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Council to vote on homestead exemption today

Thursday, June 4, 2015 by Elizabeth Pagano

Though City Council plans to vote on a homestead exemption today, the discussion at Tuesday’s work session made it clear that Council members still have a lot of work ahead of them to ensure that exemption means lower tax bills for Austin residents.

Council Member Greg Casar opened the meeting with a new proposition that he had developed with Mayor Steve Adler. His plan would implement a five percent homestead exemption, instead of the proposed six percent exemption. The one percent of “savings” – which amounts to about $700,000 – would be applied to the city’s tenant rental assistance program. That program currently has a budget of $510,000.

At a projected tax rate of $0.4814, the five percent exemption would save the median valued homestead $17 and add $15 to the tax bill of non-homestead properties in the city. At that tax rate, the citywide homestead tax burden would be reduced by an estimated $3.7 million.

“It seemed very clear that we were headed in the direction of a six percent homestead exemption, and I was not shy about expressing some of my concerns with that, especially looking at the numbers next to my district and understanding the needs of so many tenants in our community,” said Casar.

A breakdown of the impact of the proposed six percent exemption shows a large disparity in benefits among districts. For example, while District 10 residents would see a median reduction of $75 and a district total reduction of $1.3 million, District 2 homeowners would see a median reduction of just one dollar. District 4 homeowners would see a median reduction of $8, but the district total reduction would be just $100,000.

While Adler indicated his support for the new five percent plan, it remains unclear whether the majority of Council members will join him.

Council Member Ellen Troxclair, for one, expressed disappointment in the idea, which she said served only to further pit homeowners against renters. She said that a $700,000 increase in the rental assistance program did not need to be tied to a reduction in the homestead exemption, and she would support it being pursued on its own merits.

“I worry that we’re basically providing a false benefit when we’re telling people we are going to initiate a homestead exemption but we are going to add to a renters’ relief fund. If we are going to increase the tax rate to provide for it, that’s not providing them with the full benefit,” said Troxclair.

Council Member Don Zimmerman joined Troxclair in support for a 20 percent homestead exemption.

“We’ve got a decision in this community. We’re either going to continue to expand the size of the city budget explosively, as we have been doing for many years. Or we have to be fiscally conservative (and) draw back on our spending. It’s really a philosophical question,” said Zimmerman. “We either provide tax relief by cutting spending, or we don’t.”

Soon thereafter Zimmerman went on to target money spent on affordable housing and libraries.

Though most of the Council members present indicated support for some kind of homestead exemption, they were less enthusiastic about discussing where potential lost tax revenue would be made up.

At one point, Mayor Pro Tem Kathie Tovo attempted to determine which Council members would support a tax rate increase and which Council members would support budget cuts to help finance an exemption. Though some – like Zimmerman and Troxclair – were clear in their intention to reduce city spending, Adler maintained that the topic was a separate conversation for another day.

“Where that base (tax) rate would be is something this Council will have to decide as we head into September or October, based – again – on all of the programs we want to do and all of the cuts we want to make,” said Adler. “We don’t have to make any cuts for the homestead exemption, because I don’t believe we should make any cuts for the homestead exemption. I see the conversation differently.

“It’s possible that we could do this and still end up with not only a lower tax rate, but also lower taxes,” said Adler.

It’s an important distinction. Though City Council has not raised the tax rate in recent years, skyrocketing home values have meant higher property tax bills for Austinites nonetheless.

Tovo allowed that lower taxes for Austinites may be possible, if Council “identified enough areas within the proposed budget that could be tightened.”

“I’m interested in hearing those suggestions. We have a tremendous amount of work to do between here and September to identify those,” said Tovo, who kicked things off by suggesting that dialing back economic incentives could save the city money.

Troxclair has suggested that the the city look into permanently eliminating positions vacant more than a year. Such a move would save the city an estimated $8.4 million, though as Tovo pointed out, about $4 million of that total comes from currently vacant firefighter positions, which complicates things. Her proposal for a 20 percent exemption lists several more efficiencies, such as a tiered wage increase for city employees.

Council Member Sheri Gallo reiterated her challenge to city departments to save money internally by incentivizing efficiency in city culture.

And Council Member Ann Kitchen took umbrage with the fact that the issue was distilled down to a choice between a homestead exemption and cutting basic city services or raising the tax rate.

“I, personally, don’t feel like that’s necessary,” said Kitchen. “I don’t want to be labelled that way. … But we are getting labelled that way, in the press, and I don’t think that’s fair.”

Photo by “Tax Credits” and available through a Creative Commons 2.0 license

This story has been corrected.

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