On Tuesday last week, the Attorney General’s office released its pre-trial brief in the case against Austin’s light rail bond proposal. The case will be heard by Eric Shepperd, the presiding judge of the Travis County Court at Law Two.
As was mentioned in previous reporting, municipal bonds normally get approval from the Public Finance Division of the Attorney General’s Office (OAG).
In this case, the non-profit corporation Austin Transit Partnership (ATP) is attempting to get approval for up to $5 billion in bonds, against the position of the OAG, from a court through a bond validation lawsuit (BVL).
In a BVL, the OAG is still a mandatory party to the lawsuit and is notified of an entity's pursuit of bond authority from the courts.
In February, the OAG reiterated its previously stated position from KP-0444 - the proposed financing mechanism creates an unconstitutional debt - and did so again this week.
“This case is about a city’s attempt to convert voter approval of an increased maintenance tax rate into a long-term property tax revenue stream to finance a multibillion-dollar capital project known as ProjectConnect,” wrote the OAG in the filing.
“Their requested declarations necessarily require statutory construction of what a tax rate election authorizes. As will be shown, section 26.07 is not a financing statute.”
The Austin Transit Partnership argues that they do have this authority and the Austin City Council created a contract with voters and Austin voters approved it.
The OAG is unpersuaded.”That agreement was void ab initio upon its execution because it created an unconstitutional debt,” argues the latest filing. “Given that the City impermissibly attempted to use a tax ratification election under section 26.07 outside the purposes for which it was designed, the ballot language for Proposition A was necessarily defective and misleading.”
Austin Transit Partnership will also need to demonstrate to the court that they are authorized to bring a bond validation lawsuit in the first place. The OAG says they are not - nonprofit corporations are not one of the types of entities listed in the statute.
In addition to those claims, Austin Transit Partnership and its team of lawyers will need to argue to the court that that ballot language was not misleading and defective, the funding agreement with the City of Austin does not create an unconstitutional debt, and the revenue generated from section 26.07 is allowed to be dedicated to a third-party indefinitely to pay for future bonds.
In an interview with the Lone Star Standard, Senator Paul Bettencourt (SD-7), the author of the changes to section 26.07 in question said “the Legislature did not intend to allow” for this financing mechanism and he agreed with the OAG that it was “likely unconstitutional.”
The trial begins on Monday, June 17, 2024 at 10 a.m.
