TX: Austin urban Rail Ballot Item Promises, But Lacks, Road Money

Aug. 06- The city of Austin in November would ask voters for authorization to issue bonds for $600 million for light rail, according to ballot language up for approval Thursday by the Austin City Council, while only promising additional funding for roads.

Business interests this summer have made it clear that their support for the overall program is contingent on $400 million in road funding, 40 percent of what the city plans to spend on rail. But instead of including road bonds in the ballot language, city officials would make the rail bonds contingent on finding unspecified sources for road money.

The move follows the Texas attorney general's office's view that combining roads and rail in one bond issue isn't legal.

In addition, the proposed ballot's open-ended language, which city officials said Wednesday will be tightened up, would appear to allow the city to proceed with the rail project even if a hoped-for 50 percent match from the federal government fails to materialize.

Mayor Lee Leffingwell, whose term is up this year, has repeatedly promised that the rail project will be contingent on securing at least half the funding from the Federal Transit Administration.

However, the ballot language in its current form says the rail bonds could be issued if the city obtains "match funding or financial assistance" from a public or private entity for a "portion" of the rail system cost. Given the vague language, even a minimal contribution from any government or person would be legally sufficient.

That possibility has spurred officials with the Real Estate Council of Austin to consider withdrawing their support for the light rail initiative. In recent days, they have contacted Leffingwell and other city officials with their complaint.

Leffingwell told the American-Statesman that the match language will be amended before the City Council votes to call the election Thursday.

"It's going to make it clear that a match from the Federal Transit Administration or other federal or state source" would be required, Leffingwell said Wednesday. "And a match is understood to be 50 percent."

Leffingwell wasn't concerned about the relegation of the road funding to what amounts to a caveat.

He said the ballot language as written in effect asks voters to OK the full $1 billion for rail and roads. The resolution coming before the City Council says the rail bonds, which would be backed by revenue from a property tax increase, couldn't be issued unless the city also provides the $400 million for roads.

That roundabout approach, rather than specifically asking voters to authorize the full $1 billion of general obligation bonds, arose after the attorney general's office in a letter to the city gave a thumbs-down to the idea of offering a rail and road combination.

Neither the city nor the attorney general's office, when asked for that letter under the Texas Public Information Act, would immediately release it Wednesday to the American-Statesman.

"The intent is clear," Leffingwell said. "We're asking voters for approval of $600 million for rail and are basically making a covenant with the voters to spend $400 million, and incur debt for that, for roads."

The council resolution doesn't specify how the city might provide that money nor does it make the timing clear. Local governments in Texas without voter approval may issue so-called "certificates of obligation," which are backed by general city revenue (including property tax revenue), but the amounts involved typically are well below $400 million.

Council Member Chris Riley said city staffers told him that certificates of obligation would be used for the road spending. Voter approval of the bond question would amount to a public OK of the council raising property taxes, or perhaps fees, to back the added debt, he said.

"It is an innovative approach," Riley said. But he compared it to the unusual method local officials conceived for funding the new University of Texas medical school, asking voters for a tax increase for Central Health, which then guaranteed $35 million a year to UT for the school.

"Similarly with a multi-modal transportation network, that requires some new thinking about how we approach the financing of these projects," Riley said.

According to figures released earlier this summer by the city budget office, selling bonds for the entire $1 billion would require raising property taxes by more than 6 cents per $100 of taxable value. That would raise annual taxes on an Austin home worth $200,000 now by more than $150 once all the debt is issued in about 2020.

The ballot language, and a change in state law initiated by state Sen. Kirk Watson, D-Austin, will eliminate the need for a second referendum to give Capital Metro permission to spend money on a new rail system. That 2009 law said if another government entity holds an election on rail -- such as the city of Austin -- then another provision of state law requiring Capital Metro to hold a rail election doesn't apply.

Copyright 2014 - Austin American-Statesman

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