Council wades into 2016 city budget

City Council took its first look at next year’s budget Wednesday and got a glimpse of how its members’ campaign promises might cause some complications.

The city forecasts that in 2016, the average homeowner will be paying $6.63 more in property taxes each month. The city’s monthly bill is projected to rise from $81.05 to $87.88 each month for the median home, which is now valued at $221,086. Calculated annually, that is $1,054.56.

Combined with the other taxing entities in the area, the average homeowner’s property tax bill is now $4,390.

The budget office also expects city rates and fees to rise. The average ratepayer in Austin can expect to pay $11.43 more each month, according to the most recent projections, which estimate monthly fees to rise from $228.73 to $240.21. That is an annual increase of $137.16.

Currently, the city’s budget office projects a 0.5 cent decrease in the property tax rate, to 47.59 cents per $100 in property valuation. However, that does not include funding for new programs, initial funding requests or new Council initiatives such as a homestead exemption.

In addition to the daunting task of tackling their first city budget, Council members are already wrestling with the potential impact of a proposed homestead exemption. Last year, the city calculated that the 20 percent homestead exemption proposed by the current Council would cost $36 million if applied at once.

That reduction in property tax revenue would certainly mean budget cuts. Though not in the budget presentation, Council addressed rumors that a 5 percent reduction in each department would mean a 5 percent reduction in staff. The city currently employs 12,976 people.

“Five percent is a pretty big cut,” said Mayor Pro Tem Kathie Tovo. “But $36 million is (big) as well. It’s larger than our library budget. … There are no easy resolutions to that.”

Tovo was not the only Council member to express concern.

“I heard, from a department, there were specific positions slated for cuts, and they were filled positions,” said Council Member Delia Garza. “They reached out to me because they were concerned about losing their jobs.”

Garza told the Austin Monitor that she had heard from an employee in the Parks Department that the cuts could mean the elimination of 19 filled positions in his section of the department alone. She said another source had expressed concern that the cuts could mean shorter pool hours for Austinites.

Austin Chief Financial Officer Elaine Hart explained that they presented the 5 percent cutbacks as just one option to balance the budget if they implement the homestead exemption. She clarified that the work had not asked for the elimination of specific positions, as they did not want employees to worry about their jobs. Instead, they asked department heads to sketch out ways to reduce their budgets by 5 percent, and that would most likely involve staff cuts.

“Our internal service funds are, primarily, 85 to 90 percent people,” said Hart. “So when you ask them to cut their budget back by 5 percent, there’s no way to meet that target without eliminating positions.”

City Manager Marc Ott explained that things were still in the preliminary stages. He said a similar scenario played out during the Great Recession of 2009, and ultimately, the city managed not to lay off a single person.

“We are acutely aware and committed to the employees,” said Ott.

“It is a menu, it is one of the tools; there are other things we will look at to see how ($36 million) will be absorbed,” said Ott. “As always, that kind of request kind of reverberates throughout the organization.

“Naturally, people start to wonder … what are the implications for their department? What are the implications for them individually?” Ott continued. He went on to explain that they held a meeting to make sure that everyone knew Council would deliberate the matter publicly before any decisions were made.

“I certainly don’t want to cause any needless anxiety for anybody,” said Mayor Steve Adler, adding that knowing the potential impact of 5 percent cuts would be “a useful tool, regardless.”

Plans for the Lone Star Rail also drew heat from Council members, as well as caused confusion in the budget presentation. Initially, funding for the tax increment funding zone was projected to be $4.8 million in fiscal year 2016. In reality, it will be just half of that — $2.4 million. The error had staff working into the night to crunch new numbers. However, the reduction may not make that big of a difference to Council members who expressed ideological opposition to the rail plan.

Tovo suggested that the late approval of an interlocal agreement between the city and Lone Star by the prior Council warranted further exploration by the current Council. When it approved the agreement in December, the funding estimate was $1.3 million.

Council Member Don Zimmerman took a stronger stance.

“It’s interesting to me that that came up in December, which is a month after the Urban Rail project failed pretty spectacularly,” said Zimmerman. “The voters had a say on rail and they rejected it pretty soundly. I think there is a public reason for us to go and look at that again. … You see how it looks like the city is being evasive to voters.”

Council Member Pio Renteria brushed off the notion that Lone Star Rail had anything to do with Urban Rail. However, he expressed concern that they would be taking money out of the budget that would not be used immediately at a time when Council was considering “serious cuts.” If funded, it would be three or four years until they released the funds to Lone Star, which is still pursuing an agreement with Travis County.

Wednesday’s presentation was the first step Council has taken into the budget process. The next budget forecast meeting will take place in May, and the proposed budget will be ready for review at the end of July. Budget readings and its approval will occur in September.