On Monday, the Austin Transit Partnership (ATP) will appear in the Travis County District Court to ask a judge to validate $150 million of a total $5 billion dollar bond package for Austin’s light rail project called Project Connect.
There has been some controversy over the details of the plan, including opposition from Dirty Martin’s, a 98-year-old burger joint in the path of the proposed rail line and its supporters. ATP has also drawn opposition to the project from current and former elected officials who have filed a lawsuit to challenge the changes to the plan that was approved by voters in 2020 and how they are planning to pay for the project.
During the last legislative session, ATP’s financing plan was the subject of legislation and Attorney General Opinion KP-0444.
One of the reasons it has generated so much controversy and attention at the state level is that the financing scheme “has never been done before in Texas,” according to a recent interview with Austin attorney Bill Aleshire, the lead attorney in the case against Project Connect.
The norm in Texas is for bonds to get approval from the Public Finance Division of the Office of the Attorney General. According to its website, “the Public Finance Division reviews proceedings for all bonds, public securities, municipal utility districts, hospital districts, institutions of higher education, and all other governmental entities or instrumentalities of the state, plus certain nonprofit corporations created to act on behalf of political subdivisions.”
If an entity, like ATP, wants to forego the normal process, there is an alternative called a bond validation lawsuit, where a judge, not the Public Finance Division, can validate the bonds. That is what is happening in this case.
However, the Office of the Attorney General is still a mandatory party to the lawsuit and can offer their opinion. According to James Parker, a Principal at Lloyd Gosselink Rochelle & Townsend P.C., “the trial judge will rely heavily on the Attorney General’s opinion in reaching a decision.”
That opinion is out, and it is not good for ATP. On Friday, the Office of the Attorney General filed an opposition to the bond approval request. Here are a list of the claims made in that filing:
“The City [of Austin] attempted to create a contract with the voters that Section 26.07 of the Tax Code did not authorize. Section 26.07 is a truth-in-taxation statute, authorizing a higher maintenance tax rate upon voter approval; it is not a vehicle through which the City can funnel for unlimited duration a portion of its maintenance tax for a billion-dollar capital improvement project to pay debt service.”
“The ballot language for Proposition A was defective and misleading, in violation of the principles espoused by the Texas Supreme Court in Dacus v. Parker.”
“The Funding Agreement, comprising the primary source of security for the Initial Bonds and other obligations under the Financing Program, was void at the time of its original execution (the Initial Interlocal Agreement) as an unconstitutional debt under article XI, section 5.”
This echoes what Senator Paul Bettencourt, the author of 2019’s Senate Bill-2 which amended the section 26.07 truth-in-taxation statute, told us about ATP “seeking to get the court’s approval for a financing scheme which the Legislature did not intend to allow and for which the State’s attorney and bound counsel have concluded is likely unconstitutional.”
Austin Attorney Bill Aleshire, the lead attorney in the case against Project Connect, said of the filing, “today, the Office of the Attorney General of Texas filed a devastating rebuke to the validity of the Project Connect bonds and joined us in attacking the entire funding mechanism. You are seeing the beginning of the end of the biggest con job ever perpetrated on the taxpayers of Austin.”
We reached out to the Austin Transit Partnership for comment but they have not provided a response to our questions.
