A Major Challenge For The Austin City Council: It’s Time To Double Down On Affordability

By Bill Oakey – May 11, 2014

The new City Council candidates have begun talking themselves and hearing from citizens about fresh ideas, bold reforms, and a new perspective that comes with district representation.  But affordability is one issue that should not be kept on ice until next January when the new Council gets sworn into office.

Many indications have come to light that the players in the upcoming budget cycle are not on track to deliver meaningful affordability-related results.  Below you will see the problems.  We need action on both short term and longer term efforts.

The City Manager Does Not “Get” Affordability

City Manager, Marc Ott, sent a memo to “Department Directors” this past January 10th.  Entitled, “FY 2015 Budget Planning,” some of its pronouncements do not bode well for taxpayers.  Direct quotes from the memo are included, along with my observations.

1. “In light of this renewed focus on affordability, we will institute new guidelines for the submission of unmet service demands. For the fiscal year 2015 budget cycle, unmet service demand requests in the General Fund will be limited to those that can be funded by new or increased fees or those that are of such high priority that your department would recommend reallocating existing resources to address them.”

Observation – The only type of fee that would help the typical taxpayer would be a user fee that is only paid by the person using a particular service.  The memo does not specifically address this type of “user fees.”  But every standard utility charge and every single add-on fee paid by Austin utility ratepayers has been jacked up for the upcoming budget in the Financial Forecast released by the City on May 8th.  (See Page 8).  These increases total up to $11.03 per month for a “typical homeowner.”

2. The City Manager continues to flaunt the highly misleading use of the term “tax rate” to refer to changes in your property taxes.  In this memo, he took the added step of dressing up his message in all capital letters:

Accordingly, I have but one pronouncement for next year’s budget: NO INCREASE IN THE PROPERTY TAX RATE.”

Observation – The City Manager knows DARNED WELL that your property taxes will go up significantly if your tax appraisal went up a lot.  That’s true even if the tax rate stays the same, or goes down 7/10 of a cent, as the latest City Financial Forecast now suggests.  The overall taxable value of Travis County residential property went up an estimated 8%, as reported by the Austin American-Statesman.  Many homeowners will hit the 10% appraisal cap.

3. The January memo addresses the issue of hundreds of staff vacancies.

As of the end of December, there were more than 900 vacant non-uniformed positions across City departments. This represents a City-wide civilian vacancy rate of 9.7%.”

Observation – This problem tends to continue on a year-round basis.  Last year on August 1st, the Austin Business Journal reported that the City had 934 vacancies, with only 76 of them advertised to be filled.  The implications of these perpetually unfilled positions are huge.  All staff positions, or FTE’s as they are officially called, are funded by the annual budget.  If hundreds of them go unfilled, what happens to the money that was budgeted for them?  How many of them could be cut, so that taxes could be lowered?

In April of 2013, the City Council of Honolulu put a stop to the staff practice of controlling millions of dalliers for vacant positions.  Council Member Ann Kobayashi took action to move the funds to a provisional account, as she explained to KITV.  “So it doesn’t become like a slush fund for the departments, and it’ll be even more transparent,” said Kobayashi. “The taxpayer can see what vacant positions have been filled, and where the money is.”

How Can the City Council Double Down on Affordability?

Here are some proposals that should be considered by the current City Council:

1. Transfer this year’s $14 million budget surplus to the Water Utility.  This could help hold down any potential rate increase.  The small rate increase outlined in the City’s Financial Forecast mentioned above is just the tip of the iceberg.  A new Joint Committee On Austin Water Utility’s Financial Plan is hard at work reviewing a series of rate structure changes that will dramatically increase water rates.  Much of the need is attributed to the severe drought and the high debt cost of the poorly timed and ill advised Water Treatment Plant #4.  See my previous blog entry, “A Possible Breakthrough for the City’s $14 Million Budget Surplus.”

2. Take action on Council Member Kathie Tovo’s resolution to review special event fee waivers and consider creating a new Special Events Fund.  This would relieve taxpayers from the burden of subsidizing large public events promoted by for-profit companies.  See my previous blog entry, “Should the City Wave Goodbye to Special Event Fee Waivers?”

3. Create a new policy to strictly regulate all other City fee waivers, including those for construction, permitting, and anything else.  Fee waivers should become the exception rather than the rule, with an eye toward saving money for the taxpayers.  Full transparency on the City website for all fee waivers granted should also be part of this reform.  The first step would be to ask the City Manager for a complete list and dollar amount of all fee waivers given for the past 24 months.  See my previous blog entry, “Why Does the City Give Away Millions of Dollars in Fee Waivers?”

4. Follow the Honolulu model to establish a centralized provisional fund for staff vacancies.  In Austin, a designated staff official could handle disbursements from a provisional account, and report regularly to the City Council’s Audit and Finance Committee.  Full transparency to the taxpayers should be provided on the City website.

5. The City Council should ask for a full accounting from each City department with unfilled positions, to determine how or whether any of the budgeted funds for those positions has been spent.  The unfilled positions should be reviewed for possible cuts to help the taxpayers.  Any unspent funds should be remitted back to the General Fund or to a centralized fund that can be overseen by the City Manager and City Council until the upcoming budget process is complete.

6. The City should conduct a review of all unused and unneeded City-owned land.  These real estate holdings should be considered for possible sale, so that the citizens can realize some value from them.  The proceeds can be used to fund City services and City enterprises, thus holding down taxes and utility rate increases.  Shoring up the financial positions of our reserve funds and our enterprise funds could improve our bond ratings and lower the interest payments on our debt.

7. Finally, the City Council should consider holding one or more Affordability Work Sessions to consider these and other ideas for bringing meaningful tax, utility and fee relief to homeowners, renters and businesses.  Any long-term affordability strategies that Council Members, staff members, and other citizens in the community can put forth now will go a long way towards helping the new Mayor and City Council that takes office early next year.

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