Vote Against The Austin Rail Bonds – Largest Tax Increase In Austin History!

By Bill Oakey – October 20, 2014

Early voting starts this week, so be sure to head to the polls and snuff out the “Austin Proposition.” This item was originally publicized to be called Proposition One. But you will find it in the Austin section of the ballot, listed as simply the Austin Proposition.

First, a bit of good news about the ballot. Yes, it is long. But if you vote straight party in the County and State candidate races, you will be able to fly through the ballot very quickly. You will not get stuck in a long line, and if there is a line it should move fairly fast. I voted today and was very pleased with quickly it went.

The rail proposition may be an even bigger draw to the polls for some voters than any of the candidates. Despite the efforts of some news organizations and political groups, the overwhelming number of City Council candidates have come out quite vocally against the bonds. That’s because they have been going door to door for months, talking to their constituents. Voters in all corners of the City are fed up with a City Council that raises taxes every chance they get and then spends whatever budget surplus becomes available with no public input or formal process.

There is little credibility left for Mayor Lee Leffingwell to claim in the closing months of his tenure. As the leader of the so-called “Project Connect” group that was concocted to promote the rail package, he and his colleagues at the City and Capital Metro never had any interest in listening to the public for their views. Instead they sought only to appease the downtown business crowd and the real estate developers. Their preferred route has been in the planning stages for over a decade. East Riverside emerged as the special interest choice as soon as the developers started bulldozing low cost student housing and displacing those residents to build massive big box apartment structures. in the early 2000’s the Mueller neighborhood was included in the northern section of the route. But after the Red Line was built and Highland Mall rose from the ashes to become an ACC campus, Highland became the new northern destination for “urban rail.”

The problem is that there is not nearly enough population density along the entire corridor to justify rail along that route. How many people do you know personally who are clamoring for a train that they could jump on every 10 to 15 minutes to go from East Riverside to Highland Mall? If you flew in a helicopter over Austin during rush hour, you would not see the East Riverside to Highland Mall traffic backed up and congested at anywhere near the levels that you would see in U.T.’s West Campus area, or anywhere along North Lamar.

So, how does Project Connect and the proponents of this flawed route justify their choice? They claim first and foremost that it will “take cars off the road” and “relieve traffic congestion.” Well, guess what? in order to come up with the ridership numbers needed to qualify for Federal funding, the developers would have to attract many thousands of new residents to the East Riverside and Airport Boulevard corridors. All those cars hitting the roads would far exceed any supposed gains from building a rail line.

The throngs of employees who work at U.T. and the Capital Complex live all over town and many have been priced out of Austin completely. So, only a small percentage of them would be wanting to hop on that train every 10 to 15 minutes. Many of the arguments against the rail bonds that you are reading here were expressed by the editorial staff of the U.T. student newspaper, the Daily Texan. In a historic move last week, they retracted their previous endorsement of the bonds and printed a well-articulated appeal to vote against them.

Now For the Worst Part – The Devastating Price Tag

We have all heard about the $1.3 billion total cost of the rail project. When it was first announced, we were told that the Feds would put up half the cost. Just today the Statesman reported that the best we can hope for is a Federal match of 30% to 40%. There are problems with the cost in every direction you would care to look. Nobody talks about the interest on the debt. And the subject of the annual operating costs has been conspicuously absent from this election campaign. That’s because even Project Connect cannot say with any certainty how much the operating costs would be. What they have said is that they would have to go into to debt to pay for new buses. That’s a sure sign that the already declining quality of Capital Metro’s bus service will only get worse if the rail bonds are approved.

The 6 cent tax rate increase over five years for this bond package is most likely the highest property tax increase in Austin history. Keep in mind that each year in the budget cycle, the City Council routinely haggles over raising the tax rate by a fraction of one penny. The six cent increase for this bond package includes the assumption that property values will keep going up every year. So, even though affordability has risen to become the number one issue in this election cycle, Mr. Leffingwell and his right hand voting companion, Mike Martinez, would like to stick you with the highest tax increase in Austin history.

Go to the polls this week and vote no. Tell your neighbors to vote no and tell your friends to vote no. And if you run into to anybody that is not totally convinced, ask them this handy little question. If we double our bond debt to pay for this package with the largest tax increase in Austin history, how would we ever afford to expand the system and build rail extensions to take people where they really want to go? And how would we be able to afford future bonds for the City, AISD, Travis County or ACC? If we “have to start somewhere,” let’s not start in the wrong place for the wrong price.

A much better choice would be to vote no and let the new grass roots City Council build true consensus by listening to the people and formulating a transportation plan that the entire community can support.

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4 thoughts on “Vote Against The Austin Rail Bonds – Largest Tax Increase In Austin History!

  1. Larry Sunderland

    Reading about debt. An interesting quote.
    “Hyman Minsky, one of the greatest economists of the last century, saw debt in three forms: hedge, speculative, and Ponzi.

    Roughly speaking, to Minsky, hedge financing occurred when the profits from purchased assets were used to pay back the loan; speculative finance occurred when profits from the asset simply maintained the debt service and the loan had to be rolled over; and Ponzi finance required the selling of the asset at an ever higher price in order to make a profit. Minsky maintained that if hedge financing dominated, then the economy might well be an equilibrium-seeking, well-contained system. On the other hand, the greater the weight of speculative and Ponzi finance, the greater the likelihood that the economy would be what he called a deviation-amplifying system.”

    Reply
  2. Vince May

    Train supporters will tell you that the Red Line failure was expected, but it will become a success as the other components of the Project Connect Plan are built. So, the Highland Mall train has to be built. What else has to be built to complete the Project Connect Plan. There are 8 extensions planned for Urban Rail, going to Slaughter Ln on S. Congress, far west Austin on Cesar Chavez, far east Austin on E. 12th St., ABIA, Mueller, Westgate via S. Lamar, Crestview via N. Lamar, and the Seton line to 35th @ MoPac. The total cost is ~$11 billion. Project Connect also includes 4 Commuter Rail lines costing ~$3 to $4 billion more. If you want the Highland Mall train, you have to accept more failure until all of the Project Connect Plan is completed.

    Reply
  3. Roger Borgelt

    How many Austin homeowners will vote on Nov. 4 to increase their property taxes by more than $4,000 over several years, to help build a tiny light rail line they won’t use and pay for a road plan that provides no new roads? Probably not many, if voters understand what “Proposition 1” on the municipal election ballot really does.

    Prop 1 authorizes the city council to issue $1 billion in transportation bonds backed by property taxes. Of this amount, $400 million would be spent mostly on traffic studies and improving overpasses, without actually building any new roads.

    But the centerpiece of the proposition is construction of a $1.4 billion “urban rail” line to connect Riverside Drive with Highland Mall. The city would pay $600 million of the cost of the line; federal matching funds would (hopefully) cover the balance.

    To pay off the $1 billion in new bond debt, a “traffic tax” would be imposed on every Austin property owner for as long as 40 years. As a consequence, already-high city property taxes would climb even higher, and the number of people who cannot afford to live here would escalate accordingly.

    The city council developed the $1 billion cost estimate. Remember, though, that Austin has a history of overruns on major projects, such as the boardwalk, which was budgeted at $17.4 million, but ultimately cost $27 million. Then there’s Water Treatment Plant No. 4, which ballooned from $359 million to $560 million.

    But taxpayer funds can always cover cost overruns. If, for example, money for the rail line runs out prematurely, nothing would prevent the council from issuing more debt and raising taxes—without voter approval. There is no enforceable spending cap in Prop 1.

    Also, $1 billion is just the principal amount of the bonds. After adding interest costs, the actual cost to taxpayers would be $2 billion or more, depending on interest rates (as high as 15 percent) and the term of the bonds.
    Due to its odd route, the line would carry a minuscule 9,000 persons per day. Among these, only 3,250 would be new transit customers who don’t currently ride buses; most of the rest would be current bus riders who migrate to the rail.
    Spending $1.4 billion to attract 3,250 new transit users would be grossly wasteful. And creating a new transit service that cannibalizes CapMetro’s shrinking ridership base would be ludicrous.
    Ironically, the rail line would worsen traffic congestion, by closing some traffic lanes in the rail corridor. Moreover, traffic would be disrupted for months, or years, by torn-up streets during construction of the side-by-side rails. Nearby residents would be severely impacted, along with affected retailers who would lose business because of the traffic and parking mess.
    CapMetro is supposed to pay the rail line’s initial $23 million annual operating costs. Absent that, Austin taxpayers no doubt would end up paying the bills—in the same manner they are now paying $1.8 million in subsidies to CapMetro’s Leander rail line.
    City officials promise that the rail line will not be built before federal matching funds are provided. Less mentioned is the fact that tens of millions of dollars in bond funds could be spent immediately on environmental studies, system design and engineering. If federal funds fail to materialize, those costs would never be recovered.
    Considering the many financial risks associated with urban rail, a more taxpayer-friendly option would be to expand bus services. As one observer noted, “anything light rail can do, buses can do better, cheaper and faster.”
    Finally, I am reminded that a majority of the current council members approved a $2.3 billion contract to buy energy from a wood-burning generator in East Texas. Despite its huge cost to Austin Energy ratepayers, that plant is producing just 17 percent of the electricity city officials expected. As with urban rail, the log-burner “costs too much, does too little.”
    One disastrous white elephant is enough for Austin taxpayers. Proposition 1 should be rejected.

    Reply

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