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Council wants justice for state’s actions

Wednesday, June 19, 2019 by Ryan Thornton

Caught in the wake of the 86th Texas Legislative session, City Council members are directing attention to the state leaders they say have intentionally pitted city governments against their constituents.

In a briefing with Council on Tuesday, Brie Franco, intergovernmental relations officer, offered a sobering glimpse into the future with the property tax rollback rate 3.5 percent cap taking effect at the start of 2020.

Between the tax caps and a bill that says the city may only collect the greater of telecommunications and cable franchise right of way fees when companies provide both services, Franco said the financial impact could be abrupt.

Effective Sept. 1, city staffers predict not having power to charge cable companies for both uses of right of way will cost $4 million in revenue from Fiscal Year 2020 and $5.6 million each following year.

If the city is held at a 3.5 percent increase, city staff predicts the combined result of the two bills would lead to a $15 million deficit in Fiscal Year 2021 that would grow to $51 million by Fiscal Year 2024.

According to Brandon Aghamalian, a lobbyist with Focused Advocacy, there are essentially two ways to get around that 3.5 percent cap. The first is to hold an election approving a higher rate, and the second is to stay below that limit for a few years to make room for a larger increase in the fourth year.

By keeping under the cap and adopting the current tax rate for three years, Aghamalian said, the city could have the option to increase the rate by 10.5 percent the following year. Alternatively, smaller yearly increases like 2 or 3 percent would give the city a small buffer for the future while still increasing tax revenue.

Council Member Jimmy Flannigan said the banking solution doesn’t really make sense for Austin given the city’s need for funds. Since the tax increases are based on a percentage of the previous year’s rate, he said, the city would end up with less revenue by banking for a big increase in the future than by steadily increasing the rate each year.

While the banking provision may be of little help, Council has expressed strong interest in holding elections to go beyond the 3.5 limit in future budget cycles. Ed Van Eenoo, deputy chief financial officer, said the city will have to make schedule adjustments in order to consider elections as part of the annual budgeting process.

“We’re going to have to bring the budget process up forward, at least a month, and then maybe even further,” Van Eenoo said. “It’s just going to be a different budget cycle in the future.”

Council Member Leslie Pool said the city could consider pushing Council’s annual July break forward to June in order to give staff extra time to focus on the upcoming fiscal year budget.

Council also discussed rethinking the homestead exemption policy as another way to deal with the changes. Though the state had previously limited the city’s ability to reduce its homestead exemption rates, Aghamalian said that will no longer be the case in Fiscal Year 2020.

“This was all the remnant of the Legislature’s 2013 failed effort to address property taxes and the fake narrative that cities would eat up the fake tax relief that they didn’t provide in 2013 by lowering your homestead exemptions,” Aghamalian said. “And so they handcuffed us for five years … but that ill-fated law will expire.”

Council Member Kathie Tovo noted the unfortunate reality that the state’s property tax relief bill could encourage the city to take a fresh look at its homestead exemption policy to help make up for the lost revenue.

Mayor Pro Tem Delia Garza said she would like to see state leaders face consequences for their harmful actions in the coming years.

“Hopefully there’s a point where our leadership is held accountable for, frankly, the hypocrisy of some of the arguments they make on why they’re doing certain things and the reality that these revenue caps are going to affect our city in such a major way when we are continuously being asked to provide more,” she said. “I hope in this interim we can really rally, and frankly, change the makeup of our Legislature.”

Council Member Greg Casar added that while the community fights for political change it will be important to keep the intergovernmental relations team in the conversation to remind the public how we arrived at this point.

“I think it will be really important as there’s genuine debate in the community that we not tear each other up when it was really somebody else that put us in that situation, because we’re going to have those really hard conversations and we’re going to debate vigorously how to survive and keep Austin Austin and keep standing up for our values,” Casar said.

Aghamalian added that the stakeholders who benefited from some of the Legislature’s actions also share the blame for the current situation.

“It is wrong that the cable industry, with all of their resources and community outreach ability that they had, never once picked up a phone and called a single mayor or city manager of Texas ahead of session and said, ‘I need to come talk to you about something that’s going to directly impact your budget and your ability to provide services for your constituents and we’re going to be pushing that this Legislature,’” he said.

Tovo noted, however, that the state’s aim at cities this session goes beyond the tax cap and cable franchise fee bills. Responding to a list of six bills that will have a particularly negative impact on cities, she requested the names of individuals and organizations that were behind the handful of bills that were “direct attacks at Austin.”

Photo by Roger Heslop [CC BY 3.0], via Wikimedia Commons.

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