Tag Archives: Austin City Budget

Austin And Travis County Should Announce Joint Affordability Initiative

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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.

The City Can Save $4 Million Every Year – But There Is a Huge Mountain To Climb

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By Bill Oakey – July 10, 2015

In the last few weeks I have met with several City Council offices. One of my top cost-saving priorities is to replace taxpayer-funded special event fee waivers with alternate funding. In May of last year, the City Council passed Resolution # 20140501-036 directing the City Manager to review options for this alternate funding. The intent and the deadline were crystal clear:

“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.”

We now know that last August’s deadline came and went with no formal response to the resolution. So, we have a critical policy issue and very possibly a legal one as well. When the City Council passes a resolution and it is signed and placed into the public record, does it carry the force of law? You would think that a change to the substance and intent of a resolution, or a change to the deadline for directed action would require another public vote by the City Council. This is certainly true of City Ordinances. Is there any provision in the City Charter or the City Code that addresses required actions to amend a resolution? Is there a process in place to follow up on the status of resolutions to ensure that they don’t fall through the cracks?

Not only does the City need to establish a clear set of policies and procedures for timely implementation and amending of resolutions, but the process needs to be made transparent to the public. It would be most helpful if the Council Members, their staffs and the public could go online and check the status of a pending ordinance or resolution. It is my understanding that Council Member Ann Kitchen is interested in pursuing a model that is similar to the one that it is used in the Texas Legislature. And I am looking into resolution tracking systems that have been adopted in other cities.

Here’s what can happen when no one on the outside can see what the insiders are doing with a Council resolution. I found an undated City Manager’s PowerPoint presentation on the City’s website that reveals that they were attempting to comply with the May 1, 2014 resolution on special events funding. Slide # 17 in the presentation shows that 30 Texas cities use funding sources other than fee waivers to support special events. Most of those cities use Hotel Occupancy Tax funds. In the PowerPoint, the staff was told to bring back a funding plan for Council action in time for the resolution’s August 2014 deadline.

But sometime between this presentation and November of 2014, a major intervention took place behind the scenes. Without a vote of the City Council directing him to do so, the City Manager issued a memo to the Council on November 7th. This memo addresses a completely new approach to handling large special events. Although no detailed backup is provided, the aspect of alternate funding sources is dropped from the discussion. The central topic has shifted from single-year contracts with large event promoters to multi-year agreements. Under that arrangement, the local taxpayers could very well find themselves locked into the status quo system of funding special events with fee waivers.

Keep in mind that last November the old City Council was still in office. Here is what the City Manager related to them in his memo:

“I have directed staff to take the next several months to gather the necessary information to develop recommendations that can be evaluated as we begin discussion of the upcoming FY2015-2016 budget process.”

So, it appears that the City Manager and his staff are operating on a path to action that is, at the very least, unclear to the public and unclear to the newly elected City Council members. In my meetings with them, I have found no one who is aware of what the City Manager’s staff is working on with respect to the November memo. In another twist, I have been informed that the question of how to fund City services for special events will be taken up by the Parkland Events Task Force. When you click the link to their page, you will notice that they have not held any meeting yet, and in fact the City is still accepting applications for new members. In addition, the primary function of the task force is addressed in a completely different resolution.

My efforts are focused on a compromise plan to pay for special events from three sources: The Hotel Occupancy Tax, surcharges on ticket sales, and requiring the event companies to pay a reasonable portion of their own fees. I have asked the City Council to set an early 2016 deadline for studies and discussions of the new funding formula. In the meantime, I have asked them not to fund any fee waivers for large for-profit events with local tax dollars in the new budget.

We have a new City Council that wants to find cost-savings in the budget. They have also promised a high level of public engagement and better transparency. Later this month when the Council members get back to town, I will post a link for you to email them and ask them not to include any local taxpayer funding for special events. It’s a golden opportunity to save $4 million per year in recurring expenses. But it will never happen unless they commit to a firm timetable to establish a new funding formula. And whatever path the City Manager’s Office is taking on the matter needs to be clarified and communicated to the City Council.

Update on July 10th, 11:53 AM

I just received the following email from Mr. William “Bill” Manno, City of Austin Management Services, Corporate Special Events Program Manager. This information request was forwarded by Mayor Pro-Tem Kathie Tovo’s office.

Mr. Oakey,

The presentation you referenced was one I made for the very first stakeholder group meeting for the specific purpose of getting the conversations started.  It is in no way the final report to this Resolution and should only be used as a reference as to how this process was started.  The response to Resolution is currently being drafted and will be sent to Council by October, if not sooner.  The research mentioned in that presentation was done by interns and was limited to identifying cities that in some way use HOT funds for events.  I have staff currently doing more in-depth research as to how they actually apply those funds.  This information will be included in the report back to Council.

Resolution No. 20140501-036 included the following language:

“WHEREAS, the City collected approximately $54.8 million from hotel occupancy taxes in Fiscal Year 2012 and these collections from Austin hotels are used to fund the Austin Convention Center, the Austin Convention and Visitor’s Bureau, and the City’s Cultural Arts Program; and

WHEREAS, the City’s Music Commission has recommended that City Council explore other funding mechanisms for special events, including considering whether anticipated increases in hotel occupancy taxes could support special events costs;”

Therefore, the report will discuss other cities’ use of HOT funds, however, it will be Council’s decision as to what aspects of alternative funding mechanisms they wish to move forward with.

Please feel free to contact me directly should you have further questions.  Until the report is finalized and presented to Mayor and Council, it would inappropriate to release any portion of the report.

Thanks,

Bill

U.T. Journalism Student Reports On Vacant City Staff Positions

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Introduction By Bill Oakey – June 25, 2015

Last week I was pleasantly surprised to receive an email from Amanda Atwell, a journalism student with a minor in government at U.T. As a follower of this blog, she became interested in the high number of vacant staff positions in the City budget. She asked me some questions for a paper on that subject for one of her journalism classes. So, today I welcome her to this blog by posting her report, which I found to be quite impressive.

But first, a few quick notes about Amanda. Last year she received College Honors from U.T.’s Moody College of Communication. She belongs to Texas Student Television and currently works as an intern at KXAN-TV. Her career interests include sports broadcasting and political journalism.

Amanda Atwell

Amanda Atwell

Resolution Passes Regarding Vacant Positions

By Amanda Atwell

Austinites will have a better idea of where some of their tax dollars are being spent because of the recently passed resolution by City Council regarding excessive city job vacancies.

The resolution, which passed June 11, will attempt to eliminate some of the 1,012 vacant city staff positions. It will also allow City Council to re-appropriate the funding for vacant positions. The resolution allows the council to reevaluate the necessity of the long-term vacancies, some vacant for nine years. Many positions have been vacant due the difficulty of the city being able to compete salary-wise with the private sector. The resolution requires the city manager to bring vacancies before the council from the varying departments, allowing the council to determine what to do with excess funding and whether or not to terminate the position for the next fiscal year.

Austinite and author of a website focused on affordability in Austin, Bill Oakey, believes the resolution is a step in the right direction, but is still concerned about the lack of transparency in where tax dollars are going. Oakey is a former member of the City Electric Utility Commission and continues to work with City Council to find solutions to alleviate excess city spending, in turn lowering the burden on city taxpayers. According to Oakey, much of the unused money for the vacant positions has gone into a “slush fund,” making it unclear what exactly the money was used on. “It’s (money) just thrown into a pile and they can use it without much accountability,” Oakey said. According to the resolution, $73 million is allocated in the budget for the current vacant positions.

While the lack of transparency in city government presents a major issue, the inability to fill these positions could have major implications in the city’s ability to provide necessary services. According to Oakey, Austin’s Emergency Call Center (911) remains badly understaffed, resulting in excessive overtime and increased stress on employees. The fire department suffered vacancies because of a hiring dispute and a federal mandate that resulted from the issue, postponing the hiring process. The police department and Austin Energy also have suffered from vacant positions because of the lack of applicants with the proper skills.

Austin Energy has struggled to fill vacancies because of the competition with private-sector employers. According to Ken Craig, policy advisor for Council Member Ann Kitchen, other employers are capable of being much more competitive with salaries, therefore making it difficult for Austin Energy to fill high-skill positions such as engineers, and information technology specialists. “There is a potential impact in not being able to fill needed positions, as services to citizens may be compromised,” Craig said.

The resolution allows the city manager to bring forward specific positions to be discussed by the council, whether to eliminate the position or reevaluate the pay. “It would be helpful for the city manager in situations where we have trouble filling a vacancy because we’re not being competitive in the pay that we’re offering, it would allow him an opportunity to make that case to the council, as well,” Council Member Troxclair said at the council meeting June 11.

Some believe while this is a step in the right direction, there is room for further improvement. Michael Searle, policy advisor for Troxclair, said this is just the first step in the process of reducing the number of vacancies and improving budgetary transparency. Cities such as San Antonio place protections on the percentage of allowable city job vacancies, capping their allowable vacant positions at around 6 percent. Austin is currently at 8 percent according to Searle.

The resolution does not place a percentage cap on vacant positions, but aims to increase transparency in the budget, and allows City Council to re-appropriate funding for non-sworn positions that remain vacant more than 12 months. The resolution will allow City Council to determine whether to continue funding of the long-term continuing vacancies by requiring the city manager to notify the council of positions vacant over 12 months. “This will allow us to put a structure in place so that we don’t get into this position again,“ Troxclair said at the council meeting June 11. “We don’t have to check in every, you know, every few years, and say, oh, well, we’ve been spending, you know, $500,000 on this position that was vacant.”

In order to completely alleviate the issue, Oakey believes more change should happen. “I think the new resolution was a softball approach to the problem,” Oakey said. He favors the “Honolulu policy,” which places funds for vacant positions under the control of one central office. This office will then distribute the funds on an as-needed basis, preventing departments from padding their budgets with the excess funding. Honolulu, Hawaii, adopted this policy when the city had a similar affordability crisis. Oakey also suggested that the city’s website should provide the taxpayers full transparency.

Oakey supports the resolution, but still questions where the money previously allocated for these positions went. According to an article in the Austin Business Journal, in August 2013, Austin had 934 jobs available, but only 76 were advertised and open to applicants. According to Oakey, three council members said that the funds specifically for the salaries of these vacancies could be used for other unknown purposes without discretion. Because of lack of regulation regarding the unused money, Oakey said it is difficult to tell where exactly is has been spent in previous years.

Oakey said the most immediate impact the resolution will have would be the requirement of regular reports from the city manager on the amounts of budgeted funds from vacant positions that are available to be re-apportioned. While this doesn’t eliminate the funds from the budget, it allows for accountability to the taxpayer and helps to ensure their money is spent responsibly, improving on the lack of policy regarding the issue in previous years.

Austin Needs A Budget Affordability Strategy – Can Houston Help Us?

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By Bill Oakey – June 16, 2015

Members of Austin’s new City Council have thrown down the gauntlet. They have made it clear in public statements and in Council meetings that they want to protect vital City services, and also make a real impact on affordability in the upcoming budget. That will be a tough hill to climb, so kudos to them for taking on the challenge.

Unfortunately, the one thing that is burned into everyone’s mind (pun probably intended) is the recently-retracted Staff suggestion of closing down a fire station. As an Austin resident since 1971, I can recall many times during economic downturns when the City kept the budgets lean. Taxes did not shoot up in those years, and I don’t recall that City services suffered irreparable damage. I contend that 2015 is one of those years when the City should hold the line once again. Austin’s current “boom” does not help the people on the wrong side of “the most economically segregated city in America.” But the question circles back to this: What cuts from what parts of the budget?

Scale Back On City Employee Pay Raises

I don’t believe that we can afford to give large across-the-board pay raises to City employees. One of my proposals calls for a sliding scale approach. City workers received a 3.5% pay raise last October, followed by another $750 raise in April. That alone exceeds what thousands of Austinites received during the same period. It does not seem hard-hearted to suggest that the lowest paid workers should receive higher raises, while the executives at the top should get very little, if any.

Council Members Ellen Troxclair and Don Zimmerman have revealed calculations showing that it would only cost $600,000 to raise the pay of Austin’s 350 full time workers earning less than $15 per hour up to that level. That sounds like a reasonable thing to do.

City officials have discussed trying to boost a large number of positions up to the level of some sort of market survey. Well, in a perfect world, every person in every job would be paid according to a study that shows how much they are really worth. The City needs to keep in mind that their jobs pay very well compared to an enormous number of other jobs in town, and the benefits are considerably better. If the Council Members are looking for a place to save measurable amounts of money in the budget, that would be a good place to start.

Pick the Right Set of One-Time Expenses For the $26.9 Million Transfer From the Reserves

It is out of my scope of knowledge to second-guess where the Staff and Council should look to find that list. But closing a fire station should not be on it. Perhaps they can defer some planned  purchases and spread them over a longer period. If they set a limit to the budget that does not go too far past the amount of the current budget plus the reserve transfer amount, then they will not need a large effective tax rate increase. My suggestion would be to ask the Staff for some alternate scenarios, with enough line item details to allow the Council to set priorities and make the best choice.

Get Rid of the Special Event Fee Waivers for For-Profit Companies (For Crying Out Loud)!

This is arguably one of the most unpopular policies in all of City government. I don’t need to repeat the specific details on that issue. But what seems in order is a compromise solution that funds City expenses for the events from a split formula. That would include the Hotel Occupancy Tax, a small surcharge on ticket sales, and, if anyone can handle this concept, requiring the event organizers to pay some portion of their own fees. This new funding formula needs to cover the entire cost of City services, keeping in mind that fees collected plus fees waived currently add up to less than the total cost of the services.

I hope the City Council has put in an information request to check on the intent and status of the November 2014 City Manager’s memo that appeared to shift the focus on special event funding over to setting up multi-year agreements with event organizers. That plan could lock the taxpayers in to continued fee waiver subsidies.

Is There Somebody Down In Houston Who Can Help Us?

I can remember a time when the last thing Austin wanted to be was anything like Houston. That town was considered just too big, just too disorganized without any zoning laws, and they had too darned many mosquitoes. Well, very recently I came across this little gem of a headline,  “Mayor Parker Holds Line On Spending With Final Budget Proposal.” Although this proclamation comes from the Houston Mayor’s web page, there are some interesting concepts and tidbits.

Similar to one option that Austin is considering, Houston’s Mayor proposes doubling the senior and disabled homestead exemption. And this statement sounds quite appealing, “Improved internal controls and more transparency for taxpayers and elected officials.” Their Budget Stabilization Fund would come in at $20.4 million, which compares to the estimate of $59.8 million for ours, after the transfers out. Of course, there may be very good reasons for the differences between Austin’s and Houston’s policies and strategies for their budgets. But I’m a big believer in looking at what other cities do and why they do it. Our new City Council members might gain some valuable insights by reviewing Houston’s proposed budget, which is available here.

With any luck, maybe we could ease our traffic woes by encouraging some of our visitors to head south to Houston and take a look around. To get them in the mood, how about these two songs – “Houston,” by Dean Martin from 1965 and “Houston (Means I’m One Day Closer to You)” by Larry Gatlin & the Gatlin Brothers from 1983.

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.

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.