By Bill Oakey – July 30, 2015
On Thursday morning the new City Council members were treated to something they have been eagerly awaiting all summer long – the proposed FY 2016 City Budget. If you would like to get an overview, you can see Volume One right here from the City’s website.
We have all known since the spring that property tax appraisals shot through the roof for most Austin homeowners, to the tune of mid to high double digits in many local zip codes. So, my approach to analyzing the taxpayer impact of the new budget will be different from the spin that appears in the budget’s executive summary. The word “affordability” appears a total of 8 times in Volume One, while the word “tax” appears 290 times, and “fees” appears 134 times. Here is the opening statement on the first page:
“This budget will raise more total property taxes than last year’s budget by $36,413,252 or 7.7%, and of that amount $13,926,299 is tax revenue to be raised from new property added to the tax roll this year.”
It is easy to see from those figures alone that the City intends to spend more money much faster than the growth in new population. Imagine what would happen to the tax impact on long-term residents if that trend continued for the next 10 years. Another disturbing tidbit is that the City Manager proposes adding 347.4 new staff positions, which is more than double the number of 151.25 positions that were added last year. Also, utility and fee increases averaging $7.98 per month are included in the budget.
So, What’s the Bottom Line On This Year’s Proposed Tax Increase?
The fairest and most truthful way to answer that question is to look first at the tax appraisal map from TCAD that was published in the spring when the new appraisals went out. Click to enlarge the map.
Notice this statement that appears next to the map, “The average market value for houses with a homestead exemption in Travis County went up 11% on average to $355,312.” Because the map includes several areas that are outside the City of Austin, it is hard to tell exactly how much the average appraisal increase is for Austin residents. But we can see that almost every Austin section on the map will, on average, hit the 10% tax appraisal cap.
However, the City told the Austin American-Statesman that “The owner of the median-valued homestead worth $232,272 would pay $1,051.08 in city taxes, up from $1,011.24 this past year.” That works out to a very modest-appearing tax increase of only $40. This includes the new 6% homestead exemption approved by the City Council.
What’s Wrong With This Picture?
Here is a comparison between the data in the current FY 2015 Budget (Vol. 1, Page A-16) and the proposed FY 2016 Budget (Vol. 1, Page A-13). But this comparison is not accurate, as you will soon see.
|FY 2015||FY 2016||$ Difference||% Difference|
|Median Home Value||$202,254||$232,272||$30,018||14.8%|
It turns out that the data presented in each of these budgets only allows an “apples to oranges” comparison of the numbers. After conferring with the reporter of Thursday’s article in the American-Statesman, I obtained the missing number needed to derive the $40 tax increase for the “median value” homeowner. The “median value” of $232,272 for a home in the FY 2016 budget is actually the “median homestead value.” They used that value because the City has adopted a 6% homestead exemption. So, in order to calculate the tax increase, we need to know the “median homestead value” for FY 2015. That number, which does not appear in either of the budgets, happens to be $210,279. Thanks to Andra Lim with the Statesman for tracking it down from the City.
With all of the required figures in hand, here is how to calculate the estimated tax increase:
|FY 2015||FY 2016||$ Difference||% Difference|
|Median Homestead Value||$210,279||$232,272||$21,993||10.5%|
|Less 6% Exemption||$0||$13,936|
|Tax Rate Per $100||0.4809||0.4814|
The median homestead value only includes owner-occupied homes, and not the ones being rented. So, there is a vast difference in the variety of residential properties on the tax rolls. A $40 annual tax increase looks small, but the median value numbers above include small units in multi-family properties such as condos. The biggest tax burden is borne by single-family homeowners, who make up a large percentage of Austin’s long-term residents.
We have been told that the City Manager’s budget proposal calls for a tax rate increase from 48.09 cents to 48.14 cents per $100 valuation. But that doesn’t tell us the percentage increase above the “effective rate,” which would take the appraisal increases into consideration.
A Taxpayer Impact Statement Would Be a Good Tool for Truth In Taxation
My “Truth In Taxation” proposal calls for the City to produce a Taxpayer Impact Statement that includes a chart of home appraisal values in $50,000 increments. The chart should include the following information:
1. A column showing last year’s taxable values, with no homestead exemption, plus columns showing the standard homestead exemption and the over-65 and disabled homestead exemption.
2. Additional columns showing this year’s taxable values at various appraisal levels, up to the 10% cap. And the dollar amount of taxes due at each appraisal level.
3. Columns showing the average amounts of utility and fee increases.
4. A final column showing the estimated grand total of tax, utility and fee increases.
It is time for the City to finally bring the full, complete and truthful impact of the budget out of the shadows and into the open!
Page A-11 of the budget spells out the frustrations of the people in the results of a citizen satisfaction survey. Here is just one example:
- When asked to rate “Overall value for city tax dollars and fees,” 40% of citizens responded that they were satisfied or very satisfied, four percentage points better than the national average. However, 30% of respondents expressed dissatisfaction. Satisfaction is down nine percentage points from previous years, indicating that residents and business owners may increasingly be feeling the pinch of higher tax and utility bills.
(1) Unaffordability is the No. 1 challenge facing Austin. AISD is losing poor
students because low-income families can’t afford to live in Austin. Service workers–and
musicians–can’t afford to live here. The city created a rental assistance program to help
renters who can’t afford to live here. The pervasive manifestations of unaffordability are endless. And how does City Hall respond? By increasing taxes and fees.
Former Statesman editor Ray Mariotti likened city council members to blind bats hanging
upside down in a dark cave, oblivious to the realities outside their habitat. Enough said.
(2) Bill, you pointed out that 30% of Austinites polled felt they were not receiving good
value for city taxes and fees. Thank goodness for municipal monopolies. If Austin
were a competitive business, 30% of whose customers didn’t like the product, its
doors would soon close.
Thank Mr. Oakey.
I saw you at Monday’s forum on CodeNext but I did not get to say hello. I asked the panel about debt and city’s debt as portion of other debt in particular bonds.
Per numbers I checked, if I understand it correctly – City of Austin debt is about $1,400 per tax payer but if we add Austin ISD, Austin Community College, and Traffic county debt goes ups 10 times plus. It looks like this is item 4 in your comment above.
City Manager must be put on the spot to rethink the budget and publish a transparent budget and it must include all debt that residents must pay. Otherwise the City Manager needs to resign or be fired.
On a positive note about the City of Austin, it provides a much better service for our dollar than other cities i.e. Houston which I think has a higher property tax, higher debt and provides zero services.
So sales taxes go up a bunch, property taxes go up 10%, and our city manager says he needs a tax rate increase to make ends meet. I think this is a cause for him to be discharged at once. All the people moving here was supposed to make life better for the people already here. If it raises our taxes more, I don’t get it.
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I haven’t seen any analysis on the impact of the proposed budget/rate on the average renter/rental unit. Any ideas on how to estimate this?