Travis County District Judge Maria Cantú Hexsel ruled twice on Aug. 13, and both times she said no. The city of Austin and Austin Transit Partnership failed to knock out three of the taxpayers’ claims. The attorney general failed to have the bond validation suit thrown out. But only one side walked into that courtroom needing permission to move money, and it did not get it.
ATP originally came to have a court bless $150 million in 40-year bonds under Chapter 1205 of the Government Code only to have their ability to do so go all the way to the Supreme Court and back. It left without that judgment again. So did Austin taxpayers. The state filed its notice of accelerated appeal over the lunch hour, staying the trial court, and the taxpayers’ claims that the Project Connect tax is unlawful survived intact. A trial on the merits is postponed again. So are the bonds.
The state’s threshold argument turns on a clause that appears in one bond statute and not its twin. Chapter 1202, which routes public securities to the attorney general’s Public Finance Division for approval, defines an issuer to include “a nonprofit corporation acting for or on behalf of” a governmental entity. Chapter 1205, the Expedited Declaratory Judgment Act, has no equivalent clause. ATP is a nonprofit local government corporation created by the city and Capital Metro to act on their behalf.
“ATP is not an issuer under 1205,” Assistant Attorney General Lynn Saarinen told the court. “They cannot be an issuer under 1205.” The petitioners call the omission a scrivener’s error. Saarinen rejected that: “It’s not in 1205 for a reason. I don’t know the reason, Your Honor, but it’s not — the Legislature didn’t just make a mistake.” Under Cameron v. Terrell & Garrett, when the Legislature uses a term in one section and drops it from another, courts presume it meant to.
The city fares no better on the statute’s own words. Section 1205.021 authorizes declarations about “the” public securities, using the definite article each time — signaling, Saarinen argued under the Supreme Court’s 2023 TotalEnergies decision, securities issued by the petitioner and not by somebody else. Austin is a municipality and an issuer in the abstract. It is not issuing these bonds. The city “is certainly an issuer when it is issuing its bonds,” Saarinen said. “They’re just not an issuer here in this case.”
ATP’s counsel, Elliot Clark, answered that the agency meets the terms Chapter 1205 does contain: it is a public corporation, a public instrumentality and a governmental unit under the Transportation Code, and the definition closes with a catch-all reaching “any other type of political or governmental entity of this state.” Saarinen narrowed each in reply. The concurrence Clark cited arose in a case not brought under Chapter 1205, and “of this state” means of the state, not of a local government.
Clark’s strongest card was not textual. Under the state’s reading, he warned, local government corporations, housing finance corporations and public facility corporations could never obtain judicial validation, leaving the attorney general “the sole decider of whether those will get to issue or not.” It is a real consequence — and an argument about what the statute ought to say rather than what it does. Saarinen’s answer: “The Legislature’s coming back to town soon, and so maybe they can change the statute.”
The taxpayers went after the city’s standing instead. By Austin’s own evidence, said Bill Aleshire, the former Travis County judge representing the plaintiffs, the ATP bonds are not a liability of the city, the city may or may not appropriate funds annually, and neither ATP nor bond buyers have recourse against it. That exposes an unresolved tension: to defeat the unconstitutional debt claim Austin argues the obligation is not debt and binds no future council; to validate ATP’s bonds it must show concrete injury from those same bonds not being authorized.
Aleshire then produced the document most likely to outlast the procedural fight. The companion resolution the council adopted in August 2020, half of what the city itself calls its “contract with the voters,” states that under state law, “particularly Chapter 1202 of the Texas Government Code,” ATP’s obligations are subject to the attorney general’s review and approval. “Back in 2020, City of Austin promised the voters that their bonds would be approved by the Attorney General,” Aleshire said.
On the merits, the argument narrowed to a phrase. The Tax Code defines maintenance and operations as “any lawful purpose other than debt service.” Paul Trahan, for the city and ATP, said the definition exists only to let taxing units set a rate and decide whether an election is required, and limits nothing. Aleshire’s rejoinder was hard to answer: “Is that surplusage, other than debt service? It has no function at all?” And if Austin could not itself issue 40-year bonds repaid from M&O revenue, he argued, it cannot reach that end through a corporation created to act on its behalf.
Rick Fine closed on the concession he says the city has already made. Dedication of a funding stream, he argued, is the essential element of a contract with the voters. The 2020 ballot dedicated the revenue; the February 2024 amendment made that transfer subject to annual appropriation. “It was undedicated by the City and ATP in their amended funding agreement,” Fine said. If he is right, the city’s cure is also an admission that what voters approved could not lawfully be carried out.
Trahan noted that the attorney general’s own Public Finance Division has approved similar structures elsewhere and that the state has never contended ATP cannot issue these bonds at all. He rejected the suggestion that the city has stalled the case and said the financing matches what voters were told.
Hexsel denied both pleas without written explanation, overruled the state’s objections to a set of exhibits, and declined Aleshire’s request to convert the city’s plea into a summary judgment motion and certify a permissive appeal — a route that would have sent the substantive questions up alongside the jurisdictional ones. She cited the Texas Supreme Court’s May mandate.
Each previous interlocutory appeal here has consumed roughly a year, and the tax keeps being collected at a projected $185.8 million this fiscal year. But the ledger cuts both ways. Six years after the election, ATP has no validated bonds, no federal grant agreement and no path to either while the claims it asked the court to throw out remain live.