Economic trends must change to prevent bigger shortfall Director of Financial Services John Stephens and Budget Officer Rudy Garza painted a grim economic picture for members yesterday. Early budget estimates could leave the city with a funding shortfall of $32.8 million, or more, as Austin enters the budget cycle for Fiscal Year 2003.

Unemployment is the highest it has been in Austin in 10 years. Annual job growth last year was less than half of what it typically has been, on average, for the last decade. Office occupancy is at its lowest ebb since 1994. And all the construction indicators—water connections, site plans and building permit requests—are down by double digits. Sales tax revenue continues to decline.

Losses so far this year are $1.8 million over last year at this time. To meet the current budgeted needs for the city, sales tax would need to grow at a rate of 5 percent per month over the next 10 months, Stephens said. Even revised revenue projections presented in December depend upon a sales tax growth of 2 percent per month.

“And I have no indication that that would happen,” Stephens told the Council. The shortfall is likely to spell both additional budget cuts and a tax increase. At 45.97 cents per hundred-dollar valuation, Austin’s tax rate falls between 10 and 20 cents below most major Texas cities.

City staff warned the Council last month that they wanted to consider a new vehicle to fund the short-term shortfall. Stephens has proposed an $8 million tax anticipation note—which would have a 1.66-cent impact on the city’s debt service rate—to cover $2.8 million in sales tax shortfalls and an anticipated $5.2 million in new homeland security expenditures.

Back in the 1980s and early 1990s, the city carved into the budget of essential services to pay for the downturn in the economy, City Manager Jesus Garza said. Garza said it took several budget cycles after he arrived in 1994 to get city services back up to par. The goal of the tax anticipation note is to find some way to soften the blow of the revenue shortfalls while not “cutting into the meat of some basic programs that we provide for the city.” The Council will be asked to vote on the tax anticipation note in two to three weeks. Mayor Pro Tem Jackie Goodman, in particular, wanted to make sure all financial instruments were considered in paying for revenue shortfalls, bonds or otherwise. She asked whether any of the one-time expenditures could be taken to the voters to avoid a serious hit to the city’s tax rate.

Longer term, the City Council likely will have even harder choices. Revenue gains—even if the tax anticipation note were approved, and after department budgets have been cut—only yields $53 million, Rudy Garza explained to the Council. That $53 million is broken down into a number of components: sales tax and property tax increases of $11.9, which anticipates a 2 percent increase in the city’s sales tax revenue; the $8 million tax anticipation note, that will cover both one-time and recurring expenditures; and $34.1 million in budget cuts. Current-year department reductions are $13.5 million of that total.

Assistant City Manager Betty Dunkerley, whose departments would probably be the hardest hit by future cuts, said most of the current department cuts have come by freezing non-critical positions that remain unfilled. Budget, travel and capital expenditure budgets have also been frozen. Cutbacks, so far, have required no layoffs of current city employees.

Other cuts by the city include the deferral of non-critical capital projects, for a total of $5.5 million and $1.2 million of capital outlay projects that have been delayed. Other revenue gains include $10.2 million from refunding bond issues and $3.7 million of unexpected revenues that were added to the budget’s beginning fund balance. Those gains have to be measured against what has been identified, so far, as $85.8 million in additional expenditures. Those shortfalls include $22.4 million that was carried over from last year to cover this year’s budget and the $5.2 million in homeland security costs. Garza anticipates, so far, an additional $58.2 million in expenditures.

The biggest chunk of those increases will go to public safety commitments, which include the cost of the second-year requirements of the Meet and Confer agreement. The total cost is estimated at $28.5 million. Austin Police Association President Mike Sheffield, who was in the audience, said he was comfortable with the figure. The Austin Police Department has lagged behind most major police departments in pay for at least 15 years, Sheffield said. The city is also aiming to boost its number of officers to 2 per 1,000 residents. Austin must also pick up the tab on its part of the new radio system that the city will share with the county and EMS at the new regional communications center.

Other increases in expenditures for the city include a $9 million bump for employment pay-for-performance programs and increased insurance premiums. Day-to-day basic operating increases are expected to add another $20.7 million to the budget.

Council Members Beverly Griffith and Will Wynn expressed optimism that recent financial news about continuing job creation and increased consumer confidence might put the city in a better financial spot than preliminary numbers might indicate. Griffith asked for sales tax revenues from December, which should be available by the first week of February.

Stephens outlined additional strategies to close the gap between revenues and expenditures. Those include taking another look at core service levels and the cost of essential services; creating an administrative process review intended to reduce costs by streamlining the city’s administrative services; reviewing fees charged on current city services; and focusing on key performance measures. The goal of the review was to not only make it through “a difficult budget year,” but also to position the city to have a better year in Fiscal Year 2004, City Manager Jesus Garza said. If the downward revenue trends continue, Garza said, “The red ink will get worse for us.”

City and community leaders are open to Travis County’s decision to pursue a possible 20-acre parcel for a general government campus on the site of the former Robert Mueller Muncipal Airport. Jim Walker, who chairs the Robert Mueller Municipal Airport Implementation Commission, said he was pleased to see a possible tenant express interest in the airport land this early in the redevelopment process.

Under the proposed master plan, about 100 acres on the northwest end of the 712-acre Mueller property has been set aside for office space under the master plan. Walker called the county a “stable tenant.” Not everyone has appreciated the master plan for the Mueller site, Walker points out. The commission clashed a year ago over plans for the multi-agency regional communications facility—know as RDMT for radio, data and mobile transmissions—that Walker described as looking “somewhat like a bunker.”

“Nobody wants another RDMT: someone who came in and just exempted themselves from the master plan,” Walker said. The RDMT will be built adjacent to the National Guard Armory. Walker added he thought the county’s efforts would be far different. “I believe Commissioner (Ron) Davis is strongly committed to community input and a grassroots process when it comes to the master plan.”

Community leaders also were far less charitable when the state appeared poised to annex a portion of airport site five years ago. That last-minute legislative maneuver, however, came with little notice and no pay. A bill this last session to turn Mueller into a general aviation airport—filed by Houston State Rep. Ron Wilson—also died in committee. In this case, however, Travis County is offering to pay for the site.

Deputy City Manager Toby Futrell said the county could clearly be a candidate for the office space that already is a component of the master plan. The final decision, Futrell said, would depend on the city and the master developer. The county’s decision to pursue space at the former Mueller Airport site is only one part of a strategic plan on facilities that has taken more than two years to complete.

County commissioners approved the draft of a letter Tuesday that will go to Catellus Development and the Mueller Redevelopment Team, as well as the City of Austin. The two developer groups are due to file business plans with the city by Jan. 31, and staff hopes to present a final choice to the City Council in March. Catellus, based in San Francisco, was in town last week, seeking input on its plan.

Mueller may be one of a number of sites considered by the county for a general government campus. A capital facilities strategic plan intended to serve the county through 2020 encourages the county to develop a second campus to serve community needs. The downtown space would support county courts. A 14-member subcommittee that included Commissioners Karen Sonleitner and Margaret Gomez made the recommendations under the strategic plan. Leaving Mueller open as an option makes sense but does not guarantee the county would consider Mueller alone as a site for the campus, Sonleitner said. She stressed it was only a possibility as a site for consideration. “I see this as a necessary step to preserve all our options out there,” said Sonleitner, who added that a “Triple A”-rated county needed to make a commitment to long-range planning. The county’s commitment to buy its own second complex, Sonleitner said, made more sense than leasing.

According to documents from the office of Planning and Budget, the county currently leases 186,000 square feet of office space, which costs about $3.6 million. The general office campus could take about 100,000 square feet of existing space and parking off the books, at a cost of $1.2 million. The proposed second county campus would need to be at least 325,000 square feet under the facility committee’s estimates. It would need 1,100 parking spaces, of which 750 spaces would go to county employees. Estimates require a site that is at least 15 acres. Adding the option to provide parking for jury empanelment would require another 2.6 acres on the general campus site. The county, in its letter to the developers, offers to purchase 20 acres. As early as March 2000, commissioners expressed a wish to continue to support court-related functions near the historic courthouse and move all other services to a campus within 10 minutes of downtown Austin.

According to a draft of the letter, Travis County leaders wrote they had a “strong interest” in being part of any development proposal. The county envisions an office park that contains three three- to five-story buildings, with open space, sufficient parking and attractive landscaping. Executive Director Christian Smith stressed the county was interested only if the plans were consistent with the master plan’s goals and met with neighborhood approval. Smith said he had no conjecture on just how much the land might cost the county. He added that his only expectation was that the price be “fair and reasonable and consistent with appraised value.”

A wide variety of offices would relocate to the general government campus, including the county commissioners’ offices and courtroom, as well as the offices of the county treasurer, records management, information technology, purchasing and auditor. Other departments to relocate would include planning and budget, facilities management, human resource management, justice and public safety, health and human services and the offices of the tax assessor and county clerk. In December, county commissioners set out some of the goals the court wanted the general campus to meet: It needed to be within a 10-minute drive of the County Courthouse and along a major transportation corridor such as MoPac or I-35. It needed to be located on or near a Capital Metro bus route and in the Great Austin Area Telecommunications Network. And it needed to be located within an urban watershed and within the city’s Desired Development Zone.

County Judge Sam Biscoe stressed his desire to see public input in the process if and when the county was considered as a buyer at the Mueller site. At the appropriate time, public hearings on the land purchase should be held in each of the county’s precincts, Biscoe said. An executive summary of the facilities plan will also be put up on the county’s website.

Two public hearings today . . . The City Council has scheduled a public hearing on the issue of single-member districts, as well as hearing from citizens on the proposed amendment to Seton’s lease of Brackenridge Hospital regarding Reproductive Health Services. Both are scheduled for 6pm . . . Vote on Bear Lake PUD not likely today . . . The City Council is likely to bow to a request from residents along FM 1826 and members of the SOS Alliance to postpone hearing Stratus Properties’ case for a revised Planned Unit Development. Emails have been flying around accusing Stratus’ attorney Steve Drenner of misrepresenting the agreement between his client and the US Fish and Wildlife Service. Drenner has been busy rebutting those claims, as well as getting ready for a presentation that won’t likely happen before February. Stratus’ spokesperson Laurie Swan told In Fact Daily that the company plans to continue to meet with stakeholders on the overall plan for the area, but has not met with members of the 1826 Coalition since the meeting at the Zoning and Platting Commission last week . . . Library supporters clamor for land. . . The City Council is set to consider purchase Block 21 from Computer Sciences Corp. today. Folks who want more space for the Central Library have been busy sending emails to the Council asking that their pet project get the space . . . Trouble in ranks . . . Some African-American members of the Austin Fire Department are going public with complaints about the local firefighters’ union and the city’s hiring practices. Ray Hendricks, president of the African-American Firefighters Association, says most of the approximately 50 African-American firefighters have left the union over a variety of issues. Hendricks complained that there were no African-Americans on the union committee chosen to handle the “meet and confer” process as the Austin Association of Professional Firefighters holds contract discussions with the city. According to union representatives, union members chose the members of the “meet and confer” committee in an at-large election. Hendricks also criticized the city for failing to recruit and retain more minority firefighters. Austin Fire Chief Gary Warren says the department is committed to recruiting minority candidates. “It’s our biggest issue,” said Chief Warren. He estimated the cost of minority and female recruitment at $1 million per year. “We feel like it’s worth it. We intend to keep on doing it. It’s very, very hard to get results” . . . Reconsideration decision final . . . The Board of Adjustment will not be required to take another vote on whether to reconsider variances given last month to allow the city to begin construction of housing for the Anderson Hill Redevelopment Project. Assistant City Attorney Marty Terry said a careful reading of the board’s rules show that only a quorum need to be present to vote on reconsideration. Since the board deadlocked 2-2 Monday on a request from some disgruntled 12th Street property owners, the decision not to reconsider is final, she said.

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