Higher property values, extra $1 million from AE could lower tax rate

The Austin City Council heard better-than-expected budget numbers at a briefing this morning, allowing the city to roll back the proposed tax rate by almost a penny and promising some relief for city employees worried about being placed on furlough to help balance the budget.

Budget Officer Ed Van Eenoo had proposed a tax rate of 43.28 cents per hundred-dollar valuation. That’s now been rolled back to 42.09 cents due to a 5 percent increase in property tax values. As Mayor Lee Leffingwell pointed out, that means the tax rate increase over last year is going to be less than a penny.

The summer heat also means Austin Energy will be able to kick in an extra $1 million, bringing the utility’s contribution to the budget up to $101 million.

The combination of additional property values and Austin Energy’s contribution means another $1.6 million for the budget. The proposal is to take that money to forego furloughs for city employees making less than $40,000. Furloughs for those making more than $40,000 will be re-evaluated in six months.

Council is expected to adopt a tax rate on Oct. 1, with tax rate hearings on Sept. 14 and Sept. 24. The maximum potential tax rate will be set on Aug. 27.

Releasing amended numbers this morning, Austin Energy General Manager Roger Duncan told Council the city electric utility has been able to make up a million dollars in revenue through increased residential AC use even though industrial customers did not increase their usage as anticipated.

City employees can also look forward to receiving their service incentive pay in December. City Manager Marc Ott told the Council that furloughs and longevity pay cuts had been a tough decision for him but that given the information he had when staff made the proposal he thought it was the right one at the time.

General Fund furloughs were proposed as a means of saving $700,000. Cutting SIPs was projected to save $1.7 million from the General Fund also.

The utility has been transferring 9.1 percent of its average gross revenue every year since 1999, excepting 2002. The average gross revenue uses the prior two years and the current year, and such a scheme is “public power’s most commonly used transfer method,” according to Duncan.

The country’s ninth largest public power utility listed FY09 revenue of 1.32 billion and 1.414 billion in expenditures.  FY10 should be a different story, however, and the utility plans on pulling in only 1.25 billion, a decrease of 5.3 percent. Weak economic conditions have tended to drive industrial usage down, and AE estimates that will be the case next year. Austin Energy’s proposal included a contribution of $101 million to the General Fund for FY10, maintaining a 9.1 percent transfer rate, and updated to reflect the additional million.

Other highlights from the presentations included AE’s seventh consecutive year as the national leader in green power sales and its designation as one of the top six US utilities in Smart Grid development. Austin Energy serves 414,000 customers and has 1,722 full-time employees—including all of the Economic Growth and Redevelopment Department employees.

The proposed FY10 budget does not include a base electric rate increase, the 15^th year in a row such rates have not increased. AE is proposing to postpone a planned average monthly residential bill increase of 60 cents that would have covered the rising cost of using the Texas transmission grid which is expected to double in five years.

The utility has a $306 million spending plan for FY10, which includes power plant improvements, transmission and distribution systems, a system control center, and Customer Information System. Austin Energy’s expenditures are primarily on fuel and operations and management, which combine to account for 67 percent of the FY10 projected expenditures.

Nine departments and enterprise funds will present over two days. Today, in addition to Austin Energy, Austin Water Utility, Solid Waste Services/Code Compliance, Aviation and Convention Center will reveal their plans. Public Works, Transportation, Watershed Protection and Economic Growth will make presentations next week.