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Friday, June 5, 2015 by Tyler Whitson

Council adopts six percent homestead exemption

Despite the fact that views among City Council members run the gamut as far as implementing a homestead tax exemption, they opted in a 7-4 vote to meet in the middle early Friday morning, approving a 6 percent exemption for this year and expressing an intent to increase it to 20 percent over the course of four years.

Mayor Pro Tem Kathie Tovo and Council Members Greg Casar, Delia Garza and Ora Houston cast the dissenting votes.

Council Member Pio Renteria advocated for the winning measure prior to the vote, noting that the value of his most recent home appraisal went up 12 percent in the past year. “It’s the inner city that’s really hurting right now,” said the Central East Austin representative.

Council will have to set the tax rate in its upcoming budget deliberations, which will determine how much, if any, revenue the city will lose as a result of the exemption in the fiscal year 2015-2016 budget.

According to a Budget Office report, if Council were to set the tax rate at 48.24 cents per $100 of valuation, there would be no revenue loss, the overall homestead tax burden would decrease by $5.2 million and the tax burden for a median valued homestead would decrease by $26.

Mayor Steve Adler said this would be a “revenue neutral” approach because it would not require Council to cut the budget or city services in the next fiscal year.

In this scenario, the total non-homestead residential tax burden would increase by $2.4 million and there would be a $2.9 million increase in the total tax burden for all other property types. The tax burden for a median valued non-homesteaded property would increase by $17.

If landlords were to pass the increased burden onto tenants, the annual rent for a unit in the average apartment complex would increase by $6.31.

Council could also keep the tax rate at the forecasted rate of 47.5 cents, which would result in about a $7.6 million loss in revenue. The forecasted tax rate is the projected rate needed to balance the budget.

Council Members Sheri Gallo, Ellen Troxclair and Don Zimmerman voted for an earlier motion to set this year’s exemption at 20 percent — the highest amount that state law allows — though the rest of Council voted against that measure.

Troxclair, who made the motion for the full exemption, said she believed Council could pay for the roughly $32.56 million projected revenue loss without raising the tax rate from the forecasted rate or cutting city services, suggesting that the city halt corporate incentives, among other ideas. Gallo and Zimmerman agreed with the assertion.

Casar said he would support implementing a 5 percent homestead exemption and allocating an amount equal to 20 percent of the property tax savings from the General Fund to support rental assistance programs. This would have had the same fiscal impact as the six percent exemption that Council ultimately supported.

Casar called his proposal “a step in the right direction” and, although he received support from Adler and Houston during discussion, his motion did not make it to a vote.

Garza and Tovo said they would not have been able to support any type of exemption this year.

Tovo said she would have voted in favor of a flat rate exemption, which she said would have been more equitable, but the Texas Legislature did not make that tool available this year.

Garza expressed doubts about all of the proposals. “Without any of us having gone through a budget work session (with the exception of Tovo), how do we know how viable any of these are?” she said.

Several speakers requested that Council not decrease city services to pay for the revenue loss that might result from implementing the exemption.

The new exemption increases the previous rate for this year, which was .01 percent and effectively set a $5,000 across-the-board exemption.

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Key Players & Topics In This Article

Austin City Council: The Austin City Council is the body with legislative purview over the City of Austin. It offers policy direction, while the office of the City Manager implements administrative actions based on those policies. Until 2012, the body contained seven members, including the city's Mayor, all elected at-large. In 2012, City of Austin residents voted to change that system and now 10 members of the Council are elected based on geographic districts. The Mayor continues to be elected at-large.

city budget: The city’s plan for expenditures based on income.

Homestead Exemption: A reduction on a home’s taxable value in order to protect the home’s value.

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