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City may consider Lone Star funding commitment

Thursday, December 11, 2014 by Tyler Whitson

Austin’s role in funding a proposed commuter rail line that would run through Austin and San Antonio is up in the air ahead of consideration at today’s City Council meeting, with staff and some Council members disagreeing on whether it is time to commit property tax money to the project.

Council members may amend an interlocal agreement they approved last December with Lone Star Rail District that established a tax increment financing mechanism to help fund rail operations and management and set participation at zero percent.

Among other requests, Lone Star representatives are asking the city to set aside 50 percent of the property tax revenue above baseline growth for areas within a half-mile of the seven proposed stations.

Assistant City Manager Robert Goode sent a memo to Mayor Lee Leffingwell and Council last Friday stating that, although he and City Manager Marc Ott support Lone Star, they believe that setting the increment now “seems premature.”

Goode elaborated on his position at Tuesday’s Council work session. He said that, following the failure of a $1 billion bond proposal in the November election for an urban rail line and roadway improvements, the city is in the process of developing a new strategic mobility plan.

“At this point,” Goode said, “you’re making a decision to fund (Lone Star) without that plan in place and without the next Council saying, ‘This is what we want to embrace as a community.’”

Lone Star Rail Manager Joe Black told the Austin Monitor on Wednesday that he disagrees with the idea that it is too soon to set the increment. “The time is right to move forward,” he said.

“It’s the city staff being cautious,” Black asserted. “You want your city staff to be cautious when they’re making big decisions on things like this, and you don’t want them to go gangbusters on everything, necessarily, but in this case we think that they’re wrong.”

Mayor Pro Tem Sheryl Cole, who sponsored the item and represents Austin on Lone Star’s board of directors, also disagreed with staff at the work session. “I believe that it is not premature for us to take this step,” she said.

Cole pointed out that the city would hold the money in a special fund and would only have to allocate it if Lone Star meets set performance criteria and deadlines. Currently, this includes signing interlocal agreements with the city of Kyle and Travis and Hays counties by 2016, though Lone Star is also asking that this be extended to May 2017.

Cole added that Austin Community College agreed to the 50 percent participation rate last week, joining the city of San Marcos, which did so last December.

Lone Star’s most recent study — released in 2011, updated in 2013 and based on property appraisal data from 2010 — indicates that the rail would generate a 36 percent average increase in property tax revenues over the course of 20 years for the combined areas.

Council Member Laura Morrison highlighted the revenue gap. “Basically that extra 14 percent would be an investment from the general fund that would be there otherwise — with or without the development,” she said. “We would need to think about the fact that … that is a long-term investment and a long-term impact to our general fund.”

Morrison also expressed skepticism about whether the results of the study are still accurate.

Deputy Chief Financial Officer Greg Canally said that, if Council adopts a participation level above zero percent, “there will be a property tax impact for this current fiscal year,” though the city would need to conduct further study to determine how much.

Canally added that property values near the stations may have increased in the past four years based on other development, further complicating the issue.

The proposed LSTAR service would run from Georgetown to south San Antonio, using the current Union Pacific freight corridor. Lone Star has already begun working with Union Pacific to relocate its freight operations to the east of the current corridor.

Lone Star hopes to secure interlocal agreements with the cities of Buda, Georgetown, Kyle, New Braunfels, Round Rock and San Antonio by the end of next year and plans to request capital funding from the city and state.

Cole said that Council amending Austin’s agreement would help move the process along. “It is very crucial that Austin actually takes a step in designating some potential funding for this enterprise, because it will help to strengthen their ability to get funding from other cities,” she said.

Originally called the Rail District, Lone Star is an independent public agency that Austin, San Antonio and Travis and Bexar counties voted to create in 2002 to provide regional passenger service between the two cities.

 

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