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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 114019
Experience:  Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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The City of El Paso, Texas collects 10% of water bills as a

Customer Question

The City of El Paso, Texas collects 10% of water bills as a "Payment in Lieu of Taxes." The money goes into the general fund. Is this legal?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
The cities and municipalities have the right to levy taxes as approved by the council or voters. They can legally add a "tax" to the water bill instead of charging some separate tax. Some municipalities add it to water, others add it to sewer and others add it to trash collection, that is within the municipality's right to tax.
Customer: replied 1 year ago.
The city ordinance does not say that the payment is a tax or a fee. It simply says that 10% of water revenues will be paid to the city. The city has also levied a separate "franchise fee" on water customers for rights of way and wear and tear on city streets.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
If that franchise fee was passed by the municipality though, it is within their rights to vote to impose. These municipal franchise fees have been attacked by telephone and cable companies at the Texas legislature and still have not been removed.
Customer: replied 1 year ago.
Can the city collect 10% of water revenues for an undefined purpose and then levy a franchise tax on top?
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
Yes, they can and this is why the other utilities companies have gone before the Texas legislature on several occasions to try to stop them from doing so, but as of yet the Texas legislature has refused to do so.
Customer: replied 1 year ago.
Can you cite the law that allows a Texas municipality to tax water?
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
Under Texas Code Chapter 54 which governs utilities, it allows the municipality to impose a tax and also a right of way franchise fee for water running across public lands.
Customer: replied 1 year ago.
Is ther a limit to the amount of tax that municipality can impose?
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
That is up to the Public Utility Commission and you have to check with them as they do control charges and fees.
Customer: replied 1 year ago.
I prefer to do it in writing.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
You can send a written request to the Public Utilities Commission, as they would have to give you the answer as they control this with utilities.
Customer: replied 1 year ago.
Is this the law that you were referring to. It is about "Municipal Utility Districts."
WATER CODE
TITLE 4. GENERAL LAW DISTRICTS
CHAPTER 54. MUNICIPAL UTILITY DISTRICTS
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
Yes, it discusses power to levy fees and taxes and control by the PUC. That is the law municipalities rely upon to levy these fees and taxes.