The Painful Truth About the City Budget Process

By Bill Oakey

March 14, 2014

In just a few short weeks, the City of Austin will begin an annual event that is not as much fun as SXSW or hunting for Easter eggs.  But it’s not without a fair share of drama and intrigue.  Like it or not, here it comes.  30 years is a long time to be ensnared in the budget process as a financial watchdog.   During that time I have learned a few things that you might like to know.

There is a method to the madness.  I will keep it as simple and as brief as possible because some of you need to get to work so you can pay your property tax bills.  Here goes:

1. The City has posted an online training guide that you can read.  It is called “Adopting A City Budget and Property Tax Rate Training.”  Check it out at:

2. Here is the most important section, quoted verbatim, beginning at the bottom of Page 5:

“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

“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.”

3. What this means is that the City Budget staff routinely prepares a budget that uses up most if not all of the money they could get by raising your taxes to the highest level allowed by state law.  And this is done at the very beginning of the budget process!

4. The tax rate that is set at the end of the process is simply the rate that will generate that legal maximum amount of revenue, or very close to it.  The most important thing to remember is that the tax rate is nothing more than a mathematical calculation used to fit the budget.  You cannot compare this year’s rate to last year’s rate.  That’s because property appraisals go up and down.  If the citywide property values go up high enough, the City can have a so-called “zero tax rate increase” and still raise your taxes to the legal state maximum.

5. If you read in the newspaper or hear on TV that the City has something like a “$15 million budget shortfall,” here’s what that really means.  If they cut enough things to eliminate the shortfall completely, they have simply gotten the budget back down to that starting level that will raise your taxes to the legal maximum!

6. There is room for you and your partner on the dance floor at City Hall if you want to experience the event and make public comments this year.  But be sure to bring your Kindle, iPad, or a stack of comic books.  The legally posted 4:00 PM public hearings normally start at least 6 hours late.

7. Oh, in case you were wondering.  How much of a true percentage tax increase do you get whenever the budget is set to the legal maximum?

The answer is 8%.  (See the section, “Effective and Rollback Rates” on Page 4 in the online training guide).

Your actual tax increase would only be 8% if your property appraisal stayed the same as last year.  If your appraisal went up, you cannot be taxed at any more than 10% above last year’s appraisal.  But if you got a huge appraisal increase, the amount above the 10% cap will bite you again next year, up to that year’s 10% cap.

8. If you would like to see both the City of Austin and Travis County adopt a straight forward zero based budgeting plan, please stay tuned.  My top priority for budget reform is to ask them to start the budget process with a plan that keeps taxes at the “zero effective rate.”  Then if they want to increase spending above that level, they would publicize the true amount of any “shortfall” that would occur if those recommended expenditures are not approved.

And the true percentage of any tax increase.  (Tax rates are meaningless, remember?)

The whole truth and nothing but the truth.  Finally!  At long last.  After all these years!

If not by this City Council, then by the (hopefully) grass roots leaders that we elect in November.


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