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Lone Star Rail presses City of Austin over tax increment funding

Tuesday, November 12, 2013 by Michael Kanin

Officials with the Lone Star Rail District continue to push Austin City Council members to approve a tax increment financing deal between the two parties. If consummated, such an arrangement would use a portion of City of Austin property tax revenue to pay for both operations and maintenance of the potential Georgetown-San Antonio rail line and a selection of capital costs.


City staff, meanwhile, appears unready to agree to terms. Their concerns range from questions over who will control the account created by the agreement to the relatively uncommon nature of the use of tax increment funds to finance operations and maintenance for the project. Last week, staff also mentioned their concern over a lack of clarity with regard to Lone Star’s long-term financial plans.


Members of the Council’s Audit and Finance Committee echoed staff’s concerns at a special called meeting last week. “I think that is real key – that we can get the level of information from Lone Star to be able to reach that (comfortable) point,” said Council Member Laura Morrison.


Earlier, Morrison was more direct: “I’m loathe to support something that doesn’t have the strong – I don’t know if support is the right word – but the backing and comfort from our city management,” she offered. “So the question is – and I don’t think you can answer it today – what does it take to get to that point? Is there a way to get to that point?”


Still, rail officials urged Council members to agree to a deal by Dec. 31. “It shifts the request to a degree,” said Lone Star consultant Joe Lessard of a delay. “What Lone Star’s assumption has been is that we wanted to use the tax increment and the value capture from the rail investment to a maximum degree. Establishing the (tax increment) districts early allows us to do that. If it slips…it changes the relationship between how much is value capture that is rail induced versus how much is normal growth.”


Lessard implied that Lone Star’s overall funding request would remain steady.


An Oct, 22 work session also revealed staff worries about the Lone Star. There, in an unusual move, Chief Financial Officer Elaine Hart presented Council members and City Manager Marc Ott with details about differences of opinion shared by Lone Star and city officials. As In Fact Daily reported, 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. (See In Fact Daily, Oct. 23)


On Tuesday, Hart underscored the fact that, should Council members agree to a tax increment district governed by state law, there could be very little public process involved. Staff also expressed concern that any agreement made with Lone Star Rail prior to the finalization of a funding plan for the upcoming urban rail proposal could be premature.


Council members appeared to hear that issue. “My best guess is that you are going to want to continue to negotiate along a timeline that is consistent with Project Connect, meaning that you are not going to want to come back to us with a contract until something like March,” offered Council Member Bill Spelman.


Questions also continue to linger over the Rail District’s partner municipalities. The City of Georgetown, for example, has been both in and out of the proposed district. Lone Star officials also noted that other municipal entities have expressed concerns similar to those harbored by Austin city staff.


The matter will be back before the Audit and Finance Committee sometime in December.

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