Monthly Archives: September 2013

Why Are Austin’s Property Taxes So High?

September 4, 2013

We hear that question all the time.  There are a variety of reasons, including undervaluations of commercial property, as confirmed by the good research done by local citizen, Brian Rodgers.  But here is something that you might not know.  The City of Austin does not take any chances when it comes to raising taxes during their annual budget process.  If you thought they went into special meetings early on to find out how much they might need to raise taxes, well think again.

The City’s official training document, “Adopting a City Budget and Property Tax Training Guide,” lays bare my greatest fears about how the process actually works.  Their annual ritual starts out with raising taxes to the legal maximum, even before the budget process begins!

You can read all about it, straight from this excerpt from the training guide:

“The mechanism Austin uses to set the process in motion is an item on council’s agenda for a resolution to adopt a proposed maximum tax rate that the city will consider and set the date that council will consider adoption of the actual tax rate.”

“In the resolution adopting the proposed maximum property tax rate, Austin adopts the highest rate that keeps us below the trigger for citizens to take action to roll back the rate. Council then can consider various budget scenarios in the upcoming months that may lower the rate needed to generate the revenue for the upcoming fiscal year’s budget, but they know the cap and the cap is public. A sample of this resolution is at

http://www.cityofaustin.org/edims/document.cfm?id=141378.”

“When we adopt this resolution, we make clear in agenda notice, and in statements made by the Mayor at the agenda adopting this resolution, that the council may ultimately adopt a property tax rate that is lower than the maximum set out in the notice. We adopt the proposed property tax rate using a roll call vote where each person’s vote is recorded after the clerk reads their name. This information is then included in the Notice of Public Hearing discussed below. Including this information is required by Tax Code 26.06(b).”

You can read the entire training guide at: www.texascityattorneys.org/2013speakerpapers/RileyFletcher/BudgetAndTax_LeelaFireside.pdf

Raising taxes to the legal maximum provides an 8% increase over the “effective tax rate,” that would generate the same amount of revenue as the previous fiscal year.  So, year after year for as long as I can remember, the City has set a tax rate that was at or near the maximum, allowing spending to go up 8% each year.

Since 2004, the Austin City Budget has increased 73.7%, from $1.9 billion to $3.3 billion.  The Travis County Budget has nearly doubled over ten years.  The Austin American-Statesman editorial board has raised a really good question.  What has happened to all of the new tax revenue from block after block of gleaming new high rises that dot the downtown skyline?

It is very important to keep in mind that the tax rate can stay the same from one year to the next, or even go down, and we can still get steep property tax increases on our homes.  That’s because the tax appraisals on Austin homes are rising rapidly.  This year, Mayor Lee Leffingwell has shown some laudable restraint by telling the rest of the City Council that he will not vote for an increase in the tax rate.  But if the day ever comes when I hear any City leader say, “I will not vote for an increase above the zero effective tax rate,” then I’ll know that it’s a dream and I’ll roll over in bed and expect to hear the alarm go off at any moment.

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Helping Travis County Reduce the Cost of the New Courthouse

STATESMAN IN-DEPTH: TRAVIS COUNTY COURTHOUSE

As Travis County works toward courthouse price, Florida project may be a guide

Posted: 12:00 a.m. Sunday, Sept. 1, 2013
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BY FARZAD MASHHOOD – AMERICAN-STATESMAN STAFF

As Travis County commissioners embark on plans for a $340 million civil courthouse — hoping to avoid the embarrassing cost overruns, delays and lawsuits that plagued their last major downtown construction project — officials are looking toward the beaches of Florida for guidance.

Two miles from the Atlantic Ocean, officials in Broward County, Fla. are working on a new courthouse, too. The south Florida courthouse will be five stories taller and contain twice as many courtrooms as Travis County officials plan to build, but at a cost of $298 per square foot — half the price Travis County officials project.

Consumer advocate Bill Oakey has told Travis commissioners all about the Broward County courthouse, which is under construction and slated to open in the summer of 2015. Now, Travis County leaders are looking into the Florida project, and may survey other recently built courthouses around the country for cost-cutting ideas.

“I think, shame on us if we can’t find a way to build this thing the most most-effective way possible and give the judges what they feel they need,” said Commissioner Gerald Daugherty. He met with Oakey and is having an aide research the Broward project’s particulars to see how comparable Travis County’s project is and what can be scaled back here.

County Judge Sam Biscoe, chairman of the commissioners, said he will have a discussion during an upcoming meeting and will ask his colleagues to vote on whether to ask staffers to survey similar projects, including the Harris County courthouse that opened in 2005.

The county’s anxieties about cost overruns are real: The Criminal Justice Center opened in 2000, three years later than planned and at a cost of $45 million, about twice what was originally budgeted. The county sued the contractor overseeing the project, accusing it of design problems and delays, but the company said it did everything the county asked of it. Others had said the county rushed the project and demanded too many design changes.

As with that complex, commissioners plan to fund the civil courthouse through voter-approved bonds, perhaps on the November 2014 ballot. But approval is not going to be a slam dunk. Last year, Austin voters narrowly nixed $78.3 million in bonds for affordable housing; in May, two of the Austin school district’s bond packages, worth a combined $403 million, also failed.

If Travis County seeks $340 million in bonds for the civil courthouse, the cost to taxpayers would be about $61 to $69 a year. Commissioners have said shrinking the project’s tab could improve its chances for approval.

Back in Broward County, voters balked at the request for $450 million in bonds to finance most of the courthouse project, which would have cost the average landowner about $33 a year. About 61 percent of the voters rejected those bonds in 2006. That forced community leaders — lawyers, judges, mayors and commissioners — to regroup and reshape the courthouse plan into something they could afford with other pots of money.

“The type of building we had originally contemplated was not possible,” said Alphonso Jefferson, assistant to the Broward County administrator. “The task force looked at what the basic components of a new courthouse are … and that’s what you’re seeing coming out of the ground today.”

The new courthouse will have some room for expansion, but is built for Broward County’s court needs of today, Jefferson said. Originally planned as a 893,000-square-feet complex costing $510 million, the courthouse was pared down to a 714,000-square-foot tower costing $213 million. Broward officials are using cash, federal stimulus money and tax revenue to pay for it.

Shrinking the project helped, but Broward also found more affordable ways to build and finance it. How? That’s what Travis County officials hope to learn by scrutinizing the project.

Biscoe said his request for staffers to study other projects is “more than two hours of work. It’s a major investment of time.”

He also cautioned that Travis County’s $340 million estimate, originating from a consultant’s report in 2012, is likely an unreliably high figure. He said county staffers haven’t vetted the assumptions behind the estimate. The building hasn’t even been designed yet, which is when more accurate costs emerge. The actual cost, he said, will “be based on a whole lot of facts we don’t have today.”

Travis County officials plan to build a civil courthouse sized to meet its needs 2035 and last for at least 50 years. The existing Heman Sweatt Travis County Courthouse opened in 1931 and has had two major expansions, yet, the building has about half as much space as the county says it needs.

The new courthouse estimates are made on various assumptions by the consultants, such as building a “world-class building of significance/a grand public building,” according to an Ernst and Young report.

“That’s exactly what we can’t afford,” said Oakey, a retired accountant. “We definitely need a new courthouse. … But I quite frankly don’t think that if they put it on the ballot at somewhere between $300 million and $350 million, it will pass.”

The county is negotiating a contract with consultant URS Corp. to continue managing the remainder of the project, including public outreach ahead of a bond election and help with preliminary designs of the building. The firm would also help find a separate contractor to handle the final design and construction of the courthouse and help oversee the work at the downtown site, on the block south of Republic Square Park.

“The place we need to get fairly quickly is asking, ‘What are we talking about building? How big? What are the features that the judges say they need?’” Daugherty said.

The ultimate design of the building, and in turn its cost, will be determined by commissioners, working with URS.


Two courthouses

Travis County (projections)

$340 million

15 stories

510,000 square feet

500-car underground parking garage

31 courtrooms

Broward County (under construction)

$213 million

20 stories

714,000 square feet

500-car above-ground parking garage

77 courtrooms

A Decade of Flat Wages

September 4, 2013

Can the City of Austin defy gravity?

When you look around Austin, it is easy to be lulled into believing that we are invincible.  Our housing market is so hot right now that sellers are getting multiple bids that are often higher than the asking price.  Every other week a new magazine article places Austin at the top of somebody’s “Best Place To…” list.

Over the next several years, a Grand Vision Design Plan (officially known as a “charrette”) will transform Congress Avenue into something rivaling the Champs Elysees in Paris.  Any woman who leaves her white gloves at home, or any guy who forgets where he parked his Lamborghini might still be able to head over to Hut’s Hamburgers, if it survives in its present form.

All of the Grand Visions for Austin assume that the huge bubble we now find ourselves in could never burst.  They assume that we can defy gravity, in a way that no other city in the history of the world has ever been able to do.  I guess time will tell and we will all find out, one way or the other.

In the meantime, there is an inescapable economic reality that faces the United States.  It is the reality of “A Decade of Flat Wages.”  The new report by the Economic Policy Institute is subtitled, “The Key Barrier to Shared Prosperity and a Rising Middle Class.”  Here is an excerpt from that report, followed by a link to the full text:

A DECADE OF LOST WAGES (Excerpt) By LAWRENCE MISHEL AND HEIDI SHIERHOLZ

The nation’s economic discourse has finally shifted from talk of “grand bargain” budget deals to a focus on addressing the economic challenges of the middle class and those aspiring to join the middle class. Growing the economy from the “middle out” has become the new frame for discussing economic policy. This is long overdue; in our view, an economy that does not provide shared prosperity is, by definition, a poorly performing one. Further, such an economy will not provide sustainable growth without relying on consumption fueled by asset bubbles and escalating household debt. The collapse of the housing bubble and the ensuing Great Recession have laid bare the consequences of this model of unbalanced growth.

The revived discussion of strengthening the middle class, however, has so far failed to drill down to the central problem: The wage and benefit growth of the vast majority, including white-collar and blue-collar workers and those with and without a college degree, has stagnated, as the fruits of overall growth have accrued disproportionately to the richest households.

The full report is available at: www.epi.org/files/2013/BP365.pdf

Time to Pause for Another Laugh

The Definition of a Figure

By Bill Oakey

September 4, 2013

In order to become proficient in the field of accounting, one must master the art of figuring out what a figure is.  Figures are everywhere.  They just don’t seem to ever go away.  Especially the ones we don’t like, the ones that don’t balance, and the ones that linger around too long and haunt us.

Just what exactly is a figure anyway, and what do accountants use them for?

That of course depends on where it came from, who came up with it, and what you are trying to prove with it at the time.  The best way to understand figures is to sort them into types first.  Here are a few:

1. Actual Figure – A figure that actually got where it is.  It may or may not belong there, but if you rub your eyes and look again and it’s still there, it’s an actual figure.

2. Pure Figure – A single figure that is pulled from a group of figures that everybody likes.  Not to be confused with true figures.

3. True Figure – A figure that appears to be correct, but in an embarrassing sort of way.  Nobody else in the office likes it.  Usually needs to be adjusted.  Not to be confused with correct figures.

4. Correct Figure – Any figure that balances to any other figure.  It is possible for either pure figures or true figures not to balance.  In that case, do not use them.  Always use correct figures, especially if they look familiar.

5. Familiar Figure – A figure that looks right because you remember seeing it somewhere else before.  Especially useful when trying to arrive at realistic figures.

6. Realistic Figure – A figure that comes out the way it is expected to.  Should always be used on official reports.

7. Accurate Figure – A figure that bothers you because you can’t find anything wrong with it.  Be extremely careful when using one, especially if it balances the first time you try.  It may or may not be a firm figure.

8. Firm Figure – A figure that you have to go with.  Either it is too late to change it, or its effect on the person sitting next to you hasn’t been discovered yet.

9. Perfect Figure – One that makes the boss happy.  Never question it.

10. Final Figure – The kind that we only see once in a lifetime.  We can all count on it.  It’s the one that’s assessed by our undertaker.  Even if it’s out of whack, we can rest assured that it will go away and never bother us again.

Dead Serious Note:  If you were considering settling into your final resting place in a City of Austin cemetery, you might want to do it before the end of September.  The friendly folks at City Hall are planning hefty fee increases for all cemetery services, effective October 1st.  Your final figure could be 30% more, or even higher, if you don’t act quickly to avoid letting their unaffordable policies follow you to your grave.  (For the complete list of cemetery fee increases, see www.austintexas.gov/edims/document.cfm?id=191684)