A new financing strategy for long-term capital projects in Texas was a topic of discussion at Texas Public Policy Foundation Policy Summit. The panel took place on Feb. 21.
The panel, Stop the Steal: How to Make Property Tax Relief Permanent, was hosted by TPPF’s James Quintero and featured Texas Senator Paul Bettencourt, Texas Representative Ellen Troxclair, and Dr. Derek Cohen, TPPF’s Chief Research Officer.
During the discussion, Rep. Ellen Troxclair said of a new financing proposal in Texas, “just because you put something illegal on the ballot and the voters approved it doesn’t mean you can go do it.”
She compared the election in question to asking voters if they would support using an income tax to pay for a project, noting that state law prohibits an income tax so even if voters approved it, a city could not do it.
The emergence of this debate stems from Austin’s multi-billion-dollar light-rail project, Project Connect, although Troxclair and Bettencourt believe it has statewide implications for property tax relief efforts. In 2020, Austin voters approved a 8.75-cent increase in the maintenance and operations property tax rate to be used for a “city-wide, traffic-easing rapid transit system known as Project Connect.”
Typically, local governments in Texas ask voters to approve general obligation bonds. The total amount of bonds is limited to what was stated in the election. In this case, Austin asked voters to approve an increase in the tax-rate.
The main difference here is that bonds fall in the debt-service portion of the tax-rate, which is constitutionally dedicated to pay debt and not subject to annual appropriation. A bond also has a limit to how much can be borrowed before a city is required to seek further voter approval, whereas this new structure has no such limits.
Since its passage, this financing and governance structure has been celebrated by proponents of the project as a “national best practice” to be used by cities in Texas and across the country.
But Troxclair and Bettencourt disagree, arguing that it is already illegal and the city is trying to create a loophole in state law. They both signaled their intent to address the issue as a statewide policy during the legislative session. In their view, the legislature could decide whether this financing and governance structure will be allowed throughout Texas or not.
In order to understand if other cities in Texas are looking into this strategy for long-term capital projects, the Lone Star Standard reached out to the ten largest cities and asked them.
The cities of Plano, Arlington, and Fort Worth responded and said that they are not intending to utilize this funding structure, and instead are opting to use bond elections, cash financing, sales tax revenues, and other more traditional sources for their capital project needs.
However, most of the cities we contacted, including Dallas, San Antonio, Houston have not responded to multiple requests for comment.
The city of Austin has explored how they might use financing mechanisms other than general obligation bonds for its proposed 2026 climate change investment plan.
Brian Thornton, a former policy staff member for both Troxclair and Bettencourt and now a public affairs specialist at the Capitol, told the Lone Star Standard that he believes other cities are watching to see how the issue unfolds. “If the legislature does not act, we expect other cities to see this as a green light to utilize this funding structure for their capital projects,” he said.
