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Council hears Transit Bond election’s effect on future tax rates

Wednesday, April 30, 2014 by Michael Kanin

Amid questions revolving around a potential multimillion-dollar November 2014 Transit Bond election, city staff Tuesday laid out the city’s bonding capacity picture for Council members.


Though the fact that a tax increase would be required to accommodate any amount of additional bonding was not quite news, the figures associated with such an action were unveiled, specifically – an unusual occurrence.


Should Council members place an item on the November ballot to fund what almost certainly would be a rail line, and should the item succeed, the owner of a $200,000 home could expect to see an increase in the debt service portion of taxes of between $84 and $211 annually by 2020.


Though no number has been officially attached to an initial rail bond, Mayor Lee Leffingwell suggested to the Monitor in early March that $275 million might be enough to get the job done. In the same article, Council Member Bill Spelman suggested that the figure could be significantly higher. (See Austin Monitor, March 3)


According to staff numbers, Leffingwell’s figure would require somewhere between a two and three cent tax increase – a number that would generate between $265 and $440 million. For owners of a $200,000 home, that larger project would eventually result in between a $109 and $135 increase on the debt service portion of their 2020 tax bills.


Staff told Council members that the tax increase would not be applied all at once. Instead, it would phase in at one cent in FY2016, two cents in FY2017, and three cents in FY2018. Should voters grant the city more capacity – including bonding for items other than rail – the rate could rise to four cents in FY2019, with a potential five or six cents included in FY2020.


Without a tax increase, staff told Council members that they would be ready for another general obligation bond in FY2018. The figure then available to Council members would be $425.9 million.


General Obligation Bonds are one of three basic bonding tools available to the city. The other two – Certificates of Obligation and Contractual Obligations – are typically used for more routine, less intense expenses.


However, on Friday, Council Member Mike Martinez announced his push to use Certificates of Obligation to cover up to $108 million worth of floodplain buyouts. Martinez noted that the city already has the capacity to issue up to $30 million in COs. He called for another $60-$78 million to complete a substantial buyout. Much of that would be repaid through the drainage utility fee, he said.

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