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Council members get an early financial picture of 2012 bonds

Wednesday, June 23, 2010 by Michael Kanin

Members of the City Council got an early look at the tax impact of a potential 2012 bond election at a meeting of their Audit and Finance Committee on Tuesday. Deputy Chief Financial Officer Greg Canally offered a simplified snapshot of the situation with several caveats: For the city to be able to ask for $730 million in new bonds, the debt service tax rate would have to go up three cents per every $100 of valuation. That translates to a $60 rise in property taxes over a three-year period for a homeowner who pays $1,000 dollars on a $200,000 home.  


Given those parameters, Canally told In Fact Daily that property owners would see a tax increase of roughly $30 for every $100,000 of their home’s value. That means that the owner of a $500,000 home would see an increase of $150 over the same three years.


The committee also heard about the finances behind a nearly $85 million transportation bond package that has been proposed for November of this year. Though that election would have no effect on the underlying tax rate, Canally’s office is forecasting that the city will need to raise the debt service portion of the tax to 13.25 cents—an increase of .66 cents from 12.59.


Committee Chair and Council Member Sheryl Cole, who has been concerned about the economic viability of the proposed bonding activity over the next three years, was clear about the reason for Canally’s presentation, and she issued what turned out to be a revealing statement.


“As far as I know, we have never been out for a bond election that didn’t receive a 7-0 vote of Council — that’s as far as I know,” she said. “But one thing I do know for sure, almost, is that we have never been out without the full confidence of the professional staff, the city manager, the Audit and Finance Committee — in particular, the Audit and Finance chair — and, of course, the mayor.  


“We made such a concerted effort and demands on your office despite your demands on the budget because we’re simply trying to get the information to get us there,” she said.


The 2012 bond idea is the result of similar conciliatory efforts, this time on the part of the Mayor Lee Leffingwell’s office. Last week, Leffingwell signaled his support for the concept, a move that may have come as a way to increase support for the smaller 2010 initiative. Cole and her Council colleagues Bill Spelman and Laura Morrison form the currently reluctant bloc.


For her part, Cole seemed to be comfortable with Canally’s numbers. On hearing his real-life tax example, she said, “60 dollars … doesn’t give me heartburn.”


Canally’s presentation included five scenarios, with each indulging an additional penny of added debt service tax. The resulting range ran from a $335 million bond program for no added tax to $880 million for four extra cents.


Those figures look at only the financial calculations associated with the debt service portion of Austin’s tax rate, and then only at the city’s bonding capacity. No actual needs were assumed in Canally’s study.


In closing Canally offered his major disclaimer. “I will say this … these (numbers) will change,” he said.

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