City of Austin property tax dollars would start flowing to the Lone Star Rail District as soon as next year, even with the proposed commuter rail line's fate still uncertain, under a proposed agreement that has city and rail district officials far apart on the deal's broad outlines.
City officials, in a briefing Tuesday to the Austin City Council, said that all taxes collected near the seven planned Austin stations should remain in city hands until the rail line opens. Officials also said that the 50 percent of property tax growth near stations that the district wants is too high a percentage to give the rail district, and that the deal's proposed 40-year length (with a possible 40-year extension) is too long. Getting a deal worked out by a target date of early November, allowing council approval of a final agreement before the end of the year, might be a tall order, city Chief Financial Officer Elaine Hart told the council.
"We can provide a draft by then," Hart said, "but it may not be one we can recommend."
The rail district — which, despite daunting financial challenges, hopes to have the line between San Antonio and the Austin area operating by 2018 — is in similar discussions with Travis County, Austin Community College, Hays County and San Marcos. It eventually also will approach the San Antonio, Bexar County and Williamson County governments.
The district, formed in 2003, hopes to harvest property tax growth, and in some cases sales taxes as well, within a half-mile of most of the 18 planned stations on the proposed 115-mile line, starting with the 2014 tax year. One exception would be the proposed station near the Seaholm development in downtown Austin, where the "transportation infrastructure zone" instead would have a quarter-mile radius. That zone, even with the diminished reach, would extend north of West Sixth Street along North Lamar Boulevard into a densely developed section of the city with several large projects planned or under construction.
"The city didn't want us to reach halfway into downtown," said Joe Black, Lone Star's rail director.
The district wouldn't get taxes from single-family homes or duplexes within the zones, Black said, or from tax-exempt, government-owned land, or from tracts where more than half the land is outside the zone. But the district, at least in Austin, hopes to get parking revenue from lots and garages within the tax zones. The city of Austin opposes that parking provision, Hart said.
The money from the zones would be put in an escrow fund under the district's control, according to the rail agency's proposal, and be used primarily, but not exclusively, for operating and maintenance costs.
Hart said the district's proposal would allow the money to be used for "project costs," which she said would include not only operations and maintenance of the train line but also debt financing costs, real estate, professional services and "reasonable reserves."
Council Member Sheryl Cole told the American-Statesman she is uncomfortable paying for that array of possible district costs. A council resolution passed earlier this year instructed city staff to negotiate an agreement with Lone Star using city taxes only for the rail line's operations and maintenance.
"I also don't think we should agree to hand over management of those funds to Lone Star without a detailed agreement about how those funds will be handled in the interim" before rail service starts, Cole said.
The district is seeking both property and sales tax growth from San Marcos and, potentially, Kyle and Buda, but only property taxes from the city of Austin, Black said, because 1 percent of sales taxes in Austin already go to Capital Metro for transit costs. Counties don't have the authority to collect sales taxes.
Black said that securing the tax revenue for future operating costs is critical as the district in coming years attempts to secure huge grants from the federal government and the Texas Department of Transportation. Construction of the line, including the necessity of building an alternative freight track east of the Austin metro area to free up the Union Pacific track for passenger trains, could cost well above $2 billion.