Texas Attorney General Calls Project Connect Funding Scheme Illegal

Austin’s Project Connect could be in jeopardy after Texas Attorney General Ken Paxton issued an opinion stating that the project’s “unique financing model is likely illegal,” setting off concerns among supporters of the potentially transformative $7 billion transit investment.

Ryan Autullo outlines the situation in Austin American-Statesman, writing: “Voters approved two things that are at issue in Paxton's opinion: a 20% increase in the city portion of their property tax, and the establishment of a local government corporation to build the system, financed by debt backed by that tax revenue. That tax revenue transfer, according to a city resolution, is to continue indefinitely until funds are no longer required for ‘operations, maintenance, or state of good repair.’”

According to Autullo, “The opinion says Austin is not authorized to pay down debt with the increased maintenance and operation taxes. It also says the tax revenue, about $160 million a year, cannot be transferred to the local government corporation in perpetuity without the ability to terminate at the end of each budget period.” The opinion comes alongside proposed legislation that would require Texans to vote on Project Connect again because the first proposal did not include an approval of new debt.

The city has few options to save Project Connect. “The city could hold a bond election to fund the project, but that would be tricky as the light rail cost is fluid and city leaders would largely be guessing on the amount they'd ask voters to approve.” The city could also use a municipal bond, which “might also spell financial trouble for the city.”