Monthly Archives: August 2013

Time to Pause for a Laugh

Consumer Weather Bulletin

By Bill Oakey

August 28, 2013

Tax and utility rate increases from the mid teens to the upper twenties this fall, with freezing conditions expected for salaries and wages throughout Central Texas.

Ninety-eight percent chance of heavy precipitation extending from East Austin across the City, as tears begin streaming down the cheeks of low-income taxpayers.

Radar indicates a rising tide of continued cost spirals every year from an intense high pressure area developing over the Sea of Red Ink that engulfs City and County budgets.

A large hot air mass is expected to move into Central Texas next year as political election candidates attempt to cover the huge issue of fiscal responsibility with a thin layer of cloudy promises.


Austin American-Statesman Affordability Editorials

Austin American-Statesman

City, County Must Stop Its Binge On Tax Hikes

Posted: 2:40 p.m. Friday, Aug. 16, 2013


The Austin City Council is either unable or unwilling to stop itself from raising taxes to near or at maximum legal levels — despite larger revenues, windfalls, and growing tax bases. In doing so, city officials have shown themselves to be drunk on tax hikes, and it’s time to implement a 12-step program.

How else can their actions be explained? Year after year, without much — if any — consideration for the public’s ability to pay through-the-roof tax bills from the city, county, school districts, hospital district and Austin Community College, elected officials have continued to impose steep tax hikes. Other cities, such as Round Rock and Cedar Park, have held the line on taxes, even while giving employees a pay raise and expanding city services.

Certainly, well-financed local governments provide services to residents and take care of parks, libraries, schools, roads and people in need. But there are limits – points at which more harm is being done than good when taxes are raised beyond certain levels. As local contributor Bill Oakey notes in his commentary below, the current system is not sustainable for most city residents whose wages have not kept pace with ballooning housing costs, electric rates and tax bills. It’s disheartening that the public’s ability to pay has been an afterthought in budget decisions.

That concern continues to be trumped by other priorities, such as providing substantial yearly pay raises and benefits for city and county employees and, in some cases, pay raises elected officials have awarded themselves; tax rebates for private companies that relocate to Austin or Travis County; and tax breaks for homeowners of historical homes in upscale neighborhoods. The steep and continued increase of tax bills is curious given all the additional money generated by new construction and businesses, a rebounding economy and larger revenue from higher property values. Elected officials tout growth as a counterbalance against such steep tax increases. Yet that benefit is not showing up in our tax bills.

That situation caused Austin City Council Member Laura Morrison to pose this question, “What do we have systemically in our business model that, even with growth, we can’t keep up with expenses … and (because of higher rates) are taking more and more of a bite out of people’s incomes?”

That question deserves an immediate answer. And neither the council nor the commissioners court should approve budgets until that question is answered and budgets are adjusted to reflect the financial realities of people who are paying the bills. Taxpayers should be getting a break, given all the extra money the city and county are taking in.

But the binge continues.

American-Statesman writer Sarah Coppola reported in recent editions that Austin’s property tax rate would increase from 50.29 cents per $100 of property value to 51.14 cents. That rate is just below the highest rate the city could choose under state law — 51.34 cents — without triggering a possible election to limit the increase.

Under the proposal, the typical Austin household would pay $173 more in property taxes, utility bills and other fees next year if the budget is approved in September. Austin would add 365 jobs to its nearly 12,400-person payroll, including 23 jobs in the planning department to review, inspect and permit new construction. Local attorney Bill Aleshire has a good recommendation to address planning department expenditures, including new jobs: Make the department a self-supporting enterprise from user fees. Council Member Mike Martinez, citing 900 positions in the city that are vacant, doesn’t see the need to add hundreds more. We agree. Council Member Bill Spelman is challenging the idea that Austin needs an additional 47 police officers in jobs that can be filled by non-civil service employees, who earn considerably less than police officers.

To give taxpayers a break, the council should take the long overdue step of granting home owners tax relief through a homestead exemption, as the county already offers.

For its part, the county also is on a bender regarding its expenditures. Earlier this month, two county commissioners, Margaret Gomez and Ron Davis, voted themselves and about 40 other elected officials a 3 percent pay raise. They were joined in that arrogance by retiring County Judge Sam Biscoe. The proposed budget for the next fiscal year also includes 3 percent across the board pay raises for all employees, though employees received hefty pay raises this year and the year before.

Though county tax bills will rise nearly 3 percent for the average homeowner, the tax rate will decline by a wee bit, about 1.1 percent. Taxpayers could and should get a bigger break, given the windfall to the county budget from rising property values. Officials seem unaware that most residents don’t share their affluence or ability to pay ever-increasing tax bills.

We’re not advocating that the city, county and other taxing entities practice strict austerity. Perhaps smaller tax increases are warranted in some cases, but they should be justified. We are arguing for tax sobriety.


Oakey: Dollar signs can be danger signs

Posted: 12:00 a.m. Friday, Aug. 16, 2013


Let’s get straight to the bottom line. The Austin city budget has increased a whopping 73.7 percent in the past 10 years, from $1.9 billion to $3.3 billion. Travis County’s budget increased 93.6 percent between 2003 and 2013, which means that it nearly doubled. Right now, the Austin area is experiencing one of the biggest economic booms that the entire country has ever seen. The glow looks great in the national spotlight. But look out for the danger signs.

We surged from becoming America’s 17th largest city in 2000 to 11th place this year. But not without a hefty price. The layer upon layer of related cost increases and future spending proposals can be summed up with one word — unsustainable.

Local property taxes have increased 38 percent in the past decade, and rents have skyrocketed 49 percent. And yet, the median income in Austin, adjusted for inflation, has stayed virtually flat since 2000. The tax rates for the city and county alone have gone up 25 percent in just four years. Homeowners whose tax appraisals have increased during that period have seen even higher increases. And that does not include Austin Community College, Central Health, area schools, and water and electric rate increases.

When many people think of 21st-century Austin, they envision young high-tech whiz kids and innovative entrepreneurs who bring new companies with good-paying jobs to town. We hear about Formula One and the X Games, and an impressive schedule of music and cultural festivals that attract more tourists every year. But beneath the veil of prosperity lies an inescapable fact. The Austin population is a diverse demographic mix.

According to U.S. Census figures, one in five Austinites lives in poverty. Interestingly, poverty has spread to our suburbs at a growth rate that ranks number two nationwide. The Brookings Institution released a report that shows we have the nation’s fastest-growing population of “pre-seniors,” ages 55 to 64, and the second-fastest-growing senior population. And yet, our city and county older-than-65 homestead exemptions have never been indexed for inflation or rising home values, and are woefully inadequate.

Estimates of the number of people moving here range from 100 to 158 per day. Those who landed a good job or who sold their home in a West Coast market can live quite comfortably in Austin. But their arrival in older neighborhoods has driven up property values and priced a lot of longtime Austinites out of their homes. Many of the tens of thousands of residents who were already here before the boom started now face economic uncertainty.

Some of these problems are not unique to Austin. San Francisco, Portland, Ore., and other cities have gone through similar growing pains. But the accelerated pace of the Austin transition gives reason for local government officials to wake up to the harsh realities of affordability. If anyone thinks the past 10 years of tax increases and high housing costs were hard to swallow, just ask yourself this. How long could you sustain the same pace, if not even higher costs going forward?

Over the next 15 months, voters will need to decide on some very expensive bond propositions. ACC is considering a half-billion dollar bond election for building renovation and expansion. Next year, we may see a $275 million election for the first phase of the urban rail project. Add to that a proposed new Travis County Civil Courthouse for $300 million to $345 million. More water and electric rate increases are forecast. Worst of all, the Austin City Council continues to raise property taxes to the legal maximum year after year.

So, what can be done to bring the area’s perceived needs and the cost to fund them in line with the public’s ability to pay? I have read dozens of consultant reports and internal planning documents. But nowhere have I ever encountered the phrase “the public’s ability to pay.” Policymakers should heed the warning signals. For many Austinites, there are only two options: cut the family budget, or load up the car and watch Austin fade away in the rear view mirror.

If local officials really want to tackle this problem, they must first recognize how serious it is. Then they need to schedule some joint planning sessions and get down to the business of doing whatever it takes to make Austin more affordable.

Oakey is a retired accountant and a consumer advocate

Why Lack of Affordability Is Killing Austin

By Bill Oakey

August 25, 2013

Austin is no longer a stepchild to Dallas or Houston.  And its closer neighbor, San Antonio, barely registers on the national radar scene compared to Austin.  The Capital City now boasts F1, the X Games, South By Southwest, and a booming economy that appears unstoppable.  But wait, can any City experience too much of a good thing?  Could Austin somehow become a victim of its own success?  Not only is such a scenario possible, but many observers find it to be frighteningly probable.  By reviewing numerous published articles, editorials and data, both local and national, one can find compelling evidence that Austin is becoming so unaffordable so rapidly that we may be headed for another boom and bust cycle.

While that may sound like a strong statement to make, consider this.  Austin has risen from the nation’s 17th largest city in 2000, to 11th this year, according to U.S. Census figures.  The explosive growth has brought crushing demands on infrastructure and public services, along with a seller’s market for housing.  Property taxes have risen 38% since 2003.  Rents have risen 49%.  The median sales price for a home has increased from $159,000 to $225,000 in the same period.  These figures do not take into account that many Central Austin neighborhoods have seen home prices well above $300,000 or higher since the late 90’s.  And yet, median income in Austin, adjusted for inflation, has stayed virtually flat since 2000.

Here’s the bottom line.  The Travis County Budget increased a whopping 81.1% in the 10 years from 2003 to 2013, going from $449.5 million to $814.2 million.  The Austin City Budget has skyrocketed 73.7% from 2004 to the proposed 2014 budget, going from $1.9 billion to $3.3 billion.  How many friends do you have whose paychecks have gone up by those percentages?

Both Forbes and Bloomberg have recently named Austin America’s current top boomtown.  But boom and bust cycles are all too familiar to anyone who lived in Austin during the 1980’s.  We remember the savings and loan collapse and subsequent real estate crash.  Residents who moved into suburban municipal utility districts, or MUD’s as they were called, found themselves in a financial quagmire.  In the heyday of speculative land-flipping, some lots were bought and sold more than once in the same day.  But once the market crashed, many homeowners owed more on their home loans than they could get from trying to sell.  So, quite a few simply went to the loan office, laid their keys on the table, and walked away.

Fast forward to the Great Recession of 2008.  Austin fared better than most of the rest of the country.  We went through a large number of foreclosures, but it was more of a stumble than a great fall.  The local economy held up fairly well.  This year, the economic recovery is well underway.  Home values are on the rise for the first time in several years.  No place on earth is riding the real estate boom faster than Austin, Texas.  Estimates of the number of new people moving here every single day vary.  But it ranges from 100 to 158 per day.

So, what’s not to like about being the fastest growing city in the USA?   Wouldn’t any city salivate at the chance to own that crown?   Well, yes, it is safe to say that business is booming in Austin.  Austin venture capital firms have spawned the growth of innovative startup companies in a broad range of fields.  If one phrase could be used to describe the new urbanites in Austin, it would be “young and hip.”  While not all of the young professionals work in the high tech industry, many are receiving other high paying jobs.

But for Austin and Travis County to be able to afford the expensive building and expansion plans already on the books, we would need to out-recruit every other city on the planet.  That’s because existing residents are rapidly being squeezed out of the city.  So, consider this question.  Even if Austin wanted to displace all of the older folks and low to moderate income residents, could they become the only city in world history to make that happen?  Austin is flying high now, but can it really defy gravity?  And what kind of place would it be with little demographic or economic diversity?

Generous tax incentives to Apple, Samsung, and even a high-end shopping complex, The Domain, have lured a steady stream of businesses to town.  The shopping center incentives drew loud protests and an unsuccessful ballot initiative to have them repealed.  The City then followed up with a hefty round of fee waivers for a downtown convention center hotel.  Again, the protestors clamored for an explanation as to why a hotel chain would need an incentive to build in the hottest city in the country.  At the same time, the Texas Legislature delivered severe cuts to local school districts, then added to the districts’ pain by awarding a basket of school tax exemptions to incoming businesses.  Some admire the incentives; others call them “corporate welfare.”

In the shadows of the newfound glitz and glamour that charms the downtown corridors of Austin are the remaining longtime residents.  Retired school teachers and state retirees have not received a cost of living pay increase since 2001.  Those people, along with tens of thousands of other low to moderate-income residents face skyrocketing property taxes, escalating tax assessments on their modest homes, and rapidly rising utility bills.  Of course, the story of local displacement in a growing, prosperous city is nothing new.  Gentrification has happened in San Francisco, Portland and lots of other places.

And yet there is something stunning about the rapid pace at which the Austin transition is occurring.  The Great Recession may have slowed things down temporarily, but now the boom is exploding.  The effort to pay for the growth pushed both City of Austin and Travis County property taxes up a full 25% between 2008 and 2012.  If that was the pace during the downturn, how much more will taxes accelerate during the recovery?  If the public’s ability to pay is not plugged into the budget planning process, how long can the status quo be sustained?

The voters of Austin, historically proud of their clean and attractive city’s stellar reputation, have willingly ponied up to support bond propositions for the schools, as well as bonds to pay for City and County capital projects.  But a couple of years ago, a new watchword found its way into the local political lexicon.  Affordability.  A person cannot attend a civic function or a political campaign forum without hearing “affordability” mentioned countless times.  The annual budget hearings for the City and County, which once drew large interest groups asking for more money for this or that pet project have dwindled.  The lineup of speakers these days delivers a new message in multiple-part harmony.  “Don’t raise our taxes any higher.  We just can’t afford it!”

What many predicted would happen sooner or later did happen in the spring of this year.  Two out of four bond propositions for the Austin Independent School District failed at the ballot box.  It was the first time that had happened since 1989.  Between now and the end of 2015, local voters will be asked to approve half a billion dollars for Austin Community College building expansion and renovation and $200 – $300 million for a downtown skyscraper to house Travis County’s civil and family courts.  In November 2014 bonds will be on the ballot totaling several hundred million for the first phase of the City of Austin’s proposed urban rail project.  The City Council is also considering adding about $200 million for roads, and combining that with the rail bonds into a single bond proposition.

The Austin City Council routinely sets their annual budget target using the maximum property tax increase allowed by law.  Then they publicize an additional “unmet needs” amount to the media.  This is labeled as a “budget shortfall.”  Everyone clamors for them to whittle down the shortfall.  But when they do, they have only reduced it back to where they started – at or near the highest property tax increase legally allowed.  Just close your eyes and try to imagine if our community could sustain another 10 years of budget increases of the same magnitude.  Could you sustain it with your paycheck?  Or would you just be looking at Austin in your rear view mirror?

Here is an outline of topics and relevant data from newspaper articles, radio and TV websites, and primary sources:

1. “Policy Group Finds Austin Most Expensive City in Texas.”  Austin Business Journal, July 10, 2013

2. “Austin Named Most Expensive City for Families.”  KVUE-TV News, July 1, 2013

3. “Through the Roof – Cost of Living in Austin Is ‘Out of Reach’ for Most Renters.”  Austin Chronicle, March 23, 2012.  This article includes an interesting discussion of the displacement of low-income families from a historically affordable neighborhood along East Riverside Drive.  A single City zoning change led to a snowball effect that changed the lives of a large number of residents.  A valuable segment of Austin’s dwindling supply of affordable housing was wiped out.  One can only hope that voters will approve a badly needed program for affordable housing in the fall.

4. “Where Have Austin’s Urban Children Gone?” Austin American-Statesman, April 24, 2011.  The “Big Picture” of Austin’s growth reveals a disturbing pattern of outward migration by families with children.  Many young families who transfer here to start a new job try to find a home in a Central City neighborhood.  But those who locate to a close-in neighborhood find that the convenience of avoiding a long commute comes with a hefty price tag.  So much so, that it doesn’t take long for them to join the rapidly increasing migration to the outer reaches of the City or County.  This phenomenon depresses the population of children in the inner city schools.  The next refrain in that particular song is announced school closings, followed by hollering neighborhood protests.

5. “Austin: Second Fasting Growing City for Suburban Poverty (In the Nation),” KUT News, May 20, 2013.  “Poverty Takes Root in Austin’s Suburbs,” Austin American-Statesman, May 19, 2013. “More Than One in Five Austinites Live in Poverty,” Austin American-Statesman, Sept. 22, 2011.  “Crime and Homeless Drop in Austin, but Poverty Is on the Rise,” Austin American-Statesman, May 23, 2013

6. “FY 2013-2014 City of Austin Community Needs Assessment,” A comprehensive demographic study of population trends including ethnic breakdowns, age breakdowns, unemployment data, income levels, etc.

7. “Pre-Seniors Are Booming and Austin Leads the Pack,” Austin Business Journal, July 31, 2013.  Discussion of a Brookings Institution Report that states Austin has the fastest growing percentage of people ages 55 to 64 in the United States, and the second fastest growing senior population.  “Growing Senior Population May Bring Problems to Austin Area,” Community Impact Newspaper, October 25, 2012. These reports led to Austin Mayor Lee Leffingwell’s Task Force on Aging.

8. “5 Must-Do’s As Age Wave Bears Down on USA.” USA Today & The National Council on Aging, August 2, 2013.

9. “Austin Housing Prices A Concern for Employers,” Austin American-Statesman, August 1, 2013.

10. “Austin Property Taxes Jump 38% Over Past Decade,” Editorial Board, Austin American-Statesman, June 23, 2012

11. “Central Texans Deserve Truth About Their Taxes,” Editorial Board, Austin American-Statesman, August 25, 2012

12. “Austin City Council’s Budget Does Not Address Affordability,” Editorial Board, Austin American-Statesman, September 15, 2012

13. “Pull Back Now on Rapid Tax Increases,” Editorial Board, Austin American-Statesman, July 7, 2012

14. “Texas Business Incentives Highest in Nation,” New York Times, December 2, 2012.  Discussion of tradeoffs between “business Incentives” vs. “corporate welfare.”

15. “Austin Could Seek $275 Million In Bonds for Initial Urban Rail Line,” Austin American-Statesman, May 22, 2012.

16. “Start Now to Make Austin Affordable Again,” Brigid Shea, Austin American-Statesman, October 24, 2012.

17. “Taxpayers May Be Asked to Share $250 Million Cost of Replacing Austin’s Public Hospital,” Austin American-Statesman, Jan. 27, 2012.

18. “Local Entities Join Forces to Sync Myriad Bond, Tax Proposals – Average Homeowner Would See $1,000 Increase In Taxes in Next 5 Years Under Some Scenarios,” Austin American-Statesman, July 11, 2012.

19. “Austin City Council Approves Brand New Vision for Downtown ($350 Million), Austin American-Statesman, Dec. 8, 2011.

20. “Travis County’s Downtown Plan Calls for More Than $1 Billion In Spending,” Austin American-Statesman, December 23, 2012.

21. “U.T. Gets New Medical School Thanks to Tax Increase,” Houston Chronicle, Nov. 7, 2012. “Central Health Defends Tax Hike of 5 Cents, Or 63%,” Austin American-Statesman, August 18, 2012

22. ”As Debt Rises, Travis County Considers New Downtown Office Building,” Austin American-Statesman, April 29, 2013.  The County’s non-voter-approved bond debt has tripled since 2005, from $68.8 million to $226 million.

23. “Will New Travis County Civil Courthouse Rise 66 Stories?” Austin American-Statesman, October 11, 2011. “Travis County Commissioners Approve Building Method for New Courthouse ($312 Million),” July 23, 2013

24. ”Austin Community College Weighs $499 Million Bond Proposition,” Community Impact Newspaper, July 25, 2013

25. ”Big Increase In Next Year’s Proposed (City) Budget,” MyFox Austin, August 1, 2013.  New taxes and fees totaling $14.39 per month for the average Austin family.  This does not include Travis County, Central Health, ACC, or the school district.

26. ”Austin To Tackle Affordability Question in Building Rules,” Austin American-Statesman, August 10, 2013.

27. ”How to Keep Up With 158 People Moving to Austin Per Day,” Realty Austin, May 17, 2013.

28. “Austin Ranked Best for Everything and Everyone,” Austin Business Journal, June 20, 2012

29. ”America’s Fastest Growing Cities,” (Austin is #1, for Third Year In a Row), Forbes Magazine, Jan. 23, 2013.

30. “How Austin Energy’s Rate Increase Will Affect You,“ Austin American-Statesman,” June 16, 2012.  “State Report: Austin Energy Rate Increase Too High,” Austin American-Statesman, February 14, 2013.  “Austin Energy Wins Round One,” Austin Chronicle, March 8, 2013.

31. “Critics Tie Proposed Plant to Rise In Austin Water Rates,” Austin American-Statesman, August 26, 2010.  Rates to rise 35% by 2015.  “Higher Water Fees Coming for Austin Customers,” Austin American-Statesman, July 15, 2012.  Water conservation leads to lower revenues, so rates must go up.

32. ”Cost of Infrastructure to Serve New Residential Development,” Fodor & Associates, Jan. 2011.  Austin only collects two of the four types of impact fees allowed under Texas law.  Their water and wastewater impact fees only recover 38% of the full cost.  The rest is paid by all City ratepayers.  Austin’s growth is not paying for itself.

33. “The Unfair Burden: How Austin Homeowners Subsidize Speculative Land Holdings and Commercial Property Owners,” By Brian Rodgers, July 1, 2009.  “Systemic Undervaluations,” News stories and reports of undervaluations of commercial properties at the expense of residential taxpayers.  Compiled by Brian Rodgers.