Austin Property Taxes May Increase

The Austin City Council heard a presentation on Wednesday, April 20 outlining a potential property tax rate increase, according to a story in today’s Austin American-Statesman. The financial forecast predicts a shortfall of around $27 million between revenue collected and expenses paid for 2011-2012. To maintain a balanced budget, the only options are to increase revenues, cut costs, or some combination of the two.

The next steps in the process include:
• A financial forecast for Austin’s utilities (Austin Energy and Austin Water) will be presented next week.
• City departments will suggest possible cuts to services and jobs in the next few weeks.
• Residents can offer their input at public meetings in the spring and summer.
• City Manager, Marc Ott, will present a proposed budget and tax rate in July.
• Austin City Council approves a final budget in September.

The current tax rate is set at 45.71 cents per $100 of property value.
The city could increase the rate up to 48.76 cents per $100 of property value without triggering an election to seek citizen approval.

 To read the full Austin American-Statesman article, click here.

UNDERSTANDING PROPERTY TAXES

The article in the Statesman points to a $27 million predicted budget shortfall. To put that into perspective, we studied the City of Austin 2010-2011 final fiscal budget to see how that amount compares to the overall revenue of the city and how it might impact services and costs.

The fiscal year 2010-2011 budget called for revenue of $650.2 million for the general fund.  Therefore, the $27 million potential shortfall represents roughly 4% of last year’s revenues. Since revenue is derived from only four sources, it is easy to see how this amount impacts the revenue bucket for property tax collections. Out of the $650.2 million indicated in last year’s budget, 38% or $247.6 million came from property tax collections. The rest of the revenue collected came from Sales Taxes (23%), Utility Transfers (21%), and Other Revenue (18%).

City of Austin, FY 2010-2011 budget

With such a large pool of revenue to work with, one might assume that cutting $27 million would be easy and should be considered before raising taxes. The truth is, cutting $27 million is a substantial challenge, but city officials have promised to look at other options before raising property taxes. The difficulty in cutting 4% from the budget is one of prioritization.

Here are the major cost buckets that the general fund covers:
• Police – $250.8 million
• Fire – $126.2 million
• Emergency Medical – $46.2 million
• Parks and Rec – $43.5 million
• Library – $25.9 million
• Health and Human Services – $25.7 million
• Planning and Development – $21.2 million
• Social Services – $13.9 million
• Municipal Court – $12.3 million

When the budget is broken down into these major buckets, it is clear that cutting $27 million would be devastating to some departments. Few citizens support cutting police or fire, especially as our population is increasing, so the $27 million shortfall becomes even more difficult to bridge using cuts alone. Given the amount of the predicted shortfall, the city will most likely increase property taxes to cover at least a portion of the gap.

As a citizen of Austin, now is the time to express your views and opinions about the next fiscal budget. Contact your city council representatives with your ideas about how to overcome the $27 million proposed gap. Attend the public sessions to show your support or opposition to various proposals that will be discussed. Invite out-of-town guests to come visit Austin to increase our sales tax revenues. These are but a few of the things you can do to impact the budgetary decisions that are on the horizon. Stay informed and speak out in support of the solutions you think are best for the City of Austin.

As a mortgage banking company, Mission Mortgage strives to stay informed on city-level decisions that may impact the real estate industry. Increasing property taxes may lead to decreased sales, depending upon the size of the increase and the performance of the overall economy. However, we also understand that Austin must meet certain service obligations and we want our city to continue to provide adequate resources for the various departments who impact the quality of life we enjoy here. We will continue to monitor the budget process and will share relevant information with you as it becomes available. Let us know your thoughts about the proposed property tax increase by emailing us at info@missionmortgage.com

To learn more about the budget process, visit the City of Austin website by clicking here.
To read volume 1 of the 2010-2011 City of Austin budget, click here.
To read volume 2 of the 2010-2011 City of Austin budget, click here.

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About missionmortgage

A full-service professional mortgage banker providing lending in Texas for over 25 years. Our main office is located at 901 S. Mopac Expwy, Barton Oaks V- Suite 120, Austin, TX 78746 with branches in Lakeway, Houston, and Sealy. Mission Mortgage has been ranked as a Top 10 Mortgage Company in Austin for the past 7 years (Austin Business Journal).
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