AG opinion raises new questions on how Austin's Project Connect will be funded

Red Line / Project Connect
Photo credit Aaron E. Martinez / American-Statesman / USA TODAY NETWORK

AUSTIN ( -- An opinion from Texas Attorney General Ken Paxton is creating new questions that could derail Austin's efforts to build a light rail system across the city.

Paxton's opinion, which is non-binding, was issued Saturday in response to a request from State Sen. Paul Bettencourt.

In November 2020, Austin voters approved a 20% increase in the city's maintenance and operations (M&O) property taxes in order to fund the program; per a City Council resolution, those funds are then transferred to the Austin Transit Partnership, a local government corporation created by the city and CapMetro to build and manage the system.

Cost estimates as presented to voters in 2020 pegged the project at $5.8 million; since then, cost estimates have skyrocketed, nearing $12 billion to complete the project as originally proposed. That has officials working to revise the project scope, with voters expected to get a look at the scaled-down version later this week.

Per an interlocal agreement, those transfers are to continue in perpetuity, until either all debt issued by ATP is paid off and funds are "no longer required for operations, maintenance, or state of good repair" for ATP assets, or ATP is dissolved in accordance with state law.

Paxton's opinion raises two key points - first, that M&O taxes cannot be used to pay debt service; and second, that a court would likely take issue with the city's "contract" to transfer tax revenues to ATP "with no right to terminate at the end of each budget period."

Bettencourt sought the AG's opinion as the Legislature continues to debate House Bill 3899 by State Rep. Ellen Troxclair (R-Lakeway), dubbed the "No Blank Checks Act". That bill would require Austin voters to approve Project Connect a second time - specifically to approve the issuance of debt connected with the project.

The bill passed the House earlier this month, and is close to passage in the Senate.

"This bill has always been about ensuring that when the government borrows taxpayer money, they have to do it in an honest and transparent way, in accordance with state law,” said Troxclair, who previously served on the Austin City Council. "The legal questions raised by Chairman Bettencourt and answered by the Office of the Attorney General confirm what I’ve said all along — that Mayor Adler led Austin voters down an illegal path in terms of funding Project Connect, a path that left taxpayers exposed to abuse of their property tax dollars.”

Austin Mayor Kirk Watson, reacting to the opinion, released a statement on Saturday. “The advisory opinion issued by the Attorney General today upholds the will of Austin voters and reinforces that the City of Austin’s tax ratification election in 2020 was conducted in full compliance with state law," said Watson. "I appreciate Chairman Bettencourt seeking this expedited opinion, which includes some additional guidance on the path forward for Austin Light Rail."

Featured Image Photo Credit: Aaron E. Martinez / American-Statesman / USA TODAY NETWORK