New lawsuit takes aim at Project Connect's property tax funding in latest Austin budget

AUSTIN (KXAN) — A group of Austin plaintiffs filed a new lawsuit against the Austin City Council on Monday over property tax rate allocations to the Project Connect mass transit program, according to documents obtained by KXAN.

The lawsuit alleged Austin City Council's now-approved property tax rate for fiscal year 2025 violates Texas Tax Code, arguing the 2020 property tax rate increase for Project Connect funding is no longer feasible and that the tax isn't being used as promised to constituents.

“We are aware of the most recent lawsuit that once again challenges the City’s authority to set aside property taxes for the voter-approved Project Connect," a city spokesperson said in a statement to KXAN. "We will respond to the lawsuit through the appropriate court channels.”

The lawsuit is calling on Austin City Council to correct the tax rate and reduce it by 7.93 cents per $100 valuation, which would ultimately lead to a tax levy reduction of more than $187 million.

The lawsuit also alleges that $456 million in taxpayer dollars "have been stockpiled, unused" for the past four years.

“Plainly, the taxpayers of Austin are getting nothing, absolutely nothing, this year from this ‘annual appropriation’ of the Project Connect tax," the lawsuit read.

Budget documents from the Austin Transit Partnership (ATP) note hundreds of millions of dollars in reserves for future project needs as part of its FY25 proposed budget. An ATP construction revenues and expenditures chart also noted those construction expenditures will ramp up in the coming years, in tandem with the expected 2027 construction start on the light rail system.

Austin voters approved in November 2020 Proposition A, which dedicated 8.75 cents per $100 valuation from the city's property tax rate for the creation of a mass transit system. That future system included both the addition of light rail transit as well as expanded rapid bus and Pickup services to accommodate riders throughout the city's network.

The latest lawsuit alleged the city "advertised and committed to a Project Connect map of rail lines and rapid bus routes" prior to the November election.

In July 2022, the Austin Transit Partnership — the independent entity created to primarily oversee the design and construction of the system — temporarily paused design work on the system due to the light rail portion's burgeoning budget. After nearly a year's worth of community engagement and design reconsiderations, the Austin City Council, CapMetro and Austin Transit Partnership adopted the first phase of light rail development in June 2023, which featured a smaller and more tailored scope.

Project Connect leadership has repeatedly said this first phase is an initial investment that will be expanded upon down the road. In a statement Tuesday, ATP Executive Director Greg Canally said the organization has made "key investments" in Austin in recent years, including design work on the upcoming light rail system alongside a new train station and MetroRapid bus lines coming online in 2025.

"ATP has made key investments in our community over the last few years – including a new train station at Q2 stadium and two new metro rapid bus lines – while at the same time advancing Austin Light Rail through the federal grant process that will bring billions of federal dollars to Texas," Canally said in the statement. "Savings we have responsibly set aside in accordance with the public financial plan will be spent in upcoming years to fund construction. Just like buying a home – it’s always better to have a bigger down payment. Another baseless lawsuit is not going to stop ATP from advancing Austin Light Rail for all of Austin."

However, plaintiffs behind Monday's lawsuit claimed the reduction of the Project Connect plan violated the promise made to Austin voters in November 2020 and, subsequently, taxpayers following its approval.

Plaintiffs on the lawsuit included residents Cathy Cocco and Barbara Epstein, Dirty Martin's Place, former Texas State Senate Member Gonzalo Barrientos, Travis County Commissioner Margaret Gómez, former Austin City Council Member Ora Houston and Susana Almanza, executive director of PODER.This l

This isn't the only lawsuit challenging Project Connect. A trial centered around the validity of the funding structure behind Project Connect is waging right now in the Third Court of Appeals. That trial was slated to begin in mid-June, before Attorney General Ken Paxton's office filed an interlocutory appeal, delaying proceedings and punting it to the Third Court of Appeals.

Bill McCamley, executive director of the Austin-based transit organization Transit Forward, slammed the newest lawsuit in a Tuesday statement.

"Unfortunately, the same few, anti-transit minority who frivolously filed a lawsuit last Fall are at it again. This continues to waste Austinites' hard earned taxpayer money through unnecessary legal fees and possibly forcing further delays which will cost us – the voters – more. Additional courtroom delays are anti-democratic, anti-affordability, anti-environment and anti-safety," the statement read in part. "Transit Forward urges the City to vigorously defend the will of the voters against this small vocal minority seeking to keep Austin from moving forward on Project Connect."