Adler drops pitch for city tax swap with Austin schools

6:38 p.m Friday, Aug. 25, 2017 Local
Austin Mayor Steve Adler, shown at a press conference last week, announced Friday he was dropping his proposal for a tax swap between the city and Austin schools. Nick Wagner / AMERICAN-STATESMAN

Mayor Steve Adler will not pursue a tax swap with the Austin school district this year after all, but maybe next year, the mayor said Friday in a post on the City Council’s message board.

“The message I’m getting from the community is that the tax swap concept is not ready yet, but I’d like to continue the conversation and see if we can get it ready for next year,” Adler wrote.

The proposal would have had Austin raise its taxes to increase revenue 14.4 percent — high enough to trigger an election — while the school district lowered its taxes, and the city would pay for some school district functions. The ultimate goal was to save taxpayers money overall by avoiding collecting a portion of school district taxes that go to the state of Texas.

BACKGROUND: Austin tax rate may mean election as city mulls school district swap

“If the Legislature continues to fail in fixing the school finance system, … more and more cities are going to try to do what they can on their own,” Adler wrote Friday. “Even though there’s still more work that needs to be done and (the tax swap) is not ready for this budget, I am optimistic that we can solve some of its remaining challenges over time.”

Adler now doesn’t expect to set the city tax rate above the rollback rate, the highest it can set the rate without triggering a possible election, his spokesman said Friday. The proposed city budget would bring in about 8 percent more revenue than this past year.

Austin school district leaders said they will continue to work with the city to determine whether a tax swap is feasible for 2019.

“We’d like to keep it alive for next year to find some kind of relief,” said Kendall Pace, the district’s school board president.

The city and school district were exploring the idea of a tax swap, first conceived while Adler was on the campaign trail, to offer relief to taxpayers in the Austin school district. The state’s complex education funding formula has long required the Austin district, which has high property values, to give millions in property tax revenue to help fund school systems in property-poor areas across Texas. The higher the district’s property values, the greater the percentage of it that goes to the state.

RELATED: City, Austin school board look to save millions with tax swap plan

This year, the average Austin homeowner’s school tax bill is expected to exceed $4,000, and more than $1,700 of that will go toward so-called recapture for property-poor districts.

The Austin district is the largest payer of such recapture in the state, and is expected to pay $534 million in recapture this year.

An initial analysis by city staff in April 2016 showed a limited tax swap was feasible but raised multiple concerns, including the possibility that some property owners could pay more in taxes.

The school board for the Del Valle district, which falls in Austin’s city limits, has already voiced opposition against such a swap. Some trustees in the Leander district, which also sits partly within the city, last week expressed concern but decided to see what the city proposes before determining whether to take a position.

Jason Stanford, Adler’s spokesman, said opposition from City Council members whose districts included non-Austin school district areas played a role in the decision to not move forward on the tax swap this year. Council Members Jimmy Flannigan and Ellen Troxclair vowed to lead a citywide fight against the plan, and Council Members Ora Houston and Delia Garza also opposed Adler’s idea.

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“The biggest thing we couldn’t solve was Austinites who don’t live in AISD, how do we solve for that, and seniors — raising the senior/disabled exemption only partially solved the problem,” Stanford said. “The budget’s coming up now and we don’t have the answers, so we can’t push this forward. We’re going to try to see if we can figure out the answers.”

Superintendent Paul Cruz said the school district will continue to seek ways to offset the recapture payments and find relief for taxpayers.

“We appreciate the city of Austin in its efforts to come up with unique solutions to address taxpayer issues in Austin,” he said. “We will continue working with the city and other stakeholders to make meaningful progress in regard to recapture.”

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