Union Pacific has jumped off the Lone Star commuter rail project between Austin and San Antonio, but taxpayers remain tied to the tracks.
The San Marcos-based Lone Star Rail District is authorized to tax Central Texas residents for the multi-billion dollar project. The state legislation that created the district contains the word “tax” 51 times.
“Taxpayers should pay attention. This is a potent taxing and borrowing authority,” said Chuck DeVore, vice president of national initiatives at the nonpartisan Texas Public Policy Foundation.
LSRD has had its hooks into local funding sources since 2002, while chasing state and federal transportation grants with the aim of reducing traffic on I-35.
Bexar County earmarked $500,000 to Lone Star Rail this year. San Antonio pitched in $449,500 to cover engineering and administrative costs, as well as UP negotiations – which went nowhere.
Austin held back on contributing this year. But proposals to divert property taxes to LSRD would shift $1 million to $1.3 million annually from the city.
DeVore says Lone Star is after much bigger stakes. “They’ll get their money with a claim of increasing property values” along the proposed 120-mile route, he said.
“When Travis County’s taxable value goes up, the district can claim a percentage of that — whether they are responsible or not,” DeVore noted. He estimated that Lone Star’s take could be $44 million in a single year.
And that’s just ad-valorem tax revenue. Sales and use taxes are also in LSRD’s tool box – at least until the state-sanctioned district comes up for renewal in 2021.
To grease the rails, LSRD banked on Union Pacific to turn over its freight tracks and build a bypass farther east.
When UP determined earlier this month that the $2 billion needed to lay replacement tracks wasn’t available and couldn’t be justified to shareholders, it broke off talks with Lone Star. Lone Star’s sketchy financials peg the commuter rail’s price between $2 billion and $3 billion, not counting the tracks.
Unfazed, LSRD continues to pursue federal funding through the New Starts program, which would cover up to half of start-up costs, leaving yet-to-be-determined operating expenses to localities.
“New Starts distorts local decision making. It rewards high-cost and low-capacity projects at the expense of buses, which primarily serve the poor,” DeVore asserted. “It’s go big or go home.”
Lone Star representatives say unidentified private investors are willing to bankroll some of the capital costs, including the purchase of rail cars.
After UP’s withdrawal, Lone Star’s outside counsel, Austin attorney Bill Bingham, said, “We’ll continue on. I think we’ll get this project done. I don’t know when or how.”
Kenric Ward writes for the Texas Bureau of Watchdog.org. Contact him at [email protected]. @Kenricward