The people who filed suit last fall to stop the Austin Transit Partnership from proceeding without another bond election have intervened in a lawsuit filed by the city and ATP seeking to validate bonds needed to build the light-rail system. The plaintiffs’ goal is to remove the city as a party to the bond validation lawsuit. Attorney Bill Aleshire, who represents the group seeking to stop ATP from proceeding without another election, said the suits had been consolidated and an initial hearing is set for March 18.
As for the ATP bonds and what they will buy, Aleshire told the Austin Monitor, “I think this is the biggest con ever pulled on the taxpayers of Austin.” As the language of the lawsuit says, “This lawsuit is brought because Austin taxpayers are not getting anything close to the benefit of the bargain they made for the Project Connect ‘Contract With the Voters.’”
In November, Mark Nemir, the owner of the longstanding burger joint Dirty Martin’s – along with Travis County Commissioner Margaret Gómez, former state Sen. Gonzalo Barrientos, former Council Member Ora Houston and East Austin activist Susana Almanza – filed suit seeking to stop the city from collecting any more tax dollars to fund Project Connect. The group of taxpayers complain that voters were deceived in November 2020, when they approved a 21 percent property tax rate increase to pay for the construction of Project Connect.
In November 2020, when voters approved funding, city and transit officials anticipated the total cost of the plan to be about $7.1 billion, but they expected the federal government to pay for 45 percent of that. The rest would be funded through a tax rate increase.
In March 2023, ATP Executive Director Greg Canally admitted that transit leaders had been overly optimistic about what they could do with the bond funding. As the Monitor reported, Canally said, “The days of overpromising are over. In the last 10 months, we’ve been very clear and transparent about the work that’s ahead of us. And we will always be like that. We’re going to be transparent about our cost and how we’re going to live within our budget.”
Last month, ATP and the city of Austin filed a special kind of lawsuit aimed at validating bonds to be issued in the future by ATP. As requested by the five original plaintiffs objecting to ATP’s plans, those suits have now been consolidated. But what is unusual about that consolidated suit is the request by the five taxpayers to strike the city of Austin as a plaintiff in the bond validation suit, leaving ATP and, technically, the bonds themselves to argue on behalf of validation.
One of the arguments made by the objecting taxpayers is that ATP is the sole issuer of the bonds and that because the city of Austin asserts that it has no obligation to provide funds to ATP to pay the bonds’ obligations, the city should not be a party to the lawsuit. According to the plaintiffs’ request, “Because the city of Austin is neither a party to” the cause of action, which was consolidated into this lawsuit, “and the city of Austin has no standing or capacity to be a petitioner/issuer in this lawsuit, the court should strike the city of Austin as a party in his lawsuit.”
A spokesperson for the city said via email, “The City will respond to the concerns Mr. Aleshire raises, including who may be a necessary party, as part of the lawsuit that is currently underway in the Travis County District Court.”
As the complaining taxpayers set forth in the lawsuit, “The city of Austin claims it can stop paying ATP the funds needed to repay the bond, perhaps even causing a bond default by ATP, by simply not appropriating the funds during the City’s annual budget process.” The lawsuit goes on to quote the Interlocal Cooperation Agreement, Feb. 15, 2024, section 2.14 between the city and ATP. According to that agreement, “If the city Council does not appropriate funds for the payment of the City’s Funding Commitment in any fiscal year, the City shall not be liable to ATP or third-party beneficiaries for such payments.”
The city verified that City Council must appropriate tax revenues to the ATP to its yearly budget process. The spokesperson said, “At its February 14, 2024 meeting, the City Council authorized amendments to the Interlocal Funding Agreement between the City and Austin Transit Partnership that memorialized this annual transfer and clarified that the revenue transfer is subject to annual appropriation.”
Aleshire told the Monitor there are no construction contracts pending that would require bond funding at the moment. He said ATP would be issuing bonds for expenditures already made and paid for. He speculated that the reason ATP is so eager to issue the bonds is to make sure that the bonds have already been put on the market when the state Legislature convenes in January. During the last session, some lawmakers proposed legislation that would have required ATP and/or the city to go back to voters to approve funding for the diminished rail service ATP is now anticipating. Those attempts failed but might be successful next year.
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Project Connect: This project brought together a series of Central Texas transportation agencies looking to build high-capacity transit options in the region in the wake of CAMPO's 2035 regional transportation plan. The City of Austin's much-discussed 2014 Urban Rail plan was part of Project Connect's efforts.
