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Council to delay discussion of expanding city’s over-65 tax break

Thursday, March 6, 2014 by Michael Kanin

Austin City Council members are set to delay discussion of expanding the tax break for city residents who are 65 and over until March 20. According to Council Member Bill Spelman, the delay comes at the request of Mayor Lee Leffingwell, who will miss today’s meeting.

 

Meanwhile, city staff offered answers to a September Council resolution that calls for investigation of the possibility of such tax relief for that age group. Deputy Chief Financial Officer Ed Van Eenoo appeared in front of Council members at their regular work session Tuesday to answer questions about the potential tax relief and its impact on the rest of the city’s tax base.

 

According to the memo, increasing the 65-and-over exemption from its current level at $51,000 annually by just $1,000 a year would cost the city $170,619 in FY2015. Over five years, that figure runs to $853,000. Spread out over the tax bills of non-exempt homeowners, the memo puts the cost to the owner of a median-priced home at 36 cents annually per $1000 exemption.

 

The memo runs projections from $52,000 to $59,000 of exemption in $1,000 intervals. It also offers a look at $60,000 through $100,000 exemptions. According to the memo, each $1,000 increase costs the city roughly $170,000 for FY2015. That number grows to $853,000 over five years.

 

At $60,000, the over-65 exemption cost the city just over $1 million in FY2015. Spread over five years, those costs escalate to about $5.1 million. Each $10,000 increase in the over-65 exemption costs Austin about $1.66 million. Spread over five years, the number extends to about $8 million.

 

Each $10,000 increase in the exemption brings roughly $3.50 in additional tax on the median homeowner.

 

However, both in the memo and in person, Van Eenoo noted that the region’s over-65 population was growing significantly. He suggested that that growth could lead to even larger 65-plus exemption costs after five years.

 

Spelman noted that staff’s memo did not account for potential rent increases, the result, he argued, of property taxes increased to compensate for the revenue lost from relief for those 65 and older. Van Eenoo put that figure in the category of business tax impact—something he noted was difficult to calculate.

 

Still, Van Eenoo offered Spelman a rough estimate. He suggested that, for every $1,000 in additional exemptions, a property valued at $100,000 would see an additional 18 cents of property tax. Van Eenoo confirmed the likelihood of landlords passing that cost on to renters.

 

For her part, Council Member Laura Morrison wondered about freezing property taxes for those 65 and older. Van Eenoo suggested that this may be a more effective way of achieving Council’s goal. “I hadn’t realized that we’re actually authorized to do a tax freeze,” she said. “Just for grins, I asked them to include this information in there. As you can see, it’s very expensive.”

 

According to Van Eenoo’s memo, that could mean Council members would freeze over-65 tax bills at the amount paid “during the tax year in which the homeowner turns 65.”

 

The memo puts the initial impact of such a move at $1.8 million for FY2015. By FY2019, the figure would grow to $23.73 million in lost revenue.

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