Texas bill would derail Austin light-rail bond financing

Texas Legislature

A Texas lawmaker is once again attempting to block bond financing for an Austin light-rail project with a bill that would place prohibitions on the use of property tax revenue to back debt under certain circumstances. 

House Bill 3879 filed by Republican State Rep. Ellen Troxclair last week addresses concerns raised by litigation and the Texas Attorney General over a first-of-its-kind funding model in Texas the city put in place for the project.

In November 2020, Austin voters approved a maintenance and operations property tax hike to fund what was then a $7.1 billion light rail system. The Austin Transit Partnership (ATP), a corporation created by the city and its Capital Metro Transportation Authority to spearhead the project, plans to issue bonds that would be paid off with the tax revenue.

Enactment of Troxclair's Texas Taxpayer & Voter Defense Act would stop Austin from using or transferring the voter-approved property tax revenue to ATP for bond payments. The bill would also prohibit local governments or their corporations from using voter-approved property tax revenue that is subject to annual appropriation to repay "a public security," including bonds, certificates, and notes. 

The measure would make a ballot proposition "materially deviate" under the state tax code due to significant changes in the cost or scope of its purpose. In the case of a court challenge, property owners would be entitled to an injunction against tax collection and a tax refund if successful. 

"We don't want local governments creating new ways to increase our taxes and we certainly don't want schemes that circumvent critical taxpayer protections," Troxclair said in a statement. "This common-sense legislation will defend Texans' right to transparency and accountability in how their tax dollars are used."

She also pointed to Republican Gov. Greg Abbott's call in his State of the State address for closing loopholes that increase property taxes.

Greg Canally, ATP's executive director, said in a statement that Austin voters "overwhelmingly approved this project that will reduce travel times, spur the development of much-needed housing, and generate jobs and state-wide economic benefits."

A downsizing of the project in the wake of a steep cost increase led to litigation brought in 2023 by property owners, who also claimed the voter-approved taxes could only be used for operations and not bonds.

A 2023 Texas Attorney General opinion determined state law "does not authorize a municipality to 'earmark' use of a voter-approved increase in its maintenance and operation property tax revenue for debt service." The opinion also questioned Austin's ability to transfer property tax revenue to ATP on an ongoing basis.

Last year, ATP sought court-validation for up to $150 million of bonds paid off with the voter-approved property taxes. The attorney general's office, which contended the corporation lacks standing to bring such an action, brought an appeal on a jurisdictional question to the Texas Supreme Court.

In January, ATP released a draft environmental impact statement as a step toward obtaining federal funding. 

A bill Troxclair filed in 2023 failed to advance in the final days of the legislative session. It would have banned a local government corporation from issuing bonds backed by voter-approved property taxes transferred by its municipality.