Austin's light-rail ambitions are barreling ahead after narrowly escaping the clutches of Texas lawmakers determined to rein in the multibillion-dollar transit expansion. But the voter-approved plan, known as Project Connect, must still navigate a tricky track laden with potential legal and political hazards.
"For now, we are going to take a deep breath," Austin Mayor Kirk Watson said Tuesday, acknowledging the death of House Bill 3899, which would have toppled the light-rail funding plan. "However, we will be vigilant."
Republican state Rep. Ellen Troxclair's HB 3899, in an early version, would have made the Austin Transit Partnership hold an election before it could issue about $1.75 billion in bonds and loans needed to kickstart construction on the $5 billion high-frequency urban rail system.
But the bill underwent massive changes in the Texas Senate. State Sen. Paul Bettencourt — a Republican focused on lowering property taxes — cranked up the legislation to align with his interpretation of a nonbinding legal opinion from now-impeached Texas Attorney General Ken Paxton.
Paxton's legal opinion was hurriedly produced at Bettencourt's request. The document is dense and highly wonky. Because it's become the basis of a political and legal battle over Project Connect, it's worth understanding at least four arguments the opinion tries to make:
- Cities are allowed to ask voters to increase property taxes that are "earmarked" for a specific purpose, which is what Austin did in November 2020 when 58% of voters gave the green light to the Project Connect transit expansion.
- But maintenance and operations tax revenue — which was the portion of the city's tax rate Austin voters agreed to increase by 20.789% for Project Connect — generally speaking can't be earmarked to pay down debts like bonds.
- Austin can't obligate itself to transfer property tax revenue from the Project Connect election to ATP for more than one year at a time without retaining the ability to terminate the contract at the end of each annual budget period.
- ATP can borrow money through bonds and loans. Austin can transfer money to ATP. But Austin can't obligate itself to pay down ATP's debts for more than a year at a time unless the payments are part of the annual budgeting process.
After reading the opinion, Bettencourt proposed changes to the bill, including banning any money from the city's Project Connect property tax election from paying down ATP debts.
"The bill as it came back from the Senate would have killed Project Connect as we know it," State Rep. John Bucy, D-Austin, said.
Bucy blocked HB 3899 from passing moments before a final vote in the House. He raised a point of order — a technical objection — arguing Bettencourt's amendments changed the intent of the bill that passed the House. The House parliamentarian agreed. Bucy's point of order was upheld. The bill was sent back to the Senate, and there wasn't enough time left to pass HB 3899 before the regular session ground to an end.
Organized opponents of Project Connect say the attorney general opinion that informed Bettencourt's changes to HB 3899 will still force the city to overhaul its funding strategy.
"The Attorney General’s opinion alone provides enough legal guidance to block what’s now been declared an illegal financing scheme, regardless of the bill’s status," former Republican Travis County Commissioner Gerald Daugherty said in a statement.
But officials with the city and ATP have indicated they can comply with the attorney general's opinion by making some relatively minor changes to the documents that govern the arrangement between the city and ATP — even using some language suggested in the footnotes of the AG's opinion.
And the failure of HB 3899 means plans for a November election to authorize ATP borrowing have been called off, removing another potential obstacle to light-rail funding.
But the two sides appear headed for a legal clash that could drag out the Project Connect timeline and potentially delay the federal funding needed to pay for up to half the cost of phase one of Austin's light-rail plan.
Despite these challenges, local decision-makers are set to give key approvals this week to a new 10-mile light-rail map. The revised plan is half the length of the version presented to voters in 2020 and lacks a $2 billion downtown subway, but it fits within the $5 billion budget.
Austin City Council is scheduled to vote Thursday on the revised plans. Capital Metro's board is set to give approval Friday. ATP's board gave the green light last week.
"Ausinites voted for this transformational transit system," City Council Member Vanessa Fuentes said. "So it's exciting to be able to share and to show how we intend to deliver it."
