Prop­erty tax pro­posal may spark elec­tion

Crit­ics vow to fight rate hike that could fa­cil­i­tate school district tax swap.

Austin American-Statesman - - FRONT PAGE - By El­iz­a­beth Fin­dell efind­ell@states­man.com

Austin will con­sider a max­i­mum tax rate of 46.5 cents per $100 of prop­erty value — a 14.4 per­cent rev­enue in­crease that could trig­ger an elec­tion — to fa­cil­i­tate a pos­si­ble tax swap with the Austin school district.

T he Austin City Coun­cil ap­proved the max­i­mum rate in a 6-4 vote Wed­nes­day, de­spite Coun­cil Mem­bers Ellen Trox- clair and Jimmy Flan­ni­gan say­ing they in­tend to lead a city­wide fight against it. Coun­cil Mem­bers Ora Hous­ton and Delia Garza also voted against the rate, and Sabino “Pio” Ren­te­ria was ab­sent.

Post­ing that rate now doesn’t com­mit Austin to adopt­ing it, but al­lows it as the high­est op­tion for

fis­cal 2018, which begins Oct. 1, while city lead­ers spend the next month mulling whether a tax swap with the school district could help lower area taxes over­all.

Such a swap would in­volve the city rais­ing its taxes, the school district low­er­ing its taxes and the city tak­ing over pay­ing for some school district func­tions. The goal would be to keep more dol­lars lo­cally and to send less money in school district taxes back to the state to help fund schools in prop­erty-poor ar­eas.

“Part of be­ing cre­ative and in­no­va­tive is that we con­sider new ideas,” Mayor Steve Adler said.

The move, long dis­cussed in the­ory, comes amid grow­ing frus­tra­tion in Austin with the por­tion of the school district taxes sent back to the state, a process known as re­cap­ture. Four years ago, re­cap­ture made up $355, or 7.6 per­cent, of the av­er­age Aus­ti­nite’s tax bill. Next year, it is ex­pected to make up $1,378, or 22.7 per­cent — greater than the city of Austin’s en­tire por­tion of the tax bill was pro­jected to be, be­fore Wed­nes­day’s vote.

Of the 1,200 Texas school dis­tricts, Austin is the largest payer of re­cap­ture to the state, largely be­cause of boom­ing prop­erty val­ues cou­pled with de­creased school en­roll­ment. By 2019, more than half of ev­ery dol­lar col­lected by the district is ex­pected to go to the state.

Adding to the city’s con­cerns is the rhetoric of state law­mak­ers, who have de­cried city tax in­creases and are seek­ing in the Leg­is­la­ture’s spe­cial ses­sion to limit them.

If ap­proved, the tax swap would be full of com­pli­ca­tions. The city would have to per­suade res­i­dents to ap­prove a tax in­crease when they wouldn’t see im­me­di­ately see the de­crease on the school district side. Six other school dis­tricts in­clude parts of Austin’s city lim­its, and it’s un­clear whether res­i­dents in those ar­eas would see a ben­e­fit or just a higher bill. The city would have to find a way to bal­ance the deal for se­nior and dis­abled res­i­dents, whose school district taxes are frozen.

The city can’t legally write the Austin school district a check for ed­u­ca­tion, un­der state law. But it can pay for ser­vices such as af­ter-school pro­grams, so­cial ser­vices and se­cu­rity.

Dur­ing a coun­cil brief­ing Wed­nes­day, city Deputy Chief Fi­nan­cial Of­fi­cer Ed Van Eenoo out­lined a few op­tions. In one, the city would con­tract with the school district to pro­vide $11.2 mil­lion of ser­vices, al­low­ing the district to elim­i­nate the por­tion of its tax rate above $1.06 that re­mits the high­est per­cent­age to re­cap­ture. The tax changes would save an av­er­age home­owner within the Austin school district $29.81 but would cost an Austin home­owner in an­other school district $23.48 more and cost an av­er­age se­nior $15.90 more.

Un­der an­other sce­nario, the city would con­tract with the Austin school district to pro­vide $17.5 mil­lion of ser­vices and in­crease the se­nior/ dis­abled home­stead ex­emp­tion to com­pen­sate. In that case, the typ­i­cal home­owner within the school district would save $3.83 and the typ­i­cal se­nior would save $12.77. But the typ­i­cal Austin home­owner in an­other school district would pay $49.47 more.

Some Austin school district of­fi­cials said they were caught off-guard by Wed­nes­day’s pro­posal be­cause the tax swap is­sue hadn’t been dis­cussed re­cently, and they ques­tioned whether the tim­ing was right.

“I have not seen or heard any­thing about what’s in it. It’s news to me,” school board Pres­i­dent Kendall Pace said. “I’m dis­ap­pointed I don’t know any de­tails. But I look for­ward to the part­ner­ship with the city and value their fi­nan­cial sup­port.”

Adler said city staffers talked to district Su­per­in­ten­dent Paul Cruz on Tues­day.

“We are now at a point where com­mit­ments are needed by both en­ti­ties in or­der to move this con­cept for­ward,” said Cruz, not­ing that the district be­gan ex­plor­ing the con­cept with the city nearly two years ago. “To­day’s dis­cus­sion keeps the door open to con­sider al­ter­na­tives to re­duce the amount of lo­cal taxes be­ing sent to the state.”

Be­cause cities are re­quired to pub­licly ad­ver­tise the high­est their tax rate may be, coun­cil mem­bers found them­selves un­der the gun Wed­nes­day to make a de­ci­sion in time to get a pub­lic no­tice ad printed in the Amer­i­can-States­man. If the higher rate is adopted, be­cause it is above the 8 per­cent roll­back rate, res­i­dents could de­mand an elec­tion to over­turn it with a pe­ti­tion of 7 per­cent of reg­is­tered vot­ers, or about 38,000 peo­ple.

“I will be ab­so­lutely the first per­son to sign a pe­ti­tion for that elec­tion,” Trox­clair said.

Flan­ni­gan, whose district has about 80 per­cent of its res­i­dents not in the Austin school district, called the pro­posal “mas­sively prob­lem­atic.”

“We’ll be fight­ing for lead­er­ship on this,” he told Trox­clair of the op­po­si­tion ef­fort. “I would be out block-walk­ing my district to get sig­na­tures to op­pose this. This is not our prob­lem to solve.”

If adopted, the higher tax rate would be the first time the city has raised taxes above the roll­back rate since it was in­sti­tuted in the 1970s, Van Eenoo said. He noted it would raise the base from which the city could raise taxes each year there­after, but the coun­cil would al­ways have the op­tion to lower taxes.

“Has that ever hap­pened in your life­time?” Hous­ton asked of low­er­ing taxes.

The city has de­creased the rate twice since 1991, most re­cently with a less than 1 per­cent de­crease in 2003.

Adler and other coun­cil mem­bers em­pha­sized they weren’t nec­es­sar­ily vot­ing to set the higher tax rate or ap­prove the swap, just to al­low them­selves the op­tion of con­sid­er­ing it.

“At the end of the day, this will either save tax­pay­ers money, or it won’t,” Adler said. “And if it won’t, we’re not go­ing to do it.”

Mayor Steve Adler calls tax swap idea “part of be­ing cre­ative and in­no­va­tive.”

STEPHEN SPILLMAN / FOR AMERICANSTATESMAN

Austin City Coun­cil Mem­ber Ellen Trox­clair op­poses a plan for a max­i­mum tax rate of 46.5 cents per $100 of prop­erty value.

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