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Travis Commissioners balk at plan to use tax districts for Lone Star Rail

Wednesday, October 16, 2013 by Mark Richardson

Travis County Commissioners were asked to get on board with developing a funding mechanism for the Lone Star Rail District’s future operations on Tuesday, but the plan may be in for a bumpy ride, as some commissioners say they need much more information before moving ahead.


The Lone Star Rail District was formed in 1997 by the Texas Legislature to develop passenger rail service along the Austin-San Antonio corridor. While the district is looking for some $1.8 billion in federal, state and private capital to build the system, it is proposing to use taxing districts in and around the 13 proposed rail stations between Georgetown and San Antonio to fund the actual operation of the trains. (See In Fact Daily, May 18, 2012)


The issue before commissioners Tuesday was not to approve any funding for the rail project but to endorse the process and assign staff to work with other entities to begin developing a concrete funding plan to bring back to Travis County and others. Rail district officials said the same proposal had already been approved by the cities of Austin and San Marcos, and was under consideration by Hays County and the City of Kyle.


However, the lack of financial specifics in some parts of the proposal caused two commissioners – Pct. 3’s Gerald Daugherty and Pct. 4’s Margaret Gomez – to call for more time to study the proposal. Daugherty – a long-time skeptic of mass transit proposals – was the main antagonist to the project, saying there were a number of questions he needed answers to before he could move forward. He was particularly concerned about whether the rail district could generate sufficient funds to operate the trains.


“The more rail gets talked about and the farther it gets down the line,  the harder it is to corral it,” he said. “I would venture to say that when these things get talked about in committees, that you have very few people that . . . bring up the questions that really need to be asked before you move things down the line. When you ask questions and people can’t answer them, then I think that doesn’t bode well for a program that I believe needs a lot of discussion and a lot of really good answers, not suppositions.”


The rail district wants to institute a series of Transportation Infrastructure Zones, or TIZ’s, around each of the stops along the 118-mile rail line. Each TIZ would tax the expected rise in property values within a half-mile of the station, theoretically generating enough revenue to cover the lion’s share of the district’s operational expenses.


Joe Lessard, a governmental relations consultant for the Lone Star Rail District, told commissioners that while the use of tax increment financing has been used successfully for decades, no one has ever tried to use it exactly like this.


“This is the first time this model has been used at this level, with 118 miles covering about 10 different jurisdictions,” Lessard said. “So the actual approach is not new.  In all areas, we’re asking for 50 percent of the new growth around the station areas, within a half-mile of those stations.”


Lessard said that the rail district expects revenues from fares to cover about 15 percent of operating costs, with TIZ money paying for the rest. However, he did not provide an estimate of either the projected operational costs of the rail line or an estimate of the revenues they expect from the TIZ taxing districts. 


He said the capital budget to for the entire district is estimated at $1.8 billion. Of that, about $600 million is set to pay for the actual costs of the rail service. Another $1.2 billion is earmarked to pay to construct about 40 miles of track east of Austin for Union Pacific freight trains to bypass the city and allow the passenger rail system to use Union Pacific’s tracks that currently run through the center of Austin. 


Lessard also told commissioners that the district was under a deadline of the end of 2013 to establish the taxing districts. “The funding mechanism is driven by the economic development in the zones around the train stations,” he said. “Our financial consultants tell us that if we do not act to set up the taxing districts by the end of this year, the economic development will happen outside of the funding mechanisms. If that happens, we will eventually have to assess our participating entities for operational funds and we don’t want to do that.”


Lessard pointed out that the TIZs have been part of the rail district’s plans since mid-2012 and that county officials had been briefed several times. But rather than motivating the Commissioners Court to act, the threat of a deadline seemed to make them hesitate even more.


“That scares me to death,” said Daugherty. “That sounds like really bad planning on somebody’s part.” He said that trying to set something like that up in such a short time was an invitation to major problems down the road. Commissioner Gomez expressed a similar concern.


However, Pct. 2 Commissioner Bruce Todd, who sponsored the resolution, pointed out that Lessard had a history of delivering on major infrastructure projects in the region.       


“We had the same concern about what will happen to fees, charges and the thing with the bond election that Joe was working on some years ago known as the Austin Airport (ABIA),” Todd said. “And those numbers have all held true and they’ve made a big difference. And I think no one would say now that we shouldn’t have done it. We did it and it has been a great success. And I think this has the same potential.”


A push by Todd to go ahead and approve the resolution on Tuesday was blocked by County Judge Sam Biscoe, who said that it was the policy of the Court to generally grant any commissioner’s request to postpone a matter for a week.


Biscoe asked Lessard and others from the Rail District to return on Oct. 22 to answer more questions.

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