Downtown Alliance Rail Spending Questioned

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 Civic activist Rodgers warns City of Austin not to reimburse $440,000 in Let’s Go Austin contributions


Brian Rodgers
Brian Rodgers

Civic activist Brian Rodgers sent a letter to City Manager Marc Ott and other city officials today to urge the city not to reimburse the DAA for political contributions it made to a pro-rail campaign as such payments might entail a “potential criminal violation.”

The Downtown Austin Alliance (DAA) contributed a total of $440,000 to the Let’s Go Austin Political Action Committee (PAC) to help fund the pro-rail campaign, according to campaign finance reports filed by the PAC.

The November 4 election sought approval for a $600 million bond for an urban rail starter system if the city also provided $400 million for roadway improvement projects. Voters soundly defeated the $1 billion initiative by a vote of 108,396 (57.2 percent) to 81,107 (42.8 percent).

Charlie Betts
Charlie Betts

DAA Executive Director Charlie Betts said he has been with the DAA for 17 years and this is the first time a question has been raised about the organization making political contributions.

Betts said, “We have contributed to issue-oriented PACs many times in the past, such as the Health District, the last two transportation bond issues, and the PAC to support the last affordable housing bonds campaign. We have never contributed to a political candidate.”

Bill Aleshire
Bill Aleshire

“That doesn’t make it legal, it just means they didn’t get caught,” said Austin attorney Bill Aleshire of Riggs Aleshire & Ray PC, who assisted Rodgers in drafting the letter to city officials. “The fact they got away with it in the past doesn’t make it any less of an issue.” (Disclosure: Aleshire is one of the attorneys who represents The Austin Bulldog.)

How DAA is funded

The Austin City Council established the Austin Downtown Public Improvement District (PID) on April 15, 1993.

The council reauthorized the PID for 10 years on October 11, 2012. The DAA’s annual budget is approved by the council.

The City contracts with the DAA to manage the downtown initiative program and promote growth and revitalization in Downtown Austin, according to the City’s Economic Development Department website.

The Downtown Austin Alliance Annual Report 2013-2014 indicates the organization had an annual budget of $3,329,622 for the fiscal year ending April 30, 2014.

Of that amount, $3,271,980—99 percent of the total budget—came from property tax assessments of 10 cents per $100 valuation paid by property owners within the Austin Downtown PID.

The City of Austin annually receives from the Travis Central Appraisal District the certified tax rolls for properties located within the PID. The City bills property owners and collects the taxes, said Sandra Campbell, who handles public information for the Finance Department.

City payments to the DAA are required to be made within 30 days of receipt of the organization’s quarterly reports, based on the organization’s significant work activities, per the management contract, Rodgers’ letter states.

“Paying $440,000 in political campaign contributions would certainly be a ‘significant’ work activity,” the letter states.

“The City of Austin cannot use the DAA to launder $440,000 of public funds so they can be spent on campaign expenditures,” Aleshire said. “But if that’s legal, then the Legislature needs to change the law.” He has already contacted state lawmakers and some county officials to seek support for such legislation.

DAA legal stance

Betts, who will retire early next year when his successor is in place, said the DAA has received legal advice that these political contributions are permissible.

In fact, Austin attorney Jon Gillum of Locke Lord LLP defended the DAA’s practice to Jeri Stone, executive director and general counsel for the Texas Classroom Teachers Association, in a November 6 e-mail. The TCTA offices at 700 Guadalupe within the PID and is subject to the property tax assessment.

Gillum’s e-mail to Stone states in part, “… the Alliance does not collect assessments from property owners nor does it have any discretion over which property owners pay those assessments. Instead, the City of Austin collects assessments based on the District’s boundaries and other parameters pursuant to Chapter 372 of the Texas Local Government Code.  Similarly, the Alliance—as a private non-profit entity—is permitted to expend funds in ways that the City itself might be prohibited from doing so, such as a donation to a political action committee.”

“That is an astonishing statement,” said Aleshire. “The question is whether the City can contract with any party to violate state law.”

Rodgers’ letter includes pages from the campaign contribution reports filed by the Let’s Go Austin Political Action Committee (PAC). Those pages show contributions received from the DAA on March 21 for $5,000, April 25 for $32,000, August 21 for $253,000, and October 3 for $150,000 for a total of $440,000.

The last contribution was reflected in the PAC’s Contribution and Expenditure Report due eight days before the election and filed October 27. The Austin Bulldog verified these contributions are recorded in the PAC’s reports.

Betts told The Austin Bulldog no other contributions were made to the PAC after that date.

The warning

Texas Election Code Section 255.003 makes it a crime for an officer or employee of a political subdivision to “knowingly spend or authorize the spending of public funds for political advertising.”

“Therefore, let this letter serve as a warning to the City of Austin employee(s) who pays or authorizes payment of City funds to DAA, to pay for or reimburse the DAA’s campaign contributions, that such action may be a criminal offense,” Rodgers’ letter states.

Further, if not a crime, the letter states, such payment would still be a violation of the City’s contract with DAA.

“It is a betrayal of the taxpayers in the PID for the City to permit use of their mandatory tax for political campaign contributions. On whatever basis you choose, the City should deduct from payment to the DAA an amount equivalent to the DAA’s political contributions.”

How contributions used an issue

It appears that a significant issue concerning whether these contributions are permissible is how the Let’s Go Austin PAC used the money contributed by the DAA. PAC officials could not be reached late today.

Greg Hartman was appointed treasurer of the Let’s Go Austin PAC March 18. The phone number listed on the appointment was actually that of consultant Susan Harry, who handles campaign finance reporting.

Harry said she would relay to Hartman and campaign manager Lynda Rife The Austin Bulldog’s question about how the $440,000 contributed by DAA was used in the pro-rail campaign.

“If the rail proposal itself was a boondoggle,” Aleshire said, “how about using public funds to pay for promoting it?”

This report was made possible by contributions to The Austin Bulldog, which operates as a 501(c)(3) nonprofit to provide investigative reporting in the public interest. You can help sustain The Austin Bulldog’s reporting by making a tax-deductible contribution.


John Gillum’s E-mail of November 6, 2014, to Jeri Stone

Brian Rodgers Letter of November 25, 2014, to City Manager Marc Ott, et al

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