Discussion includes warnings for hard budget times ahead

The Tax Anticipation Note first proposed by city staff last fall to cover lower-than-expected sales taxes and unanticipated “homeland security” costs was approved by the Council Thursday night on a vote of 6-0. Council Member Danny Thomas had departed for the evening. The measure included an amendment from Council Member Raul Alvarez that will allow the Council to allocate more money for social services as requested by the Community Action Network at Wednesday’s work session. (See In Fact Daily, Feb. 14, 2002 .)

A Tax Anticipation Note is one method the city has of borrowing money. Since the city’s taxing authority backs the notes, the Council essentially promised to pay back the money next year, by using property tax revenue if necessary. The Council approved a $4.8 million note. To reach the goal of finding an additional $8 million for this year’s budget, the Council agreed to withdraw money from its Contingency Reserve Fund, issue “contractual obligations” to pay for some fire and police equipment and decrease expenditures in other departments. The decreased expenditures will primarily affect the Health and Human Services and EMS departments in the form of unfilled vacant positions.

By issuing the $4.8 million Tax Anticipation Note, the Council is raising the probability of an increase in property taxes in the next budget cycle. But Mayor Pro Tem Jackie Goodman, while questioning Finance Director John Stephens, pointed out that there were other options for repaying the $4.8 million. “If other resources were available at the time the note comes due, you could use those resources,” Stephens said. City Manager Jesus Garza reminded Council members that the city had on a previous occasion managed to move money from the city’s operating fund to the debt service fund. “But when you do that, that means you have less dollars to spend on the operating and maintenance side,” Garza said. Goodman held out hope that some other source could be found to repay the money. “I just wanted to be sure that people understand that this is not an increase in taxes done at a different time in the process than would normally be done,” Goodman said. “We have not made a decision to raise taxes by taking this action.” Other sources from which to repay the notes could include an unexpected sales tax windfall or budget cuts.

The package approved by the Council, if repaid with property tax revenue, would result in a property tax increase of 1.32 cents per $100 of property value. That would mean an increase of approximately $16 to the property tax bill of the average homeowner in Austin. Compared to the measure originally drafted by city staff, the measure as amended by Alvarez increased the amount being borrowed while decreasing the amount being withdrawn from the Contingency Reserve Fund. The resolution passed by the Council also allows the city to devote $600,000 from that fund to social service agencies, although the money was not directly appropriated during last night’s meeting.

Although the amount for social services was small compared to the $8 million deficit facing the city, Alvarez said it was important to assist those families facing hard times. “That’s what we’ve determined is needed to make sure we have a safe community . . . we also need to make sure we augment what we do in terms of police, fire and EMS in terms of the folks who are suffering from the economic downturn,” Alvarez said. “I, like my colleagues here, don’t want to place all the burden on the taxpayers and that’s why we didn’t just go ahead an say let’s do the Tax Anticipation Note for the full amount. I think it’s a very balanced way of doing it.”

Council Members Beverly Griffith and Will Wynn both expressed concern about any possible property tax hike. “I do want to remind my colleagues that AISD recently raised their tax rate,” Wynn said. “So this will be a second tax increase on homeowners in Austin, if indeed we anticipate using the tax rate increase to pay back the note.” Wynn added that he would encourage a harsh scrutiny of future budgets, especially since figures from the finance department show expenses rising faster than revenues over the next few years. “I’m just not comfortable that we haven’t looked under every rock and even if we have, whether we haven’t challenged ourselves on what we’re going to do to alter that expense trajectory.”

Alvarez countered that the city had already found millions of dollars in savings this year and the potential tax hike was small compared to the need for city services. “We’re not laying anybody off. If we do talk about more cuts, its libraries . . . it’s parks and recreation,” Alvarez said. “If we cut any more that’s where it’s going to come from, because that’s what the general fund supports. We’re continuing to provide the services we committed to provide in the community, and if we don’t take this approach then we’re going to have to start scaling back the services . . . scaling back the work force.”

Other cities in Texas, facing similar economic conditions and homeland security expenses, are considering cuts in their municipal work forces. In Dallas, the city manager recently recommended cutting 192 city jobs because of lower-than-expected sales tax revenues, but the City Council there has yet to act on that proposal.

Salary freeze possible, hiring nearly on hold

With the 2002-2003 budget in the early planning stages, Council members are already looking ahead to potential cost savings. Although Council members voiced strong opposition to laying off city employees, they did discuss a hiring freeze, eliminating vacant positions and limits on raises for city employees. “We’ve held a lot of positions open,” Garza said, “and this week, we started talking about sweeping those positions . . . just saying we’re going to not fill them, and looking at the impact that might have on the deficit in 2003.” Wynn raised the possibility of a salary freeze for the 2002-03 budget, which would save about $7 million. “That would be an option the Council could hold in its pocket as part of its deliberation for the budget of ‘03,” Garza responded. The Council would also have the option of budgeting for an across-the-board salary increase linked to the cost of living, which would likely be less than the amount needed for “pay-for-performance” increases.

Mayor Gus Garcia concluded the budget discussions with a somber warning. “Come this summer and fall when we approve the budget, everything is going to be on the table,” Garcia said. “You approved the current budget one day before September 11th. This next budget is going to be different, no question about it.”

Arguments turn on annexation policy and financial variables

Developer Pete Dwyer won annexation of his Wildhorse Ranch Planned Unit Development Thursday night with no vote to spare from the Austin City Council. The vote came after a recess during which Dwyer agreed to dedicate 150 feet of right-of-way for SH 130 along the entire length of his project. Yesterday was the last day the city would have been allowed to complete the annexation begun 90 days earlier. It is unlikely that Dwyer would have opted to go through the process again, which could not start until May, according to attorney David Armbrust.

Council Member Will Wynn, who has opposed annexation from the beginning, dissented and Council Member Danny Thomas left the meeting before the vote, but the other five members of the Council agreed to annex Dwyer’s 1,957-acre project, which is just north of Lake Walter E. Long and in the city’s Desired Development Zone.

Dwyer told In Fact Daily after the vote that he was very pleased with the annexation. However, he said if the Council had failed to approve the project, “We would have immediately started working on MUDs (municipal utility districts). So the city did the right thing for the citizens of Austin.”

He pointed out that the city had already agreed to $25 million in water and wastewater improvements for the area, part of a strategy to lure growth away from sensitive watersheds and into the economically stunted area. As the city’s annexation officer Ben Luckens told the Council, once the request for water and wastewater service is granted, “We want to control land use. Having done that (granted service), we want to annex it.”

The proposed Smart Growth housing development, located south of Manor—in the probable path of SH 130—has been in the works for more than two and a half years. Wynn raised questions about whether annexation would mean the city would end up paying the lion’s share of the highway’s right-of-way when the PUD was presented in December. At that time, no one could say who would pay for the right-of-way or how much it would cost. Alice Glasco, director of the Neighborhood Planning and Zoning Department, told the Council that staff would address the issue when the PUD came back through the Zoning and Platting Commission for its zoning. Wynn said he was disturbed by the cavalier attitude expressed by everyone concerning the money. ( See In Fact Daily, Dec. 7, 2001. )

During the intervening months, Dwyer and city staff continued to work on reaching a final agreement, including a detailed zoning map and donation of right-of-way for SH 130. When Dwyer and Armbrust arrived at the City Council yesterday, they had agreed to a 150-foot right-of-way, but only in areas of his project that would have direct access to SH 130. The Council also approved the zoning proposals, with Wynn opposed.

City transportation specialist George Zapalac told the Council that the minimum right-of-way for the highway would probably be 400 feet. However, he said, “One-hundred-fifty feet is the maximum that our ordinance allows us to require to be dedicated without compensation.” Wynn asked whether the ordinance would restrict the owner from donating the land to the city and Zapalac said no. Wynn said he was concerned because he had heard that the right-of-way might cost as much as $30 million.

Luckens said he had heard from the Texas Department of Transportation that the figure would be more like $6 million. However, he said that number “could logically be expected to double.” TxDOT does not have a concrete number, he said, “but I think $30 million is pretty much out there.” Wynn also grilled staff members about the projected timeline for the city to begin to make money from the project and the taxpayers who will eventually live in the PUD. City Finance Director John Stephens said the first year for a positive return on investment would be 2006. However, he said he had not considered the value of parkland Dwyer is donating above ordinance requirements, or a number of other things.

Council Member Raul Alvarez said, “The net benefit to the city is much greater than the cost to the city. It’s a tough issue, but having heard all the discussion, I, myself, am going to be supporting the annexation and zoning.”

Council Member Beverly Griffith termed the infrastructure deal “very positive . . . If that infrastructure goes through, that land it will have a lot better shot at being developed all the way around.”

Council Member Daryl Slusher said he too would support the project. “This is a developer who used to build in the Drinking Water Protection Zone, and has moved and is doing a very good project. It is a positive cash flow to the city, unless those row costs were to really go up. So, even though I think Council Member Wynn raises some significant points, I’m going to be in favor of it.”

Dwyer told In Fact Daily, “We just did five MUDs right next door to this.” Those districts, he noted, are in the ETJ of Manor and within Manor’s city limits. He said he will receive 70 to 100 percent reimbursement from the small town for water, sewer and drainage improvements. But he will receive nothing from the City of Austin for the improvements for Wildhorse—except to the extent that those pipes and other infrastructure mechanisms are oversized to serve future development on other land. During questions from the Council, Luckens said the city makes money on those arrangements.

As a final part of the agreement, the Council directed city staff to look into the possibility of establishing an economic development program for the PUD under Local Gov. Code Chapter 380. The part of SH 130 along Wildhorse was also designated a Scenic Roadway, which means that signage must be smaller, closer to the ground and with less lighting than signs on older highways.

Tuesday Wednesday, Thursday,

Friday

Stratus Properties postponed . . . The Bear Lake PUD case was postponed to March 21 to see if environmentalists, neighbors and the developer could reach an agreement . . . Aquifer board meets today . . . The Barton Springs Edwards Aquifer Conservation District board will be reconsidering Creedmoor-Maha’s request to increase pumpage from the aquifer by 400 million gallons per year. Last month the board rejected Creedmoor-Maha’s request, which is based on the company’s projection of what it will need in 10 years. The request for rehearing was a necessary step for Creedmoor-Maha before it can file a lawsuit, which seems likely . . . Rainbow finally wins approval . . . Council members decided to extend a contract with Rainbow Materials for structural concrete yesterday after meeting in executive session with city staff. The company has faced questions over its environmental record. (See In Fact Daily, Jan. 11, 2002. ) However, consideration of the bidders' environmental records was not specifically included in the original bid specifications. But Council Member Daryl Slusher wants that to change. As part of the motion to approve the contract, Slusher added a provision asking city staff to research the “best practices” in the concrete industry regarding environmental protection. He wants those incorporated as conditions of future contracts. In the meantime, Slusher says Rainbow is working to clean up problems at its site in Del Valle. “The city accepts their remediation plan and expects Rainbow to carry this out in good faith,” Slusher said, “although that is separate from this contract bid” . . . Saying good-bye . . . General Manager Karen Rae is leaving Capital Metro today, and so is Ted Burton. Rae is not going away, though, since she has a fat consulting contract with Cap Metro. Burton, who serves as Director of PR and Marketing for Cap Metro, is moving to the new position of Director of Media Relations for Tuerff-Davis EnviroMedia, which held Cap Metro’s media contract for two years. That relationship ended last year by mutual agreement. Emlea Chanslor, Cap Metro’s government relations coordinator, will serve as spokesman for Cap Metro until Burton’s replacement is hired. Burton is a former Assistant News Director and Executive Producer at KEYE . . . Holiday on Monday . . . We sympathize if you don’t have one. Governmental offices and In Fact Daily will be closed. We shall all return on Tuesday.

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