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Austin, TravCo leaders brace for state laws targeting revenue, local control

Tuesday, November 27, 2018 by Chad Swiatecki

Austin leaders have started gaming out the budget cuts and possible staffing and service reductions that would come from possible state caps on property tax increases.

At last week’s meeting of the Austin Regional Affordability Committee, city staff briefed a consortium of city, county and education officials on what to expect from the 2019 session of the Texas Legislature, including a proposed plan from Gov. Greg Abbott that could cap yearly property tax increases at 2.5 percent for all taxing entities, with some rare exceptions for public safety and critical infrastructure needs.

While the exact impacts of such a tight revenue cap haven’t been calculated, Deputy Chief Financial Officer Ed Van Eenoo told committee members that a 4 percent cap proposed in the 2017 Legislature would have resulted in a $45 million decrease in city revenue. That’s equivalent to 480 police officer positions or 90 percent of the city’s annual library budget, with annual increases calculated at 3.3 percent.

“Our base cost drivers … just the cost of doing business as normal, wages go up, cost of labor goes up, health insurance cost goes up, workers’ comp cost goes up, just the cost of doing business as normal generally grows about 4 percent per year,” he said. “Then if you want to do new policy initiatives it’s on top of that, but just your basic cost drivers are about 4 percent per year.”

Brie Franco, intergovernmental relations officer for the city, said the property tax caps are one of the most significant legislative priorities focused on local control measures. She said the start of early bill filing this month suggests the Legislature could surpass the more than 2,500 local-focused bills filed in 2017, which exceeded the 1,900 local bills filed in the 2015 session.

Also of concern in the 2019 bills are those intended to grant “super pre-emption” protections against local laws that are perceived to have any negative impact on businesses.

“The amount of legislation they’re filing that’s affecting cities is getting very specific and it’s getting very much into the everyday work,” she said. “We do have a strong anti-city environment still in terms of seeing a lot of legislation that will pre-empt the role of cities. There’s even a concept out there called super pre-emption … there was an attempt last session to pass legislation that would say anything that affected a business interest was pre-empted.”

Less clear is the amount of financial support the state will provide for public schools, which committee members and staff discussed as the largest driver of property tax bills in Austin. That’s due to the state’s recapture policy that removes property tax revenue from the Austin Independent School District.

Van Eenoo said AISD is expected to have to return more money to the state than it keeps from property tax collections, with the district on pace to give back $673 million this year. That number could surpass the $1 billion mark by 2023 if the state doesn’t significantly restructure its financial support for schools.

“People are feeling the pinch of rising property tax bills in the Austin Independent School District area, (and recapture) is what’s driving it,” he said. “In five years, the total tax bill for a median home has gone up $1,893, with 72 percent of that coming from recapture.”

Committee members agreed to have Travis County officials look into placing a flyer breaking down the components and cost drivers for local property taxes into the next round of notices mailed to local property owners.

Terry Mitchell, a member of the board of directors for the Capital Metropolitan Transportation Authority, said local officials need to appeal to state lawmakers to keep revenue caps and other local-focused legislation from eroding basic services at the city and county level.

“The city’s obligations and needs don’t go away, but the revenue is capped so you start seeing fee increases go through the roof,” he said. “Your needs don’t just, you know, don’t go away. So our expectations are our road maintenance would get worse, services would drop.”

Photo by Kumar Appaiah [CC BY-SA 2.0], via Wikimedia Commons.

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