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Why The Numbers Matter and What The City Did Not Bother To Tell Us

Why The Numbers Matter and What The City Did Not Bother To Tell Us

Why The Numbers Matter and What The City Did Not Bother To Tell Us 150 150 Voices of Austin

By Barbara Cilley & Susan Spataro

Critical numbers prove City Hall is hiding the true costs and impacts of Project Connect.

  • City Hall says growth will help pay for this mega-project, but the numbers show the vast majority of Central Texas’ growth will occur outside the population and property served by Project Connect.
  • The City’s credit rating will likely be downgraded because of the debt the City will take on, with the likelihood of further downgrades from the project.
  • The costs of operating the new transit system are not budgeted, which will require other property tax increases.
  • The debt load for Project Connect will be more than double the current debt of the City of Austin and Travis County, AISD, the Health District, and ACC combined!

 When the Mayor talks about the growth that is coming to Austin, he forgets to tell us it is coming to the region, not Austin! In fact, the majority of growth is coming to anywhere but Austin. The population data from the last two decades clearly demonstrate this:

(Compilation of detailed and analyzed data available for download at Austin Chamber of Commerce Greater Austin Population Profile.)

 The majority of people who are moving to ‘anywhere but Austin’ will not be paying the $7-10 billion price tag for Project Connect. Simply put, it is difficult to justify the idea that growth will pay for Project Connect, because the trend to relocate outside the City is only going to get worse because of affordability issues.

Project Connect will try to pay for its operation and maintenance with the 24.6% property tax increase on homes and 26.2% increase on everyone else, including renters, as well as all construction costs of the trains and subway!

The bus and train fares people pay do not recover the cost of operations. In Austin’s case according to 2019 and 2018 farebox recovery rate data available on the Capital Metro website, the transit system recovers only 10% of the operating and maintenance cost from fares! A comparable system in Dallas recovered 19% in 2018.

These numbers are probably only going to get worse because of downward ridership trends. According to the Texas Department of Transportation Texas Transit Statistics Report in May of 2019, the trend for ridership is down 3% across the board. Additional decline was shown in March of 2020. Where will all the money for construction and operations come from?

Because of this funding gap for operation and maintenance, the system can only pay to operate itself with another property tax increase. Capital Metro spends every sales tax dollar it currently collects to operate the existing system. The Austin taxpayer is going to have to make up the roughly 90% deficit with another tax increase because there is no other available source of revenue!

Let’s talk about what Project Connect does to debt in TRAVIS COUNTY! Using the overall tax bill for the County puts the magnitude of Project Connect’s debt into perspective. The City’s outstanding property supported tax debt is $1.04 billion. The overlapping debt, the debt of other taxing jurisdictions (AISD, Travis County, the Health District, and ACC) that share Austin’s property tax base, is $4.7 billion. (City of Austin Comprehensive Financial Report 9/30/19 pgs. 63 & 236) The community’s total debt is $5.74 billion for every other civic need.

Basically, the Mayor and Council are saying this one project is more important than all the other community needs like schools, fire stations, parks, clinics, police stations, libraries, jails, courthouses, and other facilities. Bottom line this one project is more than double every other capital investment in Austin.

There is another important point to be made about the cost of debt. Recently, Moody’s Investor Services downgraded the City’s debt because of a $2 billion unfunded pension liability. Every downgrade costs the taxpayer additional borrowing costs. Fitch’s, another bond rating agency described the City’s fiscal picture this way, “[City’s] Rating Outlook [was] revised to Negative from Stable.” (fitchratings.com 9/3/2020)

To complete the true picture of Project Connect’s cost to the residential taxpayer consider the probable shift in tax burden from commercial property to the residential taxpayer. There are multiple factors that will negatively impact the value of the commercial tax base:  the closure of small businesses, the numerous chain retail closures and bankruptcies, the pressure on office leases because of the office-at-home trend, and the shortfalls in the tourism sector. All of these indicate a potential for substantial downward valuation of commercial property. This has a real impact on all residential property taxpayers because the debt we borrow pledges the entire tax base, regardless of who pays. Bottom-line, there is a real potential for a shift in debt load from commercial devaluation to residential taxpayers who must pick up the slack.

So where are we in evaluating the impact of Project Connect?

  • The majority of growth that is supposed to help pay for this mega project is locating outside Austin.
  • The City’s credit has been downgraded with the potential for further downgrades because of multiple underlying issues.
  • Austinites are facing another property tax increase to operate the system.
  • The position of Mayor and Council is this one project triumphs over every other community need.

The vote on this tax rate is at the bottom of ballot. Project Connect’s Prop A is a potential financial disaster for Austin taxpayers!

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Barbara Cilley is a long-time Austin civic leader and Susan Spataro is a former Travis County Auditor.

Voices of Austin (VofA) is a grassroots citizen’s organization formed to speak out for the vast majority of Austin citizens and organizations.  VofA is a registered 501c4 nonprofit, nonpartisan organization.  It is not a political action committee and will not endorse or oppose candidates or propositions in an election or make financial contributions to candidates or campaigns.

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