The city of Austin’s urban rail plan, and a potential side dish of road projects now under consideration, could be financed without hurting the city’s stellar bond rating, staff money managers told the Austin City Council on Tuesday.
But those plans would come with a property tax hit.
Elaine Hart, the city’s chief financial officer, laid out a series of tax scenarios for a potential November bond election. The city could sell as much as $965 million in bonds for transportation over the next six years if voters are willing to add 6 cents to the city’s current property tax of roughly 50 cents for every $100 of taxable value.
By 2020 — design and construction would take several years so all the bonds wouldn’t be needed immediately — the added annual tax tab on a $200,000 home would be $153, a 15 percent increase over the current bill. The analysis assumed that such a home’s taxable value would have appreciated to $255,000 by 2020, Hart said.
A 3-cent increase in the tax rate would raise $440 million, Hart said, costing the owner of that typical $200,000 home about $77 a year.
Hart and deputy chief financial officer Greg Canally said the debt — combined with an expected city bond sale in 2018 for about $425 million for other city needs, such as police, parks and libraries — would sharply increase the city’s debt load.
Annual payments for tax-backed general obligation debt, now about $103 million, would increase to almost $200 million a year by 2020 if Austin voters approve the full $965 million. Now about 1.1 percent of the city’s total taxable value, such debt would increase to more than 1.5 percent. And the city’s debt per capita, now about $1,200 for each city resident, would climb to nearly $2,000.
Bond rating agencies such as Fitch and Standard & Poor’s use those figures in their analysis, Hart said. Since 2010, those two agencies, as well as Moody’s, have given Austin their highest rating of AAA, which in turn means Austin pays the lowest possible interest on borrowed money. Austin is among 7 percent of cities that have all AAA bond ratings, Canally said.
In some cases, Austin already exceeds preferred debt standards, Hart said under questioning from Council Member Chris Riley, but still gets the highest ratings because of top performance on other measures. The city, Hart said, could maintain a AAA rating even if it borrows the full $965 million.
That figure, if the city seeks authorization of that much debt, would dwarf the city’s largest bond proposition in recent years, $567 million in 2006.
What the city actually needs for urban rail should become clearer late this week. The staff of Project Connect, a joint effort of the city and Capital Metro, on Friday will present much of its final recommendation for building a nine-mile urban rail line between the Highland Mall area in North Austin and East Riverside Drive in Southeast Austin. That should include specific costs.
Based on earlier numbers released by Project Connect, however, the cost of building the full line could easily exceed $1 billion. Even with the Federal Transit Administration covering half of the cost — no sure thing, but the city’s hope and expectation — that would put the city share at $500 million or more.
The remainder of that recommendation, coming a couple of weeks later, will include whether to build those nine miles in phases, lowering what the city might need in a bond election this fall.
But city leaders are now talking about asking for an unknown additional sum for road projects, potentially for a number of changes meant to mitigate congestion on Interstate 35. Adding in roads could be politically advantageous for the urban rail bonds, which performed poorly in at least one poll over the past year, particularly if the rail and roads funding is bundled into a single bond proposition.
“There are discussions. No decisions yet,” Mayor Lee Leffingwell said in an interview Monday with the Statesman. “We’re looking at road projects that might work with rail.”
Ask whether those projects would include Austin city streets or Texas Department of Transportation highways in Austin, such as I-35, Leffingwell answered, “Potentially, on both.”
What’s next with urban rail plan
Project Connect will recommend a route for a proposed nine-mile Austin urban rail line at 1:30 p.m. Friday at City Hall. The group has said next steps include:
- May 16: Update on proposed funding and governance plan for the project, as well as options to build the line in phases.
- May 19: Recommendation presented to Capital Metro Board of Directors.
- May 22: Austin City Council briefed on recommendation.
- June 13: Central Corridor Advisory Group, a committee of elected officials and local leaders appointed by the mayor, to vote on plan before recommendation is forwarded to council, Capital Metro board and the Lone Star Rail Board of Directors.
- June 23: Capital Metro board asked to vote.
- June 26: City Council asked to approve proposed rail plan.
- Mid-August: Deadline for council to call a November bond election.
The public is welcome to offer feedback on the plan during public comment periods and via email to firstname.lastname@example.org.