Category Archives: General Affordability Updates

Budget Official Confirms $26.9 Million Surplus – But Doesn’t Want Us To Call It A Surplus

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By Bill Oakey – Updated June 13, 2015

Late Friday, we received word that Mr. Ed Van Eenoo, Austin’s Deputy Chief Financial Officer, wrote a response to the City Council regarding this blog’s reported “budget surplus.” He states that the $26.9 million cited in the City document referenced on the blog last Thursday is “not a surplus.” To be clear, he identified that same amount and described it as part of the Budget Stabilization Reserve Fund, but he stopped short of labeling it as a surplus. Excerpts from Mr. Van Eenoo’s email to the Council are attached to the end of this posting.

Do We Have a Surplus or Don’t We?

After the end of each fiscal year, any surplus funds from the annual operating budget will flow into the Budget Stabilization Reserve Fund. These surpluses come from increased revenues and / or lower expenditures than what were budgeted. Mr. Van Eenoo Identified $12.3 million in surplus funds from the FY 2014 budget that were transferred to that reserve fund this year. But that $12.3 million is only a small portion of the Budget Stabilization Reserve Fund. It has grown from $31.4 million in 2008 to $54 million in 2010 to an estimated $86.7 million for FY 2016. Since the source for those reserves is annual budget surpluses and interest, then the $26.9 million that has been deemed available to spend in the upcoming budget could be classified as surplus funds. Not all of it is a “new budget surplus,” but a look at the complete picture should settle the splitting of hairs. The important issue here is that funds transferred into the budget from a source other than new taxes creates an opportunity to lower the amount of new taxes needed.

What Are the City’s Financial Policies On Using Reserve Funds for Spending In the Budget?

In any given year, the City can spend up to 1/3 of the Budget Stabilization Reserve Fund. But, there is a caveat. Another policy requires that the City maintain a total balance in the 3 General Fund reserve accounts that equals 12% of the General Fund requirements in the upcoming budget. The limit of $26.9 million is derived from the second of those two policies.

What’s the Bottom Line for the New Council and the Taxpayers?

The City’s official record shows an estimated amount of $26.9 million in reserves that can be spent in the upcoming budget. The big challenge for City staff and the new City Council will be selecting the ideal set of one-time expenditures that can be funded from the reserves. If the City can identify critical one-time items that do not stretch overall spending too far beyond last year’s budget, then we could see tangible tax relief. It’s a matter of perspective. They can save money by picking items that were included in previous budget forecasts, but were not tied to assumptions of future surpluses. Or, they can regard the $26.9 million as an opportunity to create new “wish lists” and thus, higher spending. What needs to go onto everyone’s list is the word “affordability.” Helping the taxpayer’s is one of this year’s biggest “unmet needs.”

Last Year’s Proposed Staff Budget Included $29 Million From the Same Reserve Fund

Take a look at this Budget Office response to an information request from former City Council Member Mike Martinez:

2014‐2015 PROPOSED BUDGET RESPONSE TO REQUEST FOR INFORMATION

DEPARTMENT: Financial Services – Budget Office REQUEST NO.: 125
REQUESTED BY: Martinez
DATE REQUESTED: 9/2/14

DATE POSTED: 9/5/14

REQUEST: Please provide a breakdown of every expense in the proposed budget that is funded by the Budget Stabilization Reserve Fund, including a justification for each expense request.

RESPONSE:

Included in the Proposed Budget is a transfer from the Budget Stabilization Reserve Fund to the Critical One‐Time Fund of $29,029,312. The list of items proposed to be funded along with the justification for those expenditures is attached.

Here is the link to that document and the attached list of proposed expenditures.

Excerpts From Mr. Ed Van Eenoo’s Response to the City Council On Friday June 12, 2015

Regarding the $26.9 Million – “That figure, which was presented as part of our financial forecast, is our preliminary estimate of the allowable amount that the City’s Budget Stabilization Reserve will be able to be drawn down by in FY 2016 while remaining within Council’s adopted financial policies.” Then he goes on to say, “As you well know, reserves represent a one-time source of funding and as such their use is limited to non-recurring expenditures. Therefore, it would not be allowable under the City’s financial policies (nor advisable under any circumstance) to use those funds as a means of offsetting a recurring revenue reduction resulting from the implementation of a general homestead exemption.”

My Comment – I stand corrected on the last point. My suggestion in last Thursday’s blog posting that the surplus might be applied towards offsetting the homestead exemption is not valid. I have edited the posting and removed it. Perhaps a teacher should slap my hand with a ruler, because I have a copy of that financial policy in my affordability archives. But, we all make mistakes and hopefully, we learn from them. You can see the revised blog posting here.

Regarding the $12.3 Million – “The actual year-end surplus for FY 2014 was $12.3 million, roughly in line with prior-year surpluses. These funds flow into the Budget Stabilization Reserve for appropriation by Council in the subsequent fiscal year pursuant to the City’s aforementioned financial policies.”

City Projects Huge $26.9 Million Budget Surplus!

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By Bill Oakey – June 11, 2015

Please Note: Since June 11 when this entry was posted, a great deal of additional research has brought new information to my attention. The $26.9 million addressed here comes from the City’s Budget Stabilization Reserve Fund. That fund holds all of the unspent budget surpluses from previous years. Therefore, not all of the $26.9 million represents a “new” surplus. But all of it does come from surplus funds that have accumulated in the reserve account, along with some interest that the fund has generated. Please see the more recent related blog entry here. Below you will see the original version of this posting.

This announcement may be the first-ever local news story to break first on AustinAffordability.com. I included a teaser in yesterday’s posting, but now I have the actual documentation. The City of Austin Financial Services Dept. is projecting a budget surplus for this year of $26.9 million!

The document linked about requires a brief bit of explanation. There are two ways that the City can calculate what we call a “budget surplus.” The most prudent approach is to multiply the General Fund requirements of $903,560,106 by 12%. That comes out to $108,427,213. The top three Wall Street rating agencies prefer that cities keep that 12% amount in their reserves. The total of Austin’s three reserve funds equals $135,352,153. Therefore, if you leave that 12% requirement in the reserves, the leftover surplus is $26,924,940.

There is a City Financial Services policy that allows up to 1/3 of the single Budget Stabilization Reserve Fund to be drawn down and appropriated. That amount in this case would be $28,891,885. But since that figures exceeds the surplus left after the 12% rule mentioned above is applied, it is best for us to assume that this year’s official City Budget surplus will be $26.9 million.

So, What Will Happen to This Huge Budget Windfall?

For each of the past two fiscal years, the City has announced budget surpluses of around $14 million. As this blog has pointed out, there is no set policy on whether or how to spend these surpluses. The previous City Council spent the entire surplus for FY 2014 in a few minutes with very little discussion and no public process. Last year, there was an organized effort by citizens, including this blogger to urge the Council not to spend the surplus. They complied with our request, and the money was kept in the reserves. However, appeals to the Council to use the surplus to hold down taxes or to offset a projected water rate increase failed. The surplus was allowed to become part of the spending pot for this year’s budget. The existing Financial Services “General Fund Financial Policy” and the City Council’s latest Budget Amendment Ordinance do not include taxpayer relief as an option for addressing surpluses. One of my reform proposals calls for much stronger taxpayer provisions, and public disclosure of periodic statements of budgeted vs. actual revenues and expenditures.

Now we find ourselves at the beginning of the new 2015 Summer Budget Marathon. Grab onto the rails and prepare yourself for a wild and bumpy ride! We still have time to try to influence the fate of the $26.9 million surplus. It cannot be used for recurring expenses that would depend on equal surpluses in future years. But there are plenty of one-time expenses that are fair game. Using the surplus for those would set up a tax-saving opportunity. However, there’s a catch. Those expenses would have to be ones that were planned in the budget before the full $26.9 million surplus was put into play. If the City created a wish list of new items to spend it on, then a tax cut would flutter away like a butterfly released from a jar. Our new City Council seems more inclined toward affordability than the last one, so let’s keep our fingers crossed.

What Can You Do to Prepare for the Ultimate Outcome?

You can write to the City Council using this single-click link to reach all 11 of them. In the meantime, I have three recommendations for cautionary tales that you might enjoy watching on YouTube or Netflix. Pretend that you as a taxpayer are among the main characters in each of these stories. All three of them start out on a very promising note.

1. Twilight Zone Episode: “The Man In the Bottle”

2. Twilight Zone Episode: “The Rip Van Winkle Caper”

3. Movie: “The Treasure of the Sierra Madre” (Don’t read any spoilers)!

butterfly

A Day In The Life Of A City Hall Watchdog

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By Bill Oakey – June 10, 2015

Part One

I guess today is Wednesday. That’s what it says on the special clock that somebody gave me for a retirement gift in 2007. It shows the days of the week instead of the time, in case you forget. In any case, I got up early this morning so I could eat breakfast downtown and then head to the City Council Budget Work Session.

It was held in a small room across from the City Council chambers. The tables are arranged in a square, so the Council Members can face each other. Looking at that scene made me wonder if the Council Members will be pleased to face the taxpayers when the long hot summer is over and the budget is finalized. I was the first one in the room, except for the guys setting up the video equipment.

Before the meeting got started, I received a bit of very exciting news. It has to do with a newly calculated budget surplus, left over from the current budget. As soon as I receive the details on that, I will post them here. But the subject of budget surpluses leaves a bad taste in my mouth. Last year the Austin American-Statesman reported a $14 million surplus. I urged the readers of the blog to contact the City Council members and implore them not to spend it. We succeeded on that front. The Council pulled back their spending requests and agreed to leave the surplus in a reserve fund. Affordability advocates wanted it to be saved for taxpayer relief, or perhaps transferred to the Water Utility to soften their upcoming rate increase. But neither of those options took place. The surplus was tossed into the available spending pot for last summer’s budget talks. In fact the decision on what to do with the surplus was never mentioned publicly. The existing Financial Services Dept. policy and the city ordinance for budget amendments lack sufficient taxpayer protections. That’s why I have included it in my list of reform proposals.

OK, so back to the square table in the small room and the Budget Work Session. It was not at all what I expected. In my imagination, the Council Members would sit down and start sharing ideas on how to meet the needs of the City, while in the midst of our serious affordability situation. I had hoped that they would bring up cost-saving proposals and perhaps debate them. Those kinds of talks will probably come later. At least I hope so. This morning’s session was a very long staff presentation on their vision of the spending needs for the upcoming fiscal year. I quickly found myself awash in a sea of acronyms and buzzwords. I did not have access to one of the big loose leaf binders that adorned the spaces at the table.

But here’s the bottom line. The word “affordability” never came up. Not even once while I was there. It was all about millions upon millions of dollars in spending needs. Certainly, there will be needs for funding the various departments. But as a retired State employee, I am used to the concept of comparative budget scenarios. There is a baseline budget request that reflects very little increase in overall spending, and then 2 or 3 higher spending options to evaluate as alternatives. If the City has a budget review process of that nature, I am not aware of it. After watching and listening to the proceedings for about an hour, I exited the room and went home.

Part Two

I had a 3:00 afternoon meeting with the Policy Director in Council Member Ellen Troxclair’s office. It was very productive. In fact, I learned a great deal about the complexities of some of my proposals. There are questions to be answered and details to be sorted out. But the willingness of people on the new City Council to consider major reforms is extremely gratifying in its own right. This was a full one-hour meeting. I came away armed with the knowledge that if there are hills to climb, I now have a better map to approach those hills, and perhaps even the right tools to climb partway up some of them. That’s a very good feeling.

Part Three

At 5:27 I received an email from the Budget Adviser to Mayor Steve Adler. He requested some information on my proposal to implement the “Honolulu Plan” to control funds budgeted for vacant staff positions. His timing was great because I had just been informed at my last meeting that there was a potential pitfall. I decided to take a stab at solving the stumbling block, and to lay out an example of how one City department might comply with the new guidelines. But first, you can take a look at the Honolulu news article from 2013 that sparked my proposal. Their City Council grew weary of City departments taking money budgeted for vacant staff positions and spending it for other purposes. They even invoked the term “slush fund.” The situation in Austin has been very similar, with the staff vacancy rate approaching 10% of the total workforce. The reform could yield several millions of dollars in annual savings.

Here is my response to the information request from the Mayor’s Office:

The Austin City Charter allows the City Manager to shift funds within a department as he sees fit. Here is the text of that Charter provision:
Article VII, Section 8, Last Sentence:
  • § 8. – APPROPRIATIONS.

    No funds of the city shall be expended nor shall any obligation for the expenditure of money be incurred, except in pursuance of the annual or interim period appropriation ordinance provided by this Charter. At the close of each fiscal year any unencumbered balance of an appropriation shall revert to the fund from which appropriated and may be reappropriated by the city council. The council may transfer any unencumbered appropriation balance or portion thereof from one office, department, or agency to another. The city manager shall have authority, without council approval, to transfer appropriation balances from one expenditure account to another within a single office, department, or agency of the city.

Here is my proposed solution to that City Charter restriction. The City Council should be able to establish a policy that budgeted funds for all vacant staff positions approved in the FY 2016 budget be placed into a single account, to allow the City Council to exercise its oversight authority as manifested in the functions of the Audit and Finance Committee. The single account could be called the Vacant Staff Positions Fund.  Under this policy, all Staff departments would submit their funding requests to fill vacant positions to the staff official who manages the single account. This action would not prevent the City Manager or his staff from transferring funds within any department after they receive these funds. However, the policy would provide a mechanism for the City Council’s Audit and Finance Committee to monitor the flow of the funds. It would provide a solid foundation for good transparency. The City Council also has the authority to ask the City Manager to provide regular summaries of funds budgeted for vacant positions and the categories of expenditures ultimately used for those funds within in each department.
Additionally, I would support a City Council initiated City Charter amendment in the future to amend Article VII, Section 8. This amendment would require the City Manager to utilize budgeted funds for vacant staff positions for only that purpose. But the City Council could approve a different usage of those funds in specific cases, through the standard budget amendment process.
I also learned today that It is very important to give a simplified explanation and clear example of how the Vacant Staff Position Fund would operate.
Here is a hypothetical example:
1. Department X is allocated $10 million for 200 FTE’s in the FY 2016 budget. Of those 200 FTE’s, 170 of them are filled when the budget is adopted. The other 30 of those FTE’s are vacant. In this example, the total budgeted amount for those 30 vacant FTE’s is $1.5 million. This figure is based on a hypothetical average salary of $50,000 per FTE (without fringe benefits, to keep the example simple). The budgeted total for the filled FTE’s is $8.5 million.
2. Throughout FY 2016, Department X would not need to request funds from the central Vacant Staff Positions Fund unless and until it spends the total budgeted amount for the filled positions. in this example, the filled FTE budget is $8.5 million.
3. Therefore, in order to fill a position from the $1.5 million portion of the budget that had been identified as vacant, Department X would need to submit a request to draw funds from the Vacant Staff Positions Fund.
4. As per Article VII, Section 8 of the City Charter, the City Manager could still transfer funds within a department after those funds have been drawn from the Vacant Staff Positions Fund. But the City Council could ask the City Manager to provide summaries of all expenditures of funds that originated from those withdrawals.
A future City Charter amendment, as described above, would be the best-case scenario. With the amendment that I have proposed, the City Manager would have the ability to spend funds from vacant staff positions for other purposes. But to do so would require City Council approval through the standard budget amendment process.
Thanks, and I hope this response will be helpful. Please feel free to contact me at any time with additional questions on any of my affordability proposals.

Affordability Proposals For The Austin City Budget

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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.

A Big Thanks To Council Member Don Zimmerman

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By Bill Oakey – June 6, 2015

In the City of Austin, the name Don Zimmerman means different things to different people. Whenever I bring up the name, I get a variety of strange looks and interesting expressions. I suppose there could easily be more than one Don Zimmerman here, since Austin has become a pretty big city. The Don that I know best currently represents District 6 on the Austin City Council. Before he was elected last November, he earned a reputation as a fighter for the taxpayers, even occasionally taking his battles to court.

When I walked into his office at City Hall recently, I came prepared with documents and notes to support my affordability proposals for the upcoming City Budget. We did not discuss party politics. It was a straightforward dialog about longstanding problems with the budget. The most amusing thing he showed me is the City’s latest “Budget in a Box.” It actually does come delivered in a box. This cleverly marketed product could be easily mistaken for some kind of X-Series video game console kit, complete with hardware and software manuals and a DVD. It looks colorful and exciting from the outside:

Budget box

City of Austin Budget In a Box

But to put it mildly, Don Zimmerman was not impressed. The first thing he showed me came as no surprise, but it ticked me off nonetheless. Get ready for this everybody…we should have known it was coming. The wonderful news from the Budget In a Box is that the City is forecasting a slight decrease in the property tax rate!  Yes, once again we are not being told the Truth-In-Taxation percentage of the estimated tax increase. That is why the first item on my reform list has always been Truth In Taxation. Because of the high property tax appraisals this year, the tax rate could go down slightly and we would still see a pretty stiff tax increase, especially those people whose appraisals have hit the 10% cap. The truthful amount of the City’s tax increase would be stated as the increase above the “effective rate.” That is the amount that would generate the same amount of revenue as the City received last year. By law, they can raise the effective tax rate by as much as 8% without triggering a rollback election by citizen petition. Last year’s tax rate changed by only a fraction of a penny, but the increase above the effective rate was 3.8%.

Meanwhile, back in Don Zimmerman’s office, we looked at the chart on Page 57 of the Five Year Financial Forecast. I will not attach an audio recording of the words that may have slipped out when we saw the huge chart of tax, utility and utility add-on fee increases. You can read it yourself right here. For a “median-value home” of $221,086 the bottom line projected increase is $18.53 per month. The tax portion of that is only $7.05. But here’s the problem. The estimated tax amount does not include any new programs or changes made by the staff or the City Council. And the chart does not take into consideration whether your home saw a double digit tax appraisal increase. So, the tax increase that you would actually see on your bill would most likely be considerably higher. And, by the way, how many people do you know who live in a “median-value home” that is appraised that low?

To summarize my meeting with Mr. Zimmerman, he told me that he supports my affordability proposals. And he mentioned one of his own that I will explain in detail in another posting. We all have a big hill to climb between now and the end of the budget season. It will not be a stroll on the beach, like the Beach Boys portrayed in their 1974 album, Endless Summer.

As for Don Zimmerman, some of you may have him confused with that other guy out there that some people think is “way out there.” The one that brings to mind flying saucers, conspiracy theories, and tables levitating to the sound of voices from the dead. That is not the Don Zimmerman that I talked to down at City Hall. But, I don’t want you to leave this blog disappointed if you came here looking for a pathway to adventures from another world. Just grab a beer or a glass of something else and check out this video.

Special Event Fee Waivers – Other Texas Cities Prefer Hotel Occupancy Tax

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By Bill Oakey – June 4, 2015

The quest to eliminate taxpayer-subsidized special event fee waivers may get a boost, thanks to the discovery of a little-publicized City Manager’s Power Point presentation from mid-2014. This presentation followed the May 1st passage of City Council Resolution # 20140501-036, sponsored by Kathie Tovo, directing the City Manager to review alternative funding sources for special event fee waivers. One specified option was to consider using the Hotel Occupancy Tax. A subsequent information request from then Mayor Pro-Tem Sheryl Cole revealed that Austin’s Hotel Occupancy Tax revenues have galloped from $51 million in 2012 to an estimated $70+ million in 2014.

The newly discovered Power Point presentation should put to rest any fleeting suggestion that Austin cannot or should not use Hotel Occupancy Tax funds to replace millions of dollars in fee waivers. This statement appears on Slide # 17: “To date we have researched and found 30 cities in Texas that currently utilize other funding sources for special events that qualify; most utilizing a percentage of HOT Funds administered by the Convention & Visitors Bureau (CVB).” Cities cited in the presentation include Cedar Park, Dallas, Georgetown, Giddings, Fredericksburg and Round Rock. You can download the Power Point presentation here.

From an affordability standpoint, here’s a revelation that should catch everyone’s attention. On Slide # 8, charts show that in 2013 the City granted $1,146,127 in fee waivers. But somehow they wound up with a funding gap of $3,110,104 that year. The event costs for all City departments added up to $6,703,457, while fees collected only came to $3,593,353. (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).

At the City Manager’s Power Point session, Slide # 2 states that an alternate funding proposal for special events was due to his office on July 24th, and to the City Council on August 7th (the date specified in the Council resolution). We now know that something transpired at City Hall between May and November of 2014. Marc Ott’s November 7th memo signaled a new direction for responding to the issue, as well as a new one-year-later deadline. They are now pursuing a plan for multi-year agreements with special event organizers. These carry the potential for locking in the taxpayers to continuous fee waiver subsidies. The whole notion of considering the Hotel Occupancy Tax as an alternate funding source disappeared down the rabbit hole.

But now it is on its way back out…Stay tuned!

Rabbit Hole

This Is Austin’s Wake-Up Call – The Wage Side Of Affordability

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By Bill Oakey – June 2, 2015

Many of us probably think we know something about Austin affordability. Just today I was reminded that “affordability” means different things to different organized civic groups. But let me tell you how I came to see it in way that has never quite hit me before. Never like this.

Please read the quotes below. Then, rub your eyes and see if they read the same way a second time. If this is going on all over Austin, then we have a bigger problem than many of us realized. It simply can’t be allowed to continue.

From the Austin Chronicle, May 29, 2015, Feedback, Page 8

On Wheatsville’s Wages

“I was hired as a deli clerk at Wheatsville in 1995 at the rate of $9.00 an hour. It’s sad that in 20 years that rate has not changed. The fact that the GM will not reveal his salary is ludicrous and very telling.” – Justin A.

“When I started working at Wheatsville in 2007, I started out at $8.50 and not $8.00 because I had a little experience. So Wheatsville stepped down from their starting pay in 1995, wow. Even with a promotion to a higher-paying position, I’m still not making much more than the new employees. The ‘I can’t afford to shop where I work thing is real.'” – Captain Happy

These comments are feedback to the Chronicle’s story, Is Something Rotten at Wheatsville Co-op? Well, here’s my little story. I wandered in there sometime around 1979. i picked up a can of peaches. The price was so exorbitantly high that I asked a salesperson if it could be a mistake. “Are you a Wheatsville member?’ he asked. When I told him no, he replied that the price for that can of fruit would be even higher for non-members. That is the beginning, the middle, and the end of my story about Wheatsville. I never stepped inside the place again.

Just recently, a professional hair stylist that I really liked asked if I would mind “modeling” for her at a hair salon just north of U.T. The manager asked if she could bring in a regular customer and cut his hair as a means of trying out for a job opening there. I had learned from this stylist about the cosmetology license that is required and the cost to renew it each year. Her appointment and the modeling thing never panned out, but the stylist did tell me one interesting thing. If she had been offered that job, it would have paid only minimum wage.

Somebody is making a whole hell of a lot of money in Austin, Texas. And off the people in Austin. But if those masses of little people ever get riled up enough to join forces and speak out with a united voice, something extraordinary might happen. Maybe a bunch of them did speak out when they went to the polls last November in the City Council election.

The news stories just keep coming – about unprecedented rent increases that don’t match up well with salaries and wages. Tax appraisals that jolt homeowners out of their socks, for the second or third year in a row. And on and on. So, here’s some food for thought. Consider two key phrases that you have heard recently at City Hall and that will surely come up again. “Tipping Point” and “Unmet Needs.” Lack of affordability has placed our City at the tipping point. That means that the people in power need to stop talking about it take some action.

The Regional Affordability Committee has agreed to do that by incorporating principles and concrete proposals into a strategic plan, and then working to get that plan implemented. I will be feeding proposals into their plan, as will several other experienced affordability advocates. But the wage side of affordability is something that must be dealt with to a large extent in the business community. People can only be pushed and squeezed for so long. Then something’s got to give. I leave it to folks with expertise in that realm to take on that problem aggressively.

Finally – that other phrase, “Unmet Needs.” The City staff who work up the annual budget never get as much funding as they would like. There is always a laundry list of items that come up short. Those are routinely labeled “unmet needs.” In other words, if taxes could be raised each year to the legal maximum, the City staff would be able to minimize their list of unmet needs. But the list is endless. It’s kind of like taking one step towards the door, then taking an infinite number of additional steps, with each one of those being only half the final distance to the door.

But guess what – in this era of the tipping point and post-tipping point, the City Council and the other taxing entities are about to discover a whole new type of unmet needs. And they’ll be hearing about it from all corners of Austin. Each one of us have our own budgets that keep getting smaller and smaller, just like all those halfway steps to the door.

We just need to raise our voices.

City Council Unanimously Approves Commercial Tax Appraisal Challenge

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By Bill Oakey – May 28, 2015

In a historic move likely to elicit statewide attention, The Austin City Council on Thursday voted unanimously to proceed with a formal challenge of commercial property valuations to the Travis Central Appraisal District (TCAD). Several citizen speakers, including Leigh Murrin with Real Values for Texas and Vicki Totten with Austin Fair Tax spoke eloquently in favor of the challenge.

The rallying cry from both citizens and our Council Members this afternoon was all about fairness. In my view, this decidedly bold step will enable our City to shine a beacon for fairness across the state. Mayor Steve Adler summed up the sentiments when he stated that “Everyone here on the Council dais agrees that our appraisal system is broken.” What Austin has done will inspire other cities to sit up and take notice that the battle has begun. We all recognize that comprehensive tax reform must be done through the State Legislature. Although that task has seemed insurmountable in the past, we now find ourselves on a firm path toward that goal. People seeking to galvanize the spirits of taxpayers across the state have witnessed the lighting of the spark today. With a lot of hard work yet to come, our sights are already fixed on the 2017 legislative session.

Mayor Adler has signaled a strong desire for a spirit of cooperation among the various taxing jurisdictions impacted by today’s decision. Discussions are underway with various involved parties to ensure that each taxing entity is kept in the loop at every step of the process.  Earlier concerns expressed about potential delays in tax roll certifications and possible interruptions in revenue disbursements are being addressed quite satisfactorily. One solution being considered is to send estimated bills to taxpayers, so they can make their annual payments at the usual time and still claim their Federal income tax deductions.

We must all keep in mind, however, that the opponents of this action will be working every bit as hard to counter the success of our challenge. On that note, we are fortunate to have new City leadership with good experience and expertise. Mayor Adler, who brings many years of legal practice to the table, has established a cooperative tone at the outset. And by voting unanimously to support the appraisal challenge, the entire City Council approaches the endeavor on a united front.

Several City Council Members mentioned the compelling need to address affordability in Austin. They acknowledged that rapidly escalating tax appraisals are an oppressive burden for long-term residents, including many in our minority communities. It was also announced today that TCAD staff and City officials will work together over the next two weeks to take the necessary steps to ensure that the challenge does not impede the critical functions of each taxing authority. TCAD has assured everyone that no adverse effects will happen during that initial two-week period.

On Friday morning at 10:00 AM the Travis County Commissioners Court will meet in executive session to consider their role in Austin’s appraisal challenge.

What Happens When “The City Manager Is Directed To…” And He Doesn’t?

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By Bill Oakey – May 27, 2015

That just happened to be the burning question that woke me up this morning. And I certainly think it is a fair one to ask. Amongst the mountains of papers that lie nestled on office shelves and lurk in various cubbyholes down at City Hall are a multitude of City Council resolutions. These are very official-looking documents – the ones with all those “whereas” clauses. They even contain official-looking dates and signatures.

Many of them also contain the intriguing phrase, “The City Manager is directed to…” do a specified thing. And in many cases, he is given a specified deadline to carry out this directed task. I should have thought about that little piece of verbiage each time I emailed a City Council member during this past year, trying to follow up on affordability issues. It turns out that some of these official resolutions do not carry much weight.

Here is a case in point. Last year I blogged about the need to cease the preponderance of special event fee waivers being given away for years. The American-Statesman editorialized that the practice should be eliminated for South By Southwest, since they have received many millions in waived fees.  So last year on May 1st, Mayor Pro-Tem Kathie Tovo sponsored City Council Resolution # 20140501-036. This approved resolution called for reviewing alternate funding sources for special event fee waivers. Among those suggested were surcharges on ticket sales and using funds from the Hotel Occupancy Tax. As I mentioned in a recent blog post, the Hotel Occupancy Tax revenues have ballooned from $51 million in 2012 to over $70 million in 2014. So, I have included that source in my current round of affordability proposals. The taxpayers need relief.

Please take note of the last three “Whereas” clauses in the Tovo resolution. Each one begins with the phrase, “The City Manager is directed to.” The last one reads:

“The City Manager is directed to present the proposal for the special events fund and fee waiver process by August 7, 2014 to allow Council to consider the proposals as part of the City’s budget process.” Well, August 7, 2014 came and went and the City Manager’s response never came. My repeated attempts since then to obtain the status of this resolution have not yielded any results. Now we are bumping up against another annual budget process, and I have called upon the new City Council to consider not using local taxpayer funds for these fee waivers.

But What About the Larger Issue Here?

A few other questions have wandered across my mind this morning. Perhaps the City Council should think about them as well:

1. How many other pending resolutions are out there awaiting responses to “The City Manager is directed to…?” To help the Council members start their journey in pursuit of that question, I offer this Google search that they can cut and paste into a browser: Austin “The City Manager Is Directed to.” They can just click the link.

2. How about adopting a practice that all City Council resolutions be posted to a public webpage that contains the date, subject, text, required action deadline, and current status of all pending and future resolutions?

3. Without a firm policy in place to enforce the directives contained in City Council resolutions, why not consider gathering up all printed copies of them and directing them to the nearest recycle bin?

City Report On Tax Appraisal Inequities Draws Outrage

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By Bill Oakey – May 21, 2015

On Tuesday May 19th, a blue ribbon panel of City and County officials and other top leaders addressed an emotional crowd at the First Unitarian Universalist Church in Austin. The topic was property tax appraisals. The speaker lineup included:

Brigid Shea, Travis County Commissioner
Steve Adler, Mayor of Austin
Kathie Tovo, City of Austin Mayor Pro Tem
Bruce Elfant, Travis County Tax Assessor
Marya Crigler, Travis Central Appraisal District Chief Appraiser
Dick Lavine, Center for Public Policy Priorities
Leigh Murrin, Real Values for Texas

If you missed this event, please consider watching the full video here. It was highly informative, even if you thought you knew quite a bit about our tax appraisal system and how unjust it is. The combined factual and emotional impact is quite stunning. The City of Austin is considering filing a formal appeal of the undervalued commercial properties here in Austin. Estimates vary, but in many cases, large commercial buildings have been found to be undervalued by 40% or more.

On May 11th, the City released its detailed report on undervalued commercial properties. You can read the full report here. The panelists at the Tax Appraisal Forum discussed this blistering report, as well as details on the flawed tax appraisal system here in Texas. The cards are stacked so heavily against residential homeowners that the situation qualifies as a national disgrace. There are risks associated with the contemplated action by the City of filing a formal appeal to the Travis Central Appraisal District. The appeal could cause a delay in certifying this year’s tax rolls. Over 100 area taxing jurisdictions have been asked to weigh in on the appeal decision. But if the City indeed makes good on its formal challenge, the entire State of Texas would sit up and take notice. Fighting for justice can be a treacherous battle, just like any battle throughout history for a noble cause.

Affordability in Austin has reached an epic tipping point. You will see in the video of the panel discussion, that the citizens who spoke during the Q&A displayed emotions ranging from frustration to full-on anger. The appraisal inequities are only part of a bigger picture. Austin is growing at a breakneck speed, putting unprecedented pressure on home values and rents. Unlike businesses of all sizes, cities and counties do not carefully plan the pace of their growth. They do not add up the costs of all of their combined expansion plans that taxpayers go into debt and pay annual taxes to fund. It is more a matter of “build first and ask questions later.” That path, as everyone knows, can and often does result in spectacular boom and bust cycles. Perhaps we can convince our local officials to conduct a “Pre-Mortem” to determine how much we the citizens can realistically afford to pay for the cost of growth. And at what pace that growth can be deemed to be “affordable” for anyone but the most wealthy amongst us.

The State of Texas does not require sales price disclosure on either residential or commercial properties. We are one of only a few states that lacks this requirement. This sets up the flawed appraisal protest system, where the big boys can out-lawyer and out-spend not only the average homeowner, but the Appraisal Districts as well. Believe it or not, any cases that the Appraisal Districts lose in court require them to pay the commercial property owners’ legal fees. But if the case is decided in favor of us lowly taxpayers, we still have to pay the people’s side of the legal fees. The scales of justice are as titled as they can be. Attempts at reform during the current Legislative session went mostly nowhere, just as they have in every previous session going back for eons.

If you have a strong enough stomach, try to make yourself comfortable and watch this informative video on the inequity issues in our tax appraisal system. Thanks to the good folks at Real Values for Texas for their tireless efforts to push for reforms.