Affordability Proposals For The Austin City Budget

By Bill Oakey – June 9, 2015

It’s that time of year again. This year we have an unprecedented opportunity for affordability reforms. Those of you who have followed this blog since 2013 will recognize some of the items included below. The good news is that the new 10-1 City Council has been very open to suggestions and ideas from the citizens. I have witnessed a new spirit of transparency and inclusiveness.

In that light, I have offered the following proposals for their consideration. If anyone would like to review the details on these from previous blog postings, just enter the topic in the Search box in the upper right section of this page.

  1. Truth In Taxation – Develop a “Taxpayer Impact Statement” that shows the true percentage amount of a tax increase. That would be the percentage increase above the zero “effective tax rate.” State law allows cities to impose a maximum 8% effective tax rate increase. So, the Truth In Taxation percentage would be somewhere between zero and 8%. Adopt either a City Ordinance or a City Council Resolution that directs all City staff and all City Council members to publicize tax increases using the Truth in Taxation standard. This standard would also apply to press releases and all other communications published by the City of Austin. This reform would replace the old standard of just publicizing changes to the “tax rate.” The past practice has been to characterize new City budgets as “holding the line on the tax rate.” Of course the tax rate by itself is very misleading. You can have a tax rate decrease and homeowners with large tax appraisals will still see a steep increase in their tax bills. The Taxpayer Impact Statement should include a chart that shows the dollar impact on a range of home values, perhaps between $100,000 and $1 million, in $25,000 increments.

This proposal is based on the Truth in Taxation principles embodied in House Bill 328, which I proposed to the Texas Legislature in 1987, and was passed and signed into law by Governor Bill Clements.

  1. Use Budget Surpluses for Taxpayer Relief – Please revise the language in the General Fund Financial Policy that is contained in Ordinance # 20140410-004, to Include:
  • A statement that Austin’s affordability challenges require that every effort be made to hold all budget surpluses in reserve accounts, rather than spending the money. Departmental assessments of “unmet needs” must be measured against the needs of renters, homeowners and businesses that struggle with their own budgets.
  • Items to be considered for non-emergency spending from a surplus must be applied to a matrix that evaluates the worthiness of the project in the context of other critical priorities, including relief for taxpayers in the next budget cycle.
  • Items approved based on the matrix described above will be submitted to Council Committees for review, and a public hearing on these items will be held by the City Council prior to a vote.
  • Budgeted vs. Actual revenues and expenditures, by department and with bottom line totals should be published on the public financial website. This will transparently show whether surpluses or deficits exist throughout the year. These statements could be updated quarterly or monthly, depending on how often they are already being generated by financial staff.
  • Budget surplus amounts not spent will be held in reserve accounts until the next budget cycle. Those unspent surplus amounts will be labeled and disclosed as such at the beginning of the next budget cycle. The next budget must be planned and debated without regard to the accumulated prior year surpluses. After the next budget is finalized, the surplus amounts will then be applied as expenditure reductions, in order to generate tangible cost savings to the taxpayers.

Please note that this proposal requires a cultural shift in thinking. The view from inside City Hall has been that “found money” is a new revenue stream available for spending. The view from outside City Hall is that leftover money could be and should be applied to taxpayer relief. Austin affordability is a new reality that has not played a part in City financial decision-making to the extent that it needs to be from now on.

  1. Limit and Control Staff Vacancy Funding – Limit to no more than 5% of workforce (as done in Portland). Assign control of funds to one central office. That office would disburse the funds to departments only to fill vacant positions as needed (as done in Honolulu).
  1. Publish Revenue and Expenditure Data for the Hotel Occupancy Tax – Currently there is no easy way to find that information on the public website. This fund is growing very rapidly, from $51 million in 2012, to an estimated $70+ million in 2014. A large number of additional hotel rooms will be coming onto the market in the next couple of years.
  1. Use The Hotel Occupancy Tax to Offset the Cost of Special Event Fee Waivers – Alternate funding sources, mostly from HOT funds, are currently being used for a portion of special event costs in 30 Texas cities, including Cedar Park, Dallas, Georgetown, Giddings, Fredericksburg and Round Rock. This fact was illustrated in the City Manager’s Power Point presentation to staff in mid-2014. Fee waivers in Austin do not account for the entire deficit that City incurs during special events. In 2013, we experienced a funding gap between expenses incurred and fees collected of $3,110,104. Note that The City Transportation Dept. reported the 2013 funding gap to be $4,256,000, with the total five-year deficit from 2009-2013 coming to $10,694,000.
  1. Index the Over-65 Homestead Exemption – This initiative was proposed by the last City Council. It is my understanding that City staff has been asked to present an analysis to the current Council. Travis County is also considering indexing their Over-65 exemption. It is posted for action on the Commissioners Court agenda for June 16. Both entities currently have an exemption of $70,000.
  1. Implement City Staff pay increases on a sliding scale, rather than across the board – City employees received a 3.5% pay increase this year, plus an additional $750 pay boost in April. It has been common practice for the State Legislature to grant larger pay raises to the lowest paid State workers, while giving smaller increases to the highest paid workers. City executive salaries could be left as they are, since their affordability issues are significantly less than those of most Austinites. The City Manager should be given carefully determined flexibility to award higher pay increases for certain positions that are difficult to fill because of specialized skills. However, pay increases on a very broad scale based on market surveys does not fit with Austin’s current affordability environment. Huge numbers of Austin workers are being paid salaries and wages that are significantly less than what would be considered livable by any reasonable measure. The taxpayers would be quite upset if the City went overboard in granting big raises to large numbers of City employees at this time. Please keep in mind also that retired Austin teachers, retired University of Texas staff employees and State of Texas retirees have not received a cost of living increase since 2001!
  1. Hold One Or Two Informational Budget Work Sessions With Council Members and Staff From San Antonio – This could include a meeting with the San Antonio City Council and a meeting that includes Austin Energy and CPS Energy. The two cities share many commonalities, and each could learn from the other about successful cost-saving initiatives and various planning strategies.

Please total up the cost savings from these proposals, as they relate to the upcoming FY 2016 City Budget. This savings amount can be applied toward reducing or eliminating any tax increase associated with the increased general homestead exemption. You will also see recurring savings from these proposals in future budget years.


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