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Budget discussion raises affordability questions

Friday, August 2, 2013 by Elizabeth Pagano

Tuesday’s City Council budget work session sparked immediate philosophical concerns for Austin City Council members. These surfaced at the prompting of Council Member Laura Morrison.

 

“What is systemically in our budget, in the way that we are doing business, that means that even with all the growth in our city, we’re not able to keep up with expenses?” she asked.

 

As reported Tuesday morning by In Fact Daily, the city is looking at a $3.3 billion budget for FY2014. That’s an increase of $200 million from the last budget.

 

It’s also an increase in property taxes for Austin residents, who could be paying $4.17 a month more for the average homestead, which has risen in value to $183,133. Altogether, the owner of an average home in Austin is expected to pay $4,155 in property taxes next year, once all the taxing entities are taken into account.

 

Morrison pointed specifically to a chart that showed residents’ tax burden increasing over time when placed in the context of the percentage of their income. In FY2008, the property tax bill as a share of the median family income was 4.4 percent, and in FY2014 it is projected to be 5.6 percent.

 

City Manager Marc Ott responded to Morrison’s concerns. He said that while he has always approached the budget conservatively, there were any number of unanticipated expenses that arose during the year or, as he put it, “on any given Thursday.”

 

Ott pointed to $10 million in midyear budget amendments for affordable housing. He also said that the rapid growth that the city has seen in recent years has an associated cost to the city.

 

“There are a lot of things that we try to balance, and certainly affordability is one of them,” said Ott.

 

Council Member Mike Martinez drove that point home, noting that the city doesn’t charge for public safety, transportation and roadways and other services that see increased demand when the population increases.

 

“We don’t charge for fire services,” said Martinez. “Growth, in that sense will never pay for itself… When we provide fire, police, EMS, free parks, free libraries – all of those services – we’re not charging. We have fees, based on certain things, but we’re not charging to recover the cost of that.”

 

Mayor Lee Leffingwell argued the question was moot.

 

“It’s not a question of whether we want growth or not. It’s whether or not growth is going to occur,  and I believe it is going to occur. We’re not going to be able to put a wall around the city. It’s going to happen,” said Leffingwell, who went on to say the only question was whether the city was going to provide services, and work towards providing jobs, so that people could pay taxes from their incomes.

 

That being said, the mayor said it would be a good idea to take a hard look at where money is being spent, and what money is being spent by City Council.

 

“I think we want to do that. I don’t think we want to follow the path that other cities have taken – most recently Detroit – into bankruptcy,” said Leffingwell. “I want to lead the charge about trying to find out why, and where we are spending our money. I have the feeling it’s a lot of different places.

 

Leffingwell said he, like Ott, suspected one of those places was the mid-year budget amendments. This past February, City Council added about $14 million to their budget.

 

Ten million dollars of that amount was for affordable housing, needed to cover projects that would have been covered if the $78.3 million housing bond passed. It didn’t, which helped prompt another change in the budget.

 

This year’s budget includes what could be a more stable source of funding than for the city’s Housing Trust Fund than bond elections.

 

Currently, 40 percent of property tax revenue from formerly city-owned properties in the desired development zone is transferred into the fund, with City Council approval. This past year, about $600,000 was added to the fund that way.

 

This budget cycle contemplates transferring 0.25 percent of total operations and maintenance property tax revenue, with a gradual percentage increase to two percent by FY2018.

 

The transfer into the fund would be capped at $10 million annually and, if approved, is projected to be $9.5 million by FY2018. (The current method is projected to amount to $1.6 million in FY2018.)

 

Morrison pointed out that the original discussion would have diverted 40 percent of tax revenue from any governmental-owned properties, which Deputy Chief Financial Officer Ed Van Eenoo said would roughly double the amount of money that would go into the Housing Trust Fund.

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