City budget gap: $11 to $28 million

City Budget Officer Ed Van Eenoo told the City Council this morning that city coffers will be down $11.4 million for the upcoming budget year even if the Council increases taxes to the rollback rate. Sticking at the effective tax rate—the rate needed to generate the same amount of money as the city took in last year—would mean a $28 million deficit, he said.

 

The reason for the gloomy projection, which he noted was only preliminary, is a drop in development revenues as well as property values, especially commercial buildings, and a slight decline in sales tax collections.

 

However, the economic picture for Austin is not nearly as bad as it is in the rest of the country, according to John Hockenyos of Texas Perspectives. “While things aren’t getting worse across the country, in people’s minds things are not getting a whole lot better,” despite what economic indicators may say, Hockenyos said.

 

“Between 2010 and 2014, about $1.4 billion in commercial real estate loans will reach the end of their terms. Nearly half of those are at present under water,” he said, with the borrower owing more than the underlying property is currently worth. Commercial property values have fallen 40 percent since 2007.

 

It’s challenging now to do lending to re-balance the portfolio, Hockenyos said, because it is difficult to put a proper value on the properties.

 

Hockenyos and Van Eenoo were addressing the Council in a special session that marks the beginning of the city’s lengthy process leading to a budget and setting a new tax rate in September.