumulated from other sources.
The El Paso Hospital District pays its operating expenses from several kinds of revenue, including patient fees, cafeteria charges, property taxes, and the federal Medicaid program. The District reads the truth-in-taxation statute to require that its notice show only the District's estimate of its remaining property taxes, even if other non-tax funds are also available for maintenance and operations. Gilbert and other taxpayers sued the District, contending that the statute requires the District to show the full amount of its unspent funds from all sources.
The trial court rendered judgment for the taxpayers, but the court of appeals reversed, holding that the Tax Code does not require the District to disclose balances made up of non-tax revenues. 4 S.W.3d 66, 73. We disagree, reverse the court of appeals' judgment, and remand the case to the court of appeals.
The El Paso Hospital District operates R.E. Thomason General Hospital in El Paso. Constitutionally and by statute, the District has "full responsibility for furnishing medical and hospital care for indigent and needy persons residing in the district." Tex. Health & Safety Code § 281.046; see also Tex. Const. art. IX, § 4. To discharge this responsibility and to perform its other functions, the District is authorized to assess a tax on property in the District. See Tex. Const. art. IX, § 4. In addition to property taxes, the District receives money from paying patients, its cafeteria, and Medicaid.
The District participates in the Medicaid Disproportionate Share Program, which provides extra revenue to hospitals that serve a high proportion of indigent patients. See 1 Tex. Admin. Code § 355.8065(a). This revenue is significant to the District; in 1997, the District received almost as much in Disproportionate Share ("Dispro") Funds as it received in property taxes.1 The District must use Dispro revenues to serve poor patients, but the parties agree that this requirement is the only relevant limit on the District's use of Dispro money.
The District's policy is to spend Dispro money last. It budgets its operating expenses to equal its other revenues, and segregates its Dispro funds to pay for special projects such as community outreach and capital improvements. As a result, even though the District had by 1997 accumulated about $73 million in unspent Dispro money, its records showed each year that the District's operating expenses had exhausted its property tax revenue.
To comply with the truth-in-taxation requirements, the District each year publishes a "Notice of Effective Tax Rate" in the local newspaper. See Tex. Tax Code § 26.04(e). The statute requires the District to include in this notice "the estimated amount of interest and sinking fund balances and the estimated amount of maintenance and operation or general fund balances remaining at the end of the current fiscal year that are not encumbered with or by corresponding existing debt obligation." Id. § 26.04(e)(2). Relying on its interpretation of the Texas Comptroller's "Truth-in-Taxation Guide," the District reported in 1997 only the property tax revenue remaining in these funds. Because it budgets to spend all its non-Dispro revenue each year, the District reported its estimated fund balance as $0. A group of taxpayers sued to contest the District's 1997 notice under Texas Tax Code § 26.04(g), which authorizes a court to enjoin a taxing unit's adoption of a tax rate if the unit has not made a good-faith effort to comply with the truth-in-taxation requirements. They also sought declaratory relief and attorney's fees under the Declaratory Judgments Act. See Tex. Civ. Prac. & Rem. Code §§ 37.004, 37.009.
The trial court ruled that Section 26.04(e)(2) required the District's truth-in-taxation notice to show all the money remaining at the fiscal year's end, regardless of the source. Another trial court had reached a similar conclusion in 1996 in a suit these same taxpayers had brought against El Paso County.2 The County did not appeal that judgment because it believed the case to be moot. But that judgment led the trial court here to conclude that the District's failure to follow the Tax Code was not in good faith. The court enjoined the District's adopting a tax rate in future years unless it published the full unencumbered balances, regardless of source, in its interest and sinking fund and in its maintenance and operations fund.3 The trial court also awarded the taxpayers attorney's fees under the Declaratory Judgments Act.
The court of appeals reversed the trial court's judgment, holding that the Tax Code requires publication only of fund balances derived from property taxes. 4 S.W.3d at 73. We granted review to resolve this question of statutory interpretation.
A taxing unit's annual truth-in-taxation notice allows its taxpayers to compare the unit's proposal for one year's taxes with the prior year's taxes. See Tex. Const. art. VIII, § 21. Before adopting a tax rate for the fiscal year, a taxing unit must report to its taxpayers its "effective tax rate" and its "rollback tax rate." See Tex. Tax Code §§ 26.04(e)(1), (g). In the same notice publishing these two rates, the taxing unit must show the fund balances at issue in this case. See id. § 26.04(e)(2).
The formula for the effective tax rate considers only properties that remain on the tax roll from the previous fiscal year. This rate shows how the taxing unit would collect the same amount of overall revenue from these properties in the current fiscal year as it collected in the previous year. See id. § 26.04(c)(1). The calculation of the rollback tax rate treats taxes for debt and non-debt purposes separately. By imposing the rollback tax rate, the taxing unit would meet its debt service obligations for the fiscal year and also raise its levy for non-debt expenses by 8% over the previous year's non-debt total. See id. § 26.04(c)(2). Changes in taxable property values and in the taxing unit's debts from one year to the next dictate the mathematical relationship among the effective tax rate, the rollback tax rate, and the taxing unit's actual rate for the previous year.
The Tax Code authorizes the taxing unit to adopt a rate for each fiscal year that is high enough to pay its debts and to meet its maintenance and operation needs. See id. § 26.05(a). Depending on the unit's debts, service plans, and accumulated surplus or deficit, this rate may be lower than, higher than, or equal to the previous year's rate. See Texas Co. v. Panhandle Indep. Sch. Dist., 72 S.W.2d 957, 959 (Tex. Civ. App.--Amarillo 1934, writ ref'd) (). If the unit wishes to adopt a rate higher than either the effective tax rate or the rollback tax rate, however, the taxing unit must hold a public hearing before adopting it. See Tex. Tax Code § 26.05(d). Moreover, in a special election after the taxing unit has adopted the annual tax rate, voters can cut taxes back to the rollback tax rate, perhaps forcing the taxing unit to alter its plans. See id. § 26.07; Vinson v. Burgess, 773 S.W.2d 263 (Tex. 1989).
The truth-in-taxation statute does not, by itself, limit a governmental unit's power to levy taxes. But see, e.g., Tex. Const. art. IX, § 4 (). Instead, the truth-in-taxation scheme focuses on giving taxpayers information. If the taxing unit proposes to increase taxes above either the effective tax rate or the rollback tax rate, the taxpayers can apply these rates and the proposed rate to their taxable property values to compare the burdens the rates would impose. They can also examine the taxing unit's reported fund balances to evaluate the unit's need for additional money.
The court of appeals held that Tax Code Section 26.04(e)(2) requires disclosure only of those remaining fund balances derived from property taxes. It based this holding on the terms and definitions in the Tax Code, see 4 S.W.3d at 70-72, and on its understanding of the purpose behind the truth-in-taxation requirements, see id. at 72-73. We conduct a similar analysis, but conclude, as the trial court did, that the statute requires a taxing unit to report all of its estimated unencumbered fund balances regardless of the revenue source.
Our essential task in interpreting this statute is to carry out the Legislature's intent. Union Bankers Ins. Co. v. Shelton, 889 S.W.2d 278, 280 (Tex. 1994). In doing so, we look first to the statute's language. Smith v. Clary Corp., 917 S.W.2d 796,...
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