Bonds

Austin moves forward with light rail project after dodging bond restrictions

A bill seeking to restrict bond issuance for a multi-billion-dollar light rail project in Austin did not advance to final passage in the Texas Legislature, but the city, which is considering an initial phase of the plan, is keeping an eye out in case it resurfaces.

A Senate amendment to House Bill 3899 that would have prohibited a local government corporation from issuing bonds backed by voter-approved property taxes transferred by its municipality led to the measure’s progress being halted just days before the regular legislative session ended Monday. 

The legislation was aimed at the Austin Transit Partnership (ATP), a corporation created by the city and Capital Metro Transportation Authority, and its ability to help finance the Project Connect light-rail system with yet-to-be-issued bonds paid off with property taxes voters approved in November 2020.

Austin Mayor Kirk Watson told the city council Tuesday the bill’s express purpose was to overturn the will of the voters and kill the project. He said the city will remain vigilant in case the legislation reappears as part of a special legislative session. 

“For now, we are going to take a deep breath, take mature and thoughtful action to move voters’ vision forward promptly and we can continue to look forward to the day when light rail is up and running in Austin, Texas,” Watson said.

After the legislature left some of his priorities unresolved, Gov. Greg Abbott announced Monday night that several special sessions will be required, starting with one addressing property tax cuts and border security. 

Republican State Rep. Ellen Troxclair, HB 3899’s sponsor, said it “shined a bright light on the illegal funding scheme contrived by the city of Austin for their rail project, as well as their efforts to hide the true cost of the project from voters along the way.”

As a result, Austin residents have a commitment from the city to allow them to vote on the project, along with “clear legal guidance” regarding the bonds, she added.

“Whether the city follows this guidance on their own accord or opts for a drawn out court battle in order to do the right thing remains to be seen,” Troxclair said in a statement.  

The House-passed version of the bill was amended in the Senate in the wake of a Texas Attorney General opinion that raised concerns about the legality of Project Connect’s financing structure.

When the legislation returned to the House for concurrence, an objection by State Rep. John Bucy, an Austin Democrat, that the Senate amendment changed the original purpose of the bill was sustained.

According to the May 25 House journal, the version passed by that chamber on May 2 required voter approval of property tax-backed bonds issued by local government corporations, while the amended bill approved by the Senate prohibited the bond issuance regardless of any voter approval.

As the bill initially moved through the House in April, Watson signaled voters would likely be asked in November to approve bonds for the project, which is also counting on federal funding.

A spokeswoman for Watson said the attorney general’s opinion affirmed the city’s November 2020 election complied with state law and the ability of ATP to issue contract revenue bonds. She added other matters that arose can be addressed with non-controversial changes to city contracts with ATP.

Austin is moving ahead with Project Connect, with the city council receiving a presentation Tuesday on a recommendation for a first phase that calls for 9.8 miles of light rail at an anticipated cost of $4.5 billion to $4.8 billion.

 As estimates rose to $10.3 billion last year from $7.1 billion in 2020, ATP in March unveiled five lower-cost options that carry a price tag of about $5 billion each and would take as much as 10 years to complete.

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