Austin And Travis County Should Announce Joint Affordability Initiative

By Bill Oakey – July 15, 2015

In about 7 weeks the City of Austin and Travis County will each have to finalize their Fiscal Year 2016 budgets that will take effect on October 1st. For the past several years, citizens throughout the area have been clamoring for major steps toward affordability. Today I am calling upon City and County officials to make some decisions on what affordability measures and proposals they will include in their new budgets, and to make a public announcement telling the citizens what their affordability plans are. As I have said many times in public presentations – the time for talking about affordability is behind us. The time for action is now.

The Austin American-Statesman has repeatedly editorialized on the need to slow down the growth of the City Budget in particular. Austin’s downtown has added countless high rise buildings that should be adding to the tax base and making it easier to pay for expanding City Services. The same is true for neighborhoods all over town that have seen gigantic new resort-style apartment structures that take up a full block. Traditional neighborhoods in all parts of Austin have seen older homes scraped off and replaced with expensive luxury housing.

So that leaves us with a fundamental question. Where is all the increased tax revenue from all of those high-priced new buildings going? Why are our property taxes continuing to rise so rapidly that people are being priced out of their homes?

What Is the Bottom Line On the Growth of the City and County Budgets?

What you are about to see is not a pretty picture. Notice the rapid increases in the general fund in both of these budgets. That is the fund that is paid for with property taxes, sales taxes and some of the fees

City of Austin
  2010 2015 % Increase
General Fund $614,915,000 $854,040,000 38.9%
Total Budget $2,747,105,000 $3,493,973,000 27.2%

Travis County
  2010 2015 % Increase
General Fund $455,661,280 $650,897,476 42.8%
Total Budget $655,140,525 $910,988,941 39.1%

Has Affordability Been Addressed In These Past Budgets?

You will find that word sprinkled quite liberally throughout the current FY 2015 City Budget. In fact, in Volume 1, it graces the pages no less than 29 times. On Page A-8 within City Manager Marc Ott’s cover letter, he issues the following pronouncement with italics included:

“Carefully balances the service demands of a growing community with ongoing concerns over affordability by proposing a full penny decrease in the tax rate.”

That statement contrasts with the opening sentence on the very first page of the Budget:

“This budget will raise more revenue from property taxes than last year’s budget by an amount of $29,970,162, which is a 6.7 percent increase from last year’s budget. The property tax revenue to be raised from new property added to the tax roll this year is $8,375,296.”

What that means is that existing property owners paid the overwhelming bulk of the tax increase, to the tune of $21,594,866. The word “tax” appears 298 times in the first volume of the three-volume document. The word “fee” shows up 277 times. But, alas, on Page A-15 “affordability” gets its own section heading, with the title “Maintaining Affordability.” Most of the initiatives listed pertain to subsidies and assistance to low-income and senior residents. These are, of course, very worthy programs. But the bottom line for the average homeowner is that total property taxes for all of the taxing entities in Central Texas increased 6.1%, as shown on Page A-16. And that does not include the relentless forward march of the various “add-on fees” that appear on our utility bills.

What Can the Taxpayers Expect Over the Next Five Years?

You would probably be less frightened by spending a weekend alone in a haunted castle during a thunderstorm, while reading a Stephen King novel. But if you care to take a look, here is a glimpse of Page 60 in the City’s current Five Year Financial Forecast:

City of Austin Property Tax Assumptions

Fiscal Year Projected Assessed Valuation Growth Projected Total Tax Rate Projected Operations & Maintenance Revenue
FY 2016 9.0% (actual amount is 11%) 0.4782 $385,500,000
FY 2017 7.0% 0.4850 $420,900,000
FY 2018 7.0% 0.4860 $452,500,000
FY 2019 5.0% 0.5008 $492,700,000
FY 2020 5.0% 0.5192 $540,100,000

This chart assumes that property values and tax rates would both increase at the same time. If that were to happen, it would be in stark contrast from current policy, which has been to reduce the tax rate somewhat, to offset the increase in property assessments. In any case, the City’s O&M revenues are projected to increase 40.1% over the five years. When you look at percentage increases, keep one important factor in mind. As the base dollar amount continues to increase, the percentage applied to that base derives a progressively increasing amount. The same is true of your home valuation and your tax increases. The taxable amount of your home value is capped by law at 10% per year. So, if your home started out a few years ago being valued at $200,000, the 10% cap meant that you could only be taxed at $220,000. That’s a $20,000 increase. But once the value of that same home has doubled to $400,000, then the 10% cap yields a taxable value that is $40,000 higher. This year, as the TCAD map shows, Austin has many zip codes with home appraisal increases into the double digits. Click or tap the image to enlarge it.

That’s all the more reason why our City and County officials need to come together and decide on an affordability agenda to be incorporated into their upcoming budgets. A failure to adopt meaningful near-term and long-term reforms would only intensify our already critical economic divide.

Should We Vote to Approve Bonds for a New County Courthouse?

There is no question that Travis County needs a new Civil and Family Courthouse. It is my understanding that no other area taxing entity will place any additional bonds on the November ballot. The current price tag is pegged at $291 million. But Travis County officials are working feverishly to come up with strategies to offset the cost. Discussions have included using fees from after hours parking at the courthouse, certain rental receipts from other County properties, and the sale of other County owned land. Between now and the November election, we will know more about the total amount of those offsets. In addition, the firm that is awarded the contract to build the courthouse could potentially make some design changes that would make the project more efficient.

No decision has yet been made as to whether this blog will endorse the courthouse bonds. But I am hopeful that both the City and the County will join together and demonstrate to the community a serious commitment to affordability. The Travis County Commissioners that I have met with have laid out some innovative ideas for cost-savings, through County-specific initiatives as well as cooperative strategies with the City. Both bodies have appointed representatives to the Regional Affordability Committee. At my suggestion, that committee has embarked on the development of an Affordability Strategic Plan. If the local voters are shown that affordability efforts will finally bear fruit with tangible results, then they are much more likely to stand behind the County Commissioners’ recommendation and vote to approve the courthouse bonds.

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2 thoughts on “Austin And Travis County Should Announce Joint Affordability Initiative

  1. gonzalo camacho

    Thank you Mr. Oakey, lots of interesting info.

    The one thing Austin has been an IS VERY successful at is at NOT being affordable. It is like the Titanic is sinking and we are pretending that it can be stopped.

    Unless Austinites are in the top 10% money earners they are not and will not be able to retire in their current family home. The reason – Property taxes on homestead properties outgrows earning power of working families – this is main factor that makes central cities unaffordable for working class families. City officials call this healthy economic growth and aim for it yearly.

    Need to go back to the fundamentals of family economics but folks have no clue.

    HINT – page 73 of COA five year forecast, when NHCD column (-$0.3M) looks like APD (+$19.1M) it is when we might have a clue about doing the right thing and Austin becomes affordable.

    Regards.

    Reply

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