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Council members concerned over funding issues for Lone Star Rail

Wednesday, October 23, 2013 by Michael Kanin

Austin City Council members are calling for more in-depth discussion about a potential interlocal agreement with the Lone Star Rail District. The agreement, if approved, would govern the partnership between the city and a potential rail agency for a line that could run from Georgetown to San Antonio. It is one of several such agreements with municipalities.


At Tuesday’s work session, Chief Financial Officer Elaine Hart told Council members that Austin and Lone Star Rail have not reached agreement on several key issues. These include the length of the proposed deal, the amount of tax increment-derived funding for the project that would come from the city, and who would control the funds derived from the tax district created by the agreement. Indeed, the type of tax district itself appears to be in dispute.


City Manager Marc Ott summed up the situation for Council members, who had called for a review of some sort of agreement by Nov. 4. “So, if I may interrupt,” Ott said. “Your intent with regard to the Nov. 4 date was to express some concern about the likelihood of being able to meet that date.”


Hart confirmed that this is the case.


According to Hart, Lone Star Rail is asking the city to agree to a deal that would create a Tax Increment Zone. As part of that proposed deal, the organization would collect 50 percent of the incremental increase in tax revenue from regions within a half-mile radius of six potential station locations. The district would also collect the same figure for properties within one-quarter mile of the Seaholm Redevelopment project.


Hart told Council members that the Lone Star proposal would “like to begin setting aside the property tax revenue prior to the rail system development.” That, noted Hart, would find the district collecting revenue from a region that may or may not grow thanks to rail-associated development.


If approved as-is, the agreement would extend for up to 80 years. At least 39 of these would come at signing, along with an opt-out provision – one with an undisclosed amount of notice – that would have to be exercised, should the city want to avoid another four decades under the deal.


Forty years, Hart pointed out, is “ten years longer than our longest (current) TIF.”


The Lone Star proposal would create a Transportation Infrastructure Zone, something that Hart compared unfavorably to the rough city-equivalent of a Tax Increment Financing Zone. “It can be done, but the guidance in their legislation is fairly brief (and) it does not require a public process,” Hart said.


It would also put control of the funds derived from the TIZ under the control of the Lone Star Rail District. According to figures presented by Hart, Lone Star rail projects the total amount of TIZ-derived funds to be more than $14.6 million by the end of 2028. The district would use the money to cover operations and maintenance costs as well as what Hart described as “all project costs.”


Nearly all of this appeared to bring some level of concern from city staff. Ott also told Council members that Lone Star’s requests fell outside of the direction originally offered on the matter by Council members.


Mayor Pro Tem Sheryl Cole and Council Member Laura Morrison each called for a Special Called meeting to deal with the many issues raised by the Lone Star Rail proposal.

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