Back in 2020, voters in Austin approved a tax increase to pay for a multibillion dollar transit initiative.
It was supposed to expand the city’s bus service, fund anti-displacement efforts around town and, most notably, build a 27-mile light rail that would have connected major parts of the city.
This project is known as Project Connect, and as we near five years since voters approved it, the project hasn’t even broken ground.
Andrew Wheat is managing editor of the Austin Free Press. He joined Texas Standard to discuss what their public information request revealed. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: They haven’t even broken ground on this project after five years. Why is this taking so long?
Andrew Wheat: Well, there have been enormous setbacks, the most prominent of which is the voters approved this in 2020. In 2023, the government corporation that oversees the project, called Austin Transit Partnership, came out and said that there were runaway inflation costs and, as a result, they were going to slash back the project from 27 miles to just 10 miles of additional track at no reduction in price. That went down rather sour with some Austin taxpayers who filed a lawsuit then challenging it.
There’s been a number of legal challenges from Austin taxpayers, from the Attorney General of the State of Texas, Ken Paxton, and a couple of failed efforts to derail the project in the Texas Legislature, but those did not pass.
You mentioned that Ken Paxton’s weighed in. What are his objections to this project?
He initially came out several years ago with a non-binding legal opinion that said the funding structure for this project violated the Texas tax code and the Texas Constitution.
And he had one other zinger: He said that it would be illegal for the City Council of Austin to approve this transfer of property tax funds, sort of as a one-and-done, at the beginning for the project for the $7 billion price tag. He said instead that every year, the city council for the decades to come would have to make a separate appropriation annually for the project, which gives things like the bond market conniption fits.
Why is that important? What does it matter what the bond market has to say about this project?
Well, there’s two major funding sources envisioned for this project. One is the taxes that we approved in 2020, over a series of years. The other is the project is hoping, or had hoped, to get as much as half the price from the federal government, which is looking considerably more difficult under the Trump administration.
But for the bonds, the idea with the bonds is we’ve approved all this funding that’s gonna come in over the next decades. With a bond, we can get issued debt and get a big chunk of that money upfront so we can start to build.
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Why won’t they do that?
Well, you know, there’s been a lot of back and forth, he said/she said, about this troubled project. So we decided in March that we wanted to get an impartial view. What does the bond market think of this project? Do they think it’s highly risky? What’s going on from their perspective?
And we put in a formal public information request with the Austin Transit Partnership. They wrote back and said, yes, we do have a bond report that Moody’s prepared in January 2024, but we don’t think we have to share it with the public under an exception to public disclosure that governs issues subject to litigation.
So as it turns out, the referee for these cases is one and the same Attorney General Ken Paxton. And after looking at it, he came out in June and said that they had to fork it over to Austin Free Press. So we got a copy of Moody’s tentative credit rating for the Project Connect, and it had two notable features.
The first was that Moody gave any debt issued for Project Connect stellar straight-A grades. Yes, that was the good news. The bad news was it said that it based that rating on two assumptions that were false when Moody’s wrote the report in January 2024 and are false today.
Those assumptions were that all the lawsuits against the rail project have been dismissed. They have not. And that Ken Paxton had validated the Transit Partnership’s authority to issue these bonds. That is certainly not the case. In fact, Ken Paxton has appealed a case to the Texas Supreme Court on this very issue.
Ken Paxton had lost the issue in an intermediate court decision last fall, but the Supreme Court, of course, didn’t have to take up the case at all. They could have let the lower court decision stand. Instead, they said they wanted to have full arguments on the case. A decision in that case could be as soon as this coming fall.
Could the Texas Supreme Court essentially green-light Project Connect with their decision? Could it have that kind of impact?
I think it basically could.
I mean, it could well be the court’s going to decide on this narrow issue of whether the Austin Transit Partnership has the authority to issue bonds. And if it gave a green light to that, that would certainly be some wind in the sails of the rail project. There would still be other issues, I think, that could be litigated, but that would be a huge assist.
On the other hand, if they said that it has no authority to issue bond debt, that could potentially derail the project.
Correction: An earlier version of this story incorrectly stated that the project’s bonds have been issued. The headline has also been updated to clarify that the Austin Transit Partnership did not intentionally mislead Moody’s.
