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Council moves toward tax swap with AISD

Thursday, August 10, 2017 by Jo Clifton

In an effort to help the Austin Independent School District lower its tax rate and send fewer dollars to the state under the so-called Robin Hood plan, City Council voted 6-4 Wednesday to begin consideration of raising the city’s property tax rate to 46.51 cents per $100.

That’s two cents higher than the current rollback rate of 44.51 cents and an increase of more than 14 percent over this year.

Council members Ellen Troxclair, Jimmy Flannigan, Delia Garza and Ora Houston voted no. Council Member Pio Renteria was in Arkansas at a labor conference, according to his staff.

Mayor Steve Adler has been an enthusiastic champion of the idea of what is essentially a tax swap with AISD. Mayor Pro Tem Kathie Tovo and Council Member Greg Casar also offered enthusiastic support for the idea. Council members Ann Kitchen, Leslie Pool and Alison Alter voted yes, but emphasized that they were not certain that they would support the tax swap in September when Council has to actually take that vote.

If Council and the AISD Board of Trustees vote to do the interlocal agreement for a tax swap and Council raises the tax rate above the rollback rate, it would take about 38,000 signatures of registered voters to trigger a rollback election, according to City Clerk Jannette Goodall. That election would likely happen next March, according to a timeline laid out by Deputy Chief Financial Officer Ed Van Eenoo.

Van Eenoo laid out three different scenarios. In the first scenario, the typical city of Austin/AISD homeowner would save about $30 a year. The typical Austin homeowner outside of AISD would pay about $23 more per year. In the second scenario, the typical Austin/AISD homeowner would save a little more than $21 per year but outside of AISD, the typical homeowner would pay nearly $32 more. In the third scenario, the typical Austin/AISD homeowner would save less than four dollars per year, and the typical homeowner outside of AISD would pay more than $49 per year.

Troxclair proclaimed that she would be the first in line to sign a rollback election petition. Flannigan, whose district includes a majority of voters outside of AISD, said jokingly that he would fight with Troxclair for leadership of a rollback group. Troxclair, the lone conservative on Council, later told the Austin Monitor that she would just be happy to have someone help with the effort.

Kitchen said, “This is a really hard one for me,” indicating that she was, “worried about seniors. So if we can’t find a solution that holds those seniors harmless, I will not be voting for this in the end.”

Following the vote, Alter released a statement that read: “I voted today to explore further whether we can save taxpayers and school districts money and provide more services to students. I don’t know if that is possible yet in a way that I am comfortable. I voted today to allow us to gather more information, refine the options and to give the public time to participate in the process.”

According to a 2016 memo Van Eenoo sent to Council, “Chapters 41 and 42 of the Texas Education Code establish a system of school financing whereby a portion of the property tax revenues collected in ‘property‐rich’ school districts is ‘recaptured’ by the state for redistribution to ‘property‐poor’ districts. Among all Texas school districts defined as property‐rich under Chapter 41, the Austin Independent School District (AISD) is the single largest payer of recapture. In FY 2015, AISD’s recapture payment to the state was $181.1 million, roughly 12% of the state‐wide total of $1.5 billion collected that year.”

Van Eenoo said Wednesday that AISD’s recapture payment for Fiscal Year 2015-16 was $266.1 million, and grew to $405.3 million for 2017. That amount is projected to be more than $537 million next year, he said.

The first scenario Van Eenoo presented would raise the city’s tax rate by less than a penny above the rollback rate, the second would raise the tax rate by 1.13 cents above the rollback rate and the third would raise the tax rate by 1.76 cents above the rollback rate. If Council chooses one of those options, the city would hold on to the money until next spring when AISD sets its new tax rate and budget. If the district did not follow through on its agreement with the city, AISD would not get the money.

As the state takes more and more money because of quirks in the state formula, increased property values and fewer AISD students, the district retains a smaller portion of the taxes it collects each year.

The city and AISD are facing two specific problems if they decide to go ahead with the tax swap. First, the city must decide how much to raise the homestead exemption for senior citizens to balance the fact that AISD freezes taxes for people over 65, as well as the disabled. When AISD’s tax rate goes down it does not help people whose taxes are frozen, especially the most elderly property owners, because their taxes were frozen when their tax bills were lower.

The second problem is that the city of Austin covers seven different school districts, even though most city residents live within AISD.

For example, Flannigan, who represents District 6, said 80 percent of the taxpayers in his district live outside AISD. Many taxpayers within Garza’s District 2 live within Del Valle ISD.

Council Member Houston told the Monitor that she has students and property owners in her District 1 from Del Valle, Manor and Pflugerville, as well as AISD. Houston complained that “so much information had to be understood in a very short period of time and that’s not helpful.”

After the meeting, Adler said the matter has been discussed several times, including during a joint public meeting with Council and the school board. In addition, he noted that Council passed a resolution in 2015 initiating a study of a tax swap with AISD.

Tovo asked Van Eenoo to make sure that the subject is on next Wednesday’s budget work session agenda also.

Van Eenoo said staff had many conversations with officials at AISD, and Council had a joint meeting with the AISD board to discuss the matter earlier this year. Garza asked Van Eenoo whether they had talked to the other districts, whose taxpayers will have to have some compensation to make up for the added tax burden of increased city taxes.

One way that the city could eliminate questions about fairness to senior citizens and the disabled is by enacting a tax freeze for those people. When asked, Adler said he did not know how much that would cost. However, he said he would not want to freeze the taxes on $1 million and $2 million homes.

State law required Council to set the maximum tax rate on Wednesday. Council had to vote before noon, the mayor said, in order to meet a newspaper deadline to advertise the possible tax rate, even if they end up adding a lower rate. Meanwhile, the Texas Senate has approved a bill that would limit property tax increases for cities and counties to 4 percent. The Texas House of Representatives is set to debate a bill on Saturday that would set the rollback rate at 6 percent. In both pieces of legislation, if the city or county exceeded the rollback rate, there would automatically be an election. If such a measure is approved, it would not take effect until next year and would presumably have no impact on the FY 2017-18 budget.

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