By Bill Oakey

September 11, 2013

As a battle-scarred veteran of City Hall skirmishes dating back to the 1980’s, I jumped into the fray with the County Commissioners Court, not knowing what to expect.  It all started a few months ago when I started questioning the $300+ million cost of the proposed new Civil and Family Courthouse.

Not having access to high paid consultants, I sat down at my computer and tried a Google search for “new County Courthouse.”  After browsing through several small town projects, I hit the jackpot with Broward County, Florida.  They have a new courthouse under construction that is half the cost per square foot than the one being proposed here.

Armed with pages of detail, I drafted a summary and emailed it to all five members of the Travis County Commissioners Court.  Within just a few minutes, I received a polite and friendly response from Commissioner Margaret Gomez.  From that day forward, the entire Court has been very helpful and supportive of ideas for saving taxpayer money.

In the case of County Judge Sam Biscoe, I was particularly impressed with his patience and fair minded approach to dealing with citizens.   This even includes the flying-saucer-conspiracy-nut-cases that show up for Citizens Communications.  I met with Judge Biscoe for a full hour.  His response to my courthouse research was to place an item on the agenda to seek a formal staff review of cost saving options derived from other courthouse projects.

The meetings I had with other Commissioners were positive as well, regardless of political party affiliation.  We discussed holding the line on the overall budget.  Commissioners Todd, Daugherty, and Gomez all told me about their steps in that direction.  I even received emails with some details of their cost saving efforts.

On Tuesday, Sept. 10th, the Commissioners Court took up Judge Biscoe’s agenda item for a staff review of comparative costs for new courthouses.  I walked up to the front table and took a seat between two staff members.  I’m sure they were wondering “Who in the heck is that guy?  (I ask myself that same question all the time).

An idea had come to me earlier that morning, as I sat in the Court and waited.  When it was my turn to speak, I sprang it on the Commissioners.  “Please direct the staff to make this courthouse a national model of cost-effectiveness and efficiency,” I asked.  Judge Biscoe obliged and inserted those words into his memo.

Here’s a little secret about how I got that idea.  I found a passage in one of the thick consultant reports on the new courthouse.  They were promising to deliver a “World Class Facility / A Grand Public Building.”  That got me to thinking about the Sorcerer’s Apprentice.  I could see a consultant carrying two buckets full of reports.  Each report proposes a taller and even more expensive building.  Then, like the brooms in the original story, the single consultant morphs into two, carrying four buckets.  Then there are eight, sixteen, thirty-two and so on.

I decided to speak up before the chickens (Sorcerer) came home to roost!

By Bill Oakey

September 10, 2013

You have probably heard the news by now.  The Austin City Council “held the line” and did not raise the property tax rate for the new City Budget.  Unfortunately, this is one of the worst examples of public deception and lack of transparency that we have in our city.  The entire process needs to be reformed from top to bottom.  But for now, let’s keep it simple and focus on the tax rate issue.

On Tuesday, Sept. 10th the City Council gave each other high fives and whooped up a storm because they “did not raise the tax rate this year.”  Mayor Lee Leffingwell deserves some credit for insisting that they not increase the rate and make things even worse.  But what they gave us is a 3.8% tax increase.

Now let me explain how that happened.

Each year the City publishes a number called the “effective tax rate.”  That is the rate that would generate the same amount of revenue as last year.  This year, because overall property values increased, the effective tax rate went down.  That figure for this year’s budget cycle is 48.43 cents.  The City would have to adopt that rate in order to balance the budget with a zero tax increase.  The 50.27 cent rate that they did adopt equates to a 3.8% tax increase for the average appraised homeowner.

In some neighborhoods, the tax appraisals went up so much that homes are subject to the annual 10% cap on tax increases. So, people in that situation will see their City taxes go way up. City officials have no way of announcing what the tax impact will be on everybody.  But they could certainly be a lot more transparent and a lot less deceptive. Because of fluctuations in property values from one year to the next, it is silly to even think about comparing last year’s adopted tax rate to this year’s.  The effective rate is the one that matters.

Regardless of whether overall property values have gone up, gone down, or stayed the same, the effective tax rate will result in a zero tax increase for the average value home.  That’s the whole reason such a rate was created in the first place.  Cities use it as the starting number to make sure they do not exceed the maximum tax rate allowed by State law.

So, we need to reform the City of Austin’s budget process.  We should require them to publicize any increase above the effective tax rate that they are considering for the new budget.  That approach is sometimes called zero-based budgeting.  It’s a method that would tell us what any increase in spending would actually do to our taxes.   If the City had based all of their negotiations around the effective rate of 48.43 cents, we would have had a fair and honest budget debate.

But here’s what really happened.  City budget staff recently announced that they had $13 million more than anticipated because of increases in construction fees and sales tax collections. So, the City Council applied $7 million of that surplus towards reducing the tax rate down to 50.27 cents, 2/100 of a cent below last year’s rate of 50.29.  Then, voila! They suddenly had $6 million in happy-go-lucky “leftover” money that they could spend! Which of course, they did.  Then came the high fives, the whooping and all the rest.  All because last year’s totally meaningless tax rate was touted, instead of the fair and honest effective tax rate.

So, grab your partner, hold hands and get ready for a new kind of dance.  Next year we are going to reform the City Budget process!  And if we’re really lucky, we might be able to slip in one other reform.  How about requiring them to hold the public hearings that are published and advertised as “starting at 4:00 PM” to actually start somewhere near that time?  I stayed at home on the couch for the last one, because it started 6 hours and 39 minutes late.  Like they always do.

Note 1: For a City chart that shows the increase in property values and the effective tax rate, see Page 17 of the Proposed Budget: www.austintexas.gov/edims/document.cfm?id=193732

Note 2: In 1987 I presented a proposal to the Texas Legislature, which resulted in the revised truth-in-taxation law that local governments use to publicize notices of proposed tax increases.

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.

Urban rail failed in Portland and Austin faces same fate

Jim Skaggs, Guest Contributer

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.

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