Sat. Jul 20th, 2024

Project Connect financing model process halted by Texas AG appeal

By meerna Jun18,2024
Project Connect financing model process halted by Texas AG appeal

Lawyers with the Texas Attorney General’s office filed a notice of appeal in a Travis County courtroom on Monday, halting a trial to determine whether the financing model for Austin’s multibillion-dollar planned light rail is permitted under state law.

Project Connect, which was approved by voters in 2020 with a more than 20% increase in the property tax rate for city maintenance and operations, was originally intended to include several transportation projects and miles of light rail — the centerpiece of a proposal that supporters have praised as generational investments in Austin’s transit infrastructure.

Since then, plans for the light rail portion of the project have been scaled back to less than 10 miles, and construction is estimated to cost more, city and Austin Transit Partnership leaders say. The Austin Transit Partnership is a municipal partnership formed by the City of Austin and Capital Metro to plan and build a light rail system.

The appeal filed by Texas Attorney General Ken Paxton’s office means that instead of the three parties involved in the lawsuit presenting their cases to Judge Eric Sheppard on whether they believe the funding model is valid, it will be up to Texas’ Third Court of Appeals to determine whether a lower court has jurisdiction to hear the case.

Here’s what you need to know.

Who is involved in the Project Connect lawsuit?

There are three parties involved in the Project Connect lawsuit.

One of them is a group of people who sued Austin City Council members and ATP board members in late 2023, alleging that the city misled voters about multi-billion dollar transportation investments and property tax increases. The lawsuit aimed to stop the collection of funds for the project from property taxes and the issuance of bonds without voters’ consent, as “Staniec” previously reported.

One of the lawyers representing the plaintiffs – who include the owner of the Dirty Martin’s Place restaurant, a former Democratic state senator and others – is Bill Aleshire, a former Travis County judge and tax collector.

The other side is the city and the Austin Transit Partnership. They are trying to protect their current funding model, which, in addition to the lawsuit, has come under attack from GOP state lawmakers who, during the 2023 legislative session, sought to prohibit the issuance of any future debt to Project Connect without first seeking voter approval, the Statesman previously reported. The legislation died in the last week of the session.

The city and ATP say the proposed funding model is on sound legal footing, and they see the legal and legislative challenges as efforts to undermine the will of Austin voters and undercut plans to expand public transportation options in the city.

The third party involved in this case is Texas Attorney General Ken Paxton’s office.

In Texas, municipal bond issuance, which is the subject of debate over the Project Connect financing model, requires approval from the state’s attorney general.

This proved to be a stumbling block for the city and ATP, as Paxton expressed his opposition to light rail in a non-binding legal opinion issued during the 2023 legislative session, claiming that the funding model was likely illegal under state law and that Austin had made “misrepresentations “. voters” in 2020, as previously reported by the Statesman.

In February, the city and ATP filed a lawsuit over the bond approval, an effort to bypass the attorney general’s approval process and ask a judge to hear the argument first.

The bond validation lawsuit and the late 2023 lawsuit, sometimes called the Dirty Martin lawsuit, were consolidated into one lawsuit to be heard on Monday.

Paxton argued in pretrial court documents that “the City impermissibly attempted to exercise the tax ratification option under Sec. 26/07 beyond the purposes for which it was designed” and that “the ballot language on Proposition A was necessarily flawed and misleading.”

The appeal filed Monday morning by Paxton’s office asks the all-democratic Austin-based Third Circuit Court of Appeals to determine whether the court has the authority to hear the case jointly.

Sheppard had previously been asked by Paxton’s office to rule on whether the court had jurisdiction to hear a lawsuit seeking pre-trial bail approval. The Attorney General’s Office argues that Sheppard, by allowing the trial to begin at 10 a.m. Monday, implicitly denied the Attorney General’s jurisdictional claims.

On Monday, Sheppard told the court that despite these claims, he had not made a “clear or express ruling for or against” the jurisdiction issue.

“As I have said before, there are certain areas in your letter that could be highlighted by obtaining the facts at trial, and I have asked that that be done,” Sheppard said Monday.

However, with the appeal, all further trial proceedings are suspended until the appellate court decides on jurisdiction.

The city and ATP filed an emergency motion Monday morning to dismiss the appeal, Greg Canally, ATP’s executive director, said in court Monday. He called the Attorney General’s appeal a “delaying tactic.”

“We have full faith that the Third Court of Appeals will take swift action,” Canally said.

Aleshire said he agreed with the attorney general’s arguments about jurisdiction.

“It is time for leaders to rethink Project Connect and consider putting the election on the November ballot,” Aleshire said.

What is the funding model for Project Connect and what is at stake?

In addition to anticipated federal funding, ATP’s municipal bond issuance is a large part of the current light rail financing plan. The current plan of the city and ATP assumes that the local government company will repay its debts by transferring tax revenues approved in 2020 from the city.

According to the city’s resolution, the tax transfer is to continue indefinitely until the funds are no longer needed for “operation, maintenance or good condition,” as the Statesman previously reported.

The reason legal and legislative attacks have created such a risk for Project Connect is that they are intended to stop or delay ATP’s bond issuance. ATP’s current plan to create a light rail system relies on the agency’s ability to issue bonds.

An unfavorable outcome in the courts would likely send ATP and the city back to the drawing board.

By meerna

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