Category Archives: General Affordability Updates

Is Urban Rail an Affordable and Effective Solution for Austin?

1 Reply

September 9, 2013

For the last couple of years, Austin City leaders have been talking up the prospect of an urban rail project.  We have been told that the City can expect billions in benefits from the economic impact.  And of course it will relieve the terrible traffic congestion that Austinites have grown to hate.  The $550 million first phase of the project will carry a local cost of $275 million, most likely from a bond election to be held in November of next year.

Rather than use this space to try to explain the urban rail project, or to take sides for or against it, I prefer to just present some information for everyone to consider.  The debate just got a whole lot more interesting, thanks to a provocative new article in the Austin Business Journal. by guest contributor, Jim Skaggs.  A subscription is required to read the whole story, but the title and the opening lines reveal the tone.

Sep 6, 2013, 5:00am CDT

Urban rail failed in Portland and Austin faces same fate

Jim Skaggs, Guest Contributer

The recently reported Austin study indicating huge tax revenue increases due to the economic impact of rail transit is a total fabrication without foundation.

Portland was an early implementer of modern urban rail in the l980s. Leaders there promoted and projected major tax revenue benefits from economic development near train stations. This did not happen.

For many years in many cities urban rail’s failure to improve congestion and air quality have been generally accepted, and many supporters have again turned to the more subjective economic development carrot to lead rail promotion.

The website www.portlandfacts.com/transit/lightraildevelopment.htm reveals some of the reality regarding …(End)

Here is an excerpt from a different ABJ article, published just a week earlier.

Aug 30, 2013, 12:38pm CDT

Urban rail’s economic impact potential: $31 billion

Robert Grattan, Staff Writer

Austin Business Journal

A fully built urban rail system running through Austin could bring as much as $31 billion in economic impact to the city by 2030, according to a new economic analysis.

The study is one of the first steps toward understanding the full impact that the $1.3 billion mass-transit system would have on the city. Until now, much of the conversation has focused on cost estimates and the size of the financial undertaking, but there hasn’t been much discussion about the return on investment.

The findings are also the first step toward identifying revenue the project could generate, which could be used to leverage private investors to help with urban rail.

Estimates put the amount of increased tax revenue at around $109 million per year, once the whole urban rail system has been built in 2030. By 2020, the city would see around $54 million per year. Most of that revenue would come from the increased value of nearby property, which would be enhanced by additional transportation options.

Those figures are predicted to mesh with and add to the Imagine Austin plans for increased density and the additional 45,000 people and 58,000 new jobs that are expected to be created by 2030.

In addition, an urban rail system – functioning as a segment of a larger mass transit system – is projected to save 25,000 daily trips from 12,500 commuters. Combined with city-wide bike infrastructure, the study projects that Austinites could save $296 million in commuting costs. That money is expected to be invested in the local economy and to create 2,300 new jobs.

The study was done through partnership with a number of transit agencies, including the city of Austin and research partner the University of Texas at Austin – which provided a supercomputer to crunch numbers.  (End of excerpt).

My Comments

There seems little doubt as to which of these assessments is correct.  After all, the City’s partner in this study, the University of Texas, “provided a supercomputer” to crunch the numbers! But since I promised an objective treatment, let’s ignore that. I will certainly buy the notion that property values along the rail route will increase significantly.  So, will your property taxes if you live near the rail footprint.

Perhaps even that remains an assumption at this point.  For the moment I am intrigued by Portland’s urban rail experience.  For them, urban rail is no longer a visionary concept.  It got built.  There is plenty of Portland potpourri to satisfy anyone’s curiosity.

But first, out of fairness, here’s a link to the official “Austin Urban Rail” website, followed by a snippet from the site:

http://www.austinurbanrail.com

From “Austin Urban Rail” Website

“Because our population continues to grow at a rapid pace and the transportation network serving our business and cultural core cannot meet existing demand or future growth. Transportation impacts everyone, and if people can’t move around our city, we all stand to lose what makes it great. In the same space as six Jeeps, an urban railcar would hold up to 165 people.” (End of snippet)

Here are two links that came up when I did a Google search for “Urban Rail Failed in Portland,” taken directly from the title of the recent news article:

From the Cato Institute, “Debunking Portland: The City That Doesn’t Work” www.cato.org/publications/policy-analysis/debunking-portland-city-doesnt-work

From Oregon Live, Powered by the Oregonian, “The Lost Vision for East Portland’s Gateway”

http://www.oregonlive.com/portland/index.ssf/2013/07/broken_promises_gateways_lost.html 

Austin Ranks Low in Affordability

Leave a reply

2010 Study Traces the Roots of a Disturbing Trend

A 2010 report by the publication, Business First, which was highlighted in the Austin Business Journal, paints a dismal picture for Austin.  It shows that during the period of 2006-2008, Austin ranked second to last in the State of Texas for housing affordability.

At the recent Livable City Affordability Summit, held on Sept. 7th, several speakers identified housing and transportation taken together as the main component of affordability.  The very next day I came across a woman standing in the corner of a room.  She looked at me with a straight face and told me that a friend of hers just got hit with a $200 monthly rent increase!  I have never heard of anything like that in my entire life.  As to how such a thing could even be possible, the lady replied, “Well, the landlord probably has a waiting list.  They can rent to new people moving to town who have a lot more money than our typical long term residents.”

Below is the 2010 Business First affordability chart for all of the cities in Texas that were surveyed.  Only College Station had a lower affordability rating than Austin.  In the years since the study, one can only surmise that the situation has probably gotten worse.

Business First Analysis of U.S. Census Bureau Data

www.bizjournals.com/buffalo/blog/the_score/2010/04/wny_sets_the_pace_for_affordable_housing.html?appSession=272274124143155

The study compared median home values and median household incomes, as recorded by the U.S. Census Bureau’s 2006-2008 American Community Survey. (Medians are midpoints, with half of all values or incomes in a given market being higher, and half being lower).

The smaller the ratio, the more affordable the housing.

Metro or micro area Population (2008 estimate) Median home value Mortgage affordability (home value per $1,000 of household income) Affordability rank (of 451 areas)  
Odessa, TX 131,180 $68,200 $1,454.72 1

View Details
Beaumont-Port Arthur, TX 377,477 $83,300 $1,841.17 4

View Details
Abilene, TX 159,059 $76,400 $1,848.94 5

View Details
Victoria, TX 114,256 $93,200 $1,949.55 9

View Details
Wichita Falls, TX 147,607 $83,800 $1,954.38 10

View Details
Sherman-Denison, TX 118,786 $93,300 $2,003.56 14

View Details
Texarkana, TX-Texarkana, AR 135,981 $84,200 $2,059.23 17

View Details
Midland, TX 129,159 $111,100 $2,083.10 18

View Details
San Angelo, TX 109,152 $86,500 $2,107.08 24

View Details
Longview, TX 204,496 $94,500 $2,157.93 26

View Details
Amarillo, TX 243,682 $101,100 $2,214.14 31

View Details
Killeen-Temple-Fort Hood, TX 379,569 $107,800 $2,219.80 33

View Details
Lubbock, TX 271,582 $97,500 $2,273.42 38

View Details
McAllen-Edinburg-Mission, TX 721,275 $69,400 $2,274.07 39

View Details
Corpus Christi, TX 413,206 $99,100 $2,337.26 53

View Details
Brownsville-Harlingen, TX 389,164 $71,900 $2,381.58 66

View Details
Waco, TX 230,849 $98,600 $2,444.10 77

View Details
San Antonio, TX 2,030,691 $116,900 $2,450.84 78

View Details
Houston-Sugar Land-Baytown, TX 5,726,705 $135,800 $2,477.60 89

View Details
Tyler, TX 201,160 $115,700 $2,534.89 104

View Details
Dallas-Fort Worth-Arlington, TX 6,301,085 $145,200 $2,578.45 109

View Details
El Paso, TX 738,416 $97,800 $2,744.34 153

View Details
Laredo, TX 235,937 $102,100 $2,845.28 174

View Details
Austin-Round Rock, TX 1,654,100 $175,700 $3,030.72 223

View Details
College Station-Bryan, TX 207,140 $124,900 $3,189.40 248

View Details
Metro or micro area Austin-Round Rock, TX
Population (2008 estimate) 1,654,100
Housing units 636,362
Median household income $57,973
Median home value $175,700
Mortgage affordability (home value per $1,000 of household income) $3,030.72
Affordability rank (of 451 areas) 223

Why Are Austin’s Property Taxes So High?

Leave a reply

September 4, 2013

We hear that question all the time.  There are a variety of reasons, including undervaluations of commercial property, as confirmed by the good research done by local citizen, Brian Rodgers.  But here is something that you might not know.  The City of Austin does not take any chances when it comes to raising taxes during their annual budget process.  If you thought they went into special meetings early on to find out how much they might need to raise taxes, well think again.

The City’s official training document, “Adopting a City Budget and Property Tax Training Guide,” lays bare my greatest fears about how the process actually works.  Their annual ritual starts out with raising taxes to the legal maximum, even before the budget process begins!

You can read all about it, straight from this excerpt from the training guide:

“The mechanism Austin uses to set the process in motion is an item on council’s agenda for a resolution to adopt a proposed maximum tax rate that the city will consider and set the date that council will consider adoption of the actual tax rate.”

“In the resolution adopting the proposed maximum property tax rate, Austin adopts the highest rate that keeps us below the trigger for citizens to take action to roll back the rate. Council then can consider various budget scenarios in the upcoming months that may lower the rate needed to generate the revenue for the upcoming fiscal year’s budget, but they know the cap and the cap is public. A sample of this resolution is at

http://www.cityofaustin.org/edims/document.cfm?id=141378.”

“When we adopt this resolution, we make clear in agenda notice, and in statements made by the Mayor at the agenda adopting this resolution, that the council may ultimately adopt a property tax rate that is lower than the maximum set out in the notice. We adopt the proposed property tax rate using a roll call vote where each person’s vote is recorded after the clerk reads their name. This information is then included in the Notice of Public Hearing discussed below. Including this information is required by Tax Code 26.06(b).”

You can read the entire training guide at: www.texascityattorneys.org/2013speakerpapers/RileyFletcher/BudgetAndTax_LeelaFireside.pdf

Raising taxes to the legal maximum provides an 8% increase over the “effective tax rate,” that would generate the same amount of revenue as the previous fiscal year.  So, year after year for as long as I can remember, the City has set a tax rate that was at or near the maximum, allowing spending to go up 8% each year.

Since 2004, the Austin City Budget has increased 73.7%, from $1.9 billion to $3.3 billion.  The Travis County Budget has nearly doubled over ten years.  The Austin American-Statesman editorial board has raised a really good question.  What has happened to all of the new tax revenue from block after block of gleaming new high rises that dot the downtown skyline?

It is very important to keep in mind that the tax rate can stay the same from one year to the next, or even go down, and we can still get steep property tax increases on our homes.  That’s because the tax appraisals on Austin homes are rising rapidly.  This year, Mayor Lee Leffingwell has shown some laudable restraint by telling the rest of the City Council that he will not vote for an increase in the tax rate.  But if the day ever comes when I hear any City leader say, “I will not vote for an increase above the zero effective tax rate,” then I’ll know that it’s a dream and I’ll roll over in bed and expect to hear the alarm go off at any moment.

A Decade of Flat Wages

Leave a reply

September 4, 2013

Can the City of Austin defy gravity?

When you look around Austin, it is easy to be lulled into believing that we are invincible.  Our housing market is so hot right now that sellers are getting multiple bids that are often higher than the asking price.  Every other week a new magazine article places Austin at the top of somebody’s “Best Place To…” list.

Over the next several years, a Grand Vision Design Plan (officially known as a “charrette”) will transform Congress Avenue into something rivaling the Champs Elysees in Paris.  Any woman who leaves her white gloves at home, or any guy who forgets where he parked his Lamborghini might still be able to head over to Hut’s Hamburgers, if it survives in its present form.

All of the Grand Visions for Austin assume that the huge bubble we now find ourselves in could never burst.  They assume that we can defy gravity, in a way that no other city in the history of the world has ever been able to do.  I guess time will tell and we will all find out, one way or the other.

In the meantime, there is an inescapable economic reality that faces the United States.  It is the reality of “A Decade of Flat Wages.”  The new report by the Economic Policy Institute is subtitled, “The Key Barrier to Shared Prosperity and a Rising Middle Class.”  Here is an excerpt from that report, followed by a link to the full text:

A DECADE OF LOST WAGES (Excerpt) By LAWRENCE MISHEL AND HEIDI SHIERHOLZ

The nation’s economic discourse has finally shifted from talk of “grand bargain” budget deals to a focus on addressing the economic challenges of the middle class and those aspiring to join the middle class. Growing the economy from the “middle out” has become the new frame for discussing economic policy. This is long overdue; in our view, an economy that does not provide shared prosperity is, by definition, a poorly performing one. Further, such an economy will not provide sustainable growth without relying on consumption fueled by asset bubbles and escalating household debt. The collapse of the housing bubble and the ensuing Great Recession have laid bare the consequences of this model of unbalanced growth.

The revived discussion of strengthening the middle class, however, has so far failed to drill down to the central problem: The wage and benefit growth of the vast majority, including white-collar and blue-collar workers and those with and without a college degree, has stagnated, as the fruits of overall growth have accrued disproportionately to the richest households.

The full report is available at: www.epi.org/files/2013/BP365.pdf