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Austin’s economic outlook is grim, but better than nation
Thursday, April 23, 2009 by Austin Monitor
The city council got a look yesterday into how the economic downturn is likely to effect the city over the next five years, and it’s not good news. The city is likely to be around $30 million in the hole in 2010, even if property taxes are pegged the “rollback tax rate,” which is the most the city can raise taxes without triggering the possibility of a rollback election. In practical terms, most Austinites won’t see a huge increase in property taxes, because the model assumes that most houses in the city will be assessed at a lower value. State law also limits the amount a property’s assessed value can increase to 10 percent per year.
Jon Hockenyos of Texas Perspectives outlined
Hockenyos noted that
The city’s economic team gave an economic forecast through 2014. It shows property taxes staying relatively stable. Mayor Will Wynn noted that office buildings could fall faster than residential, although the city is not allowed to create two separate tax rates, which effectively leaves homeowners bearing more of the burden. Sales tax will be much more volatile over the next five years, with the projections showing it falling 15 percent by the end of 2011 before beginning to slowly climb back up.
The majority of the city’s expenditures are on personnel, with most going to public safety employees, who also have a contract that includes raises over the next couple years. Council Member Brewster McCracken once again suggested that the contract be renegotiated, and also suggested that all city employees, including council members, take a one percent pay cut. City Manager Marc Ott thanked him for the suggestion, but said he wasn’t going to go on record with any budget cutting proposals until he had heard from city departments.
Deputy CFO Greg Canally, under questioning from McCracken, made clear that the city has no “slack capacity” for bonds. In other words, given what the city’s financial planners now know, it would not be possible to issue any more bonds without raising taxes. Council Member Lee Leffingwell has said that, if elected Mayor, he would like to hold a bond election for transportation funding in 2010. McCracken has said the city can’t afford to do that.
At the end of the session, Leffingwell did a little cross-examination of his own on the bond question, forcing Canally to backtrack and land on a safer position. “Right now we haven’t done a detailed capacity analysis,” he said. There are a lot of factors to be considered. But “that work has not been done.” Of course, the city could do a bond election. The real question is what year could bonds be issued as a result of that election that would not raise property taxes. The city is currently in the midst of a 7-year cycle for bonds that were authorized in 2006.
Ott stressed that the big picture is that
Council Member Laura Morrison said she was really struck by one of Hockenyos’ statements. “I think it was very significant the projection that personal income will drop by 6 percent because this says to me this is really hitting people’s pocketbooks—they’re having to change their habits, they’re having to change their lifestyle, they’re having to change their spending.”
That is something the Council will have to bear in mind as they ponder the tax rate, the budget cuts and the city’s future this summer.
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