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Homestead exemption unlikely to change

Friday, April 28, 2017 by Jo Clifton

After hours of budget presentations and discussions Wednesday, City Council took up the always controversial issue of homestead exemptions. They have heard for several months that this year’s budget will be tight, leaving no room for additions without corresponding subtractions.

Council’s lone conservative, Council Member Ellen Troxclair, found herself without allies in arguing that Council has made a commitment to the community to add to the current 8 percent homestead exemption.

Council Member Leslie Pool disagreed about that commitment and pretty unequivocally said she expects to oppose adding to the exemption this year. Without a yes vote from Pool, it seems unlikely that an increased exemption could win Council approval.

Last year, the vote to raise the homestead exemption was 6-5, with Pool voting in favor. Those voting against included the four representatives of East Austin districts, Council members Ora Houston, Delia Garza, Pio Renteria and Greg Casar, as well as Mayor Pro Tem Kathie Tovo.

In 2015, the vote was 7-4, with Renteria the only east side Council member to support that initial exemption.

Deputy Chief Financial Officer Ed Van Eenoo told Council Wednesday that adding 1 percent to the homestead exemption would mean reducing General Fund collections by $1.6 million if Council goes to the rollback rate, the maximum amount they can increase taxes.

A 1 percent reduction would save the typical homeowner $11.66 on a home valued at a little more than $269,000, Van Eenoo said. Likewise, setting the exemption at 10 percent, which would be a 2 percent increase in the homestead exemption, would result in a $23.61 tax reduction for the homeowner and cost the General Fund about $3.3 million.

In the initial ordinance passed in 2015, Council alluded to its desire to reach a 20 percent exemption over four years. Since Council only raised that exemption by 2 percent last year, Van Eenoo said, if they wanted to reach 20 percent within four years they would need to look at a 6 percent increase both this year and next year.

Pool said, “I know that that was said back in ’14 when all of us were running the first time. … I said I supported a 20 percent homestead exemption over a period of time but I wasn’t willing to put a time line on it because we just don’t know what our budgets are going to look like. This year is a really good example of why saying it has to be done over X number of years is really not very good sound public policy.” She said she did not remember putting four years into an ordinance and asked Van Eenoo whether Council had done so.

The answer was yes. He said the ordinance passed in 2016 talked about Council’s goal to reach 20 percent over four years.

Pool replied that it was “aspirational,” not locked in, and Mayor Steve Adler nodded in agreement. She said, “I just want to make that really clear because we’re setting expectations one more time that we may not be able to meet.”

Pool noted that she had met with Austin Interfaith, which opposes adding to the homestead exemption, and had told them she did not see how Council could add to that exemption this year. “Maybe we’ll find a way forward,” she said, but under state law Council only has until the end of June to change the homestead exemption. “So I just wanted to signal pretty clearly,” Pool said, that raising the homestead exemption to 20 percent was purely aspirational. She also expressed “serious reservations that we can add to it this year.”

Troxclair said, “I’ve been a supporter of the homestead exemption ever since I ran for office. It’s not a commitment, it’s not binding, because we can’t bind ourselves to making appropriations for the next budget cycle. However, I did think it was a big signal to the community and to the average taxpayer that we were listening to them and that we were committing to them that we were going to get this done.”

If Council did want to raise the exemption to 20 percent within four years, they would have to consider raising the exemption by 6 percent this year and 6 percent next year.

According to Van Eenoo’s calculations, raising the exemption by 6 percent this year would bring the total homestead exemption to 14 percent and cost the general fund an estimated $10.1 million, with the impact calculated at the rollback rate, he said. The annual savings for the homeowner and the median-priced house would be about $72.

Council members Renteria and Casar were not present for the homestead exemption discussion. Houston and Council Member Jimmy Flannigan said nothing, while Garza argued that it had been a mistake to raise the exemption in the past and would be a mistake to add to it now.

On Thursday, Renteria told the Austin Monitor he would not support increasing the homestead exemption this year. “There’s too much need here in Austin,” he said. “I would like to figure a way of saving money, but the way things are looking now, with the high overtime rate we’re experiencing with the firefighters and police – there’s a lot of money being spent that wasn’t budgeted. And unless we hire more police officers and firefighters … we’re going to still be in the same boat, and I don’t think we’re going to be able to afford continuing to pay that kind of overtime.”

The city has been under a mandate from the Department of Justice for several years because of past discrimination in hiring and has had considerable difficulty hiring and training new firefighters.

Renteria said the city still needs to add to its fire stations, which carry a hefty price tag, and he is hopeful that the city might come up with a new way of funding those stations.

He added, “We’re looking for solutions but it’s going to be down the road before we can catch up.” Renteria said he remains committed to increasing the city’s affordable housing stock and taking care of city employees. In order to meet commitments the city has already made, he said, he expects to vote for a tax increase up to the rollback rate of 8 percent above what was collected for this year.

Council Member Ann Kitchen did not weigh in on the general homestead exemption, but asked Van Eenoo about the exemption for people 65 years and older. Currently, that exemption is set at $82,500. In the past, Council has said they would like to set that number at $85,000.

Unlike the general homestead exemption, which must be determined before July 1, Council can make decisions about the senior exemption when they do the budget, according to Interim City Manager Elaine Hart. With Kitchen presumably supporting an increase in that exemption, it seems likely that Council will discuss that matter in August or September.

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