Austin Mayor Steve Adler made the pitch Wednesday for a homestead exemption that would knock 6 percent off the taxable value of an Austin home — with the goal of phasing in further relief in future years — but that wouldn’t necessarily mean lower tax bills for homeowners.
City budget writers have projected needing $904 million next year to pay for taxpayer-funded services, such as police, parks and libraries. That would mean charging the typical homeowner $1,052 in city property taxes.
If the Austin City Council created a 6 percent homestead exemption, the owner of a median-valued home worth $221,086 would save $50 on that projected 2016 city tax bill — but would still pay $29 more than this year, when the owner of a median-valued home paid $973 in city taxes.
The council on Wednesday first delved into the details of adopting a homestead exemption, which many council members made a campaign pledge last year. One way to grant tax relief while maintaining city services is by providing a 6 percent homestead exemption, city budget writers said. That would require raising the tax rate to make up for the $5.2 million cost of such an exemption, but not so high that the city runs the risk of triggering an election to reduce the rate.
Under a higher tax rate, other types of properties, such as apartments and commercial offices, would see greater jumps in their city tax bills.
“In this city, the balance between what residences pay and what nonresidences pay has gotten skewed,” Adler said. “So we’re doing two things. We’re raising the rate, but we’re shifting the balance.”
Some council members said they were uncomfortable with the idea of shifting the burden to landlords and commercial property owners.
“If we’re looking at an option that increases the tax rate and shifts the burden, we’re shifting to renters as well,” said Council Member Kathie Tovo, adding that “we have majority renters across the city.”
Adler said he thought the cost passed down to renters would be minimal, around $1.50 a month. City budget writers next week will present information on how a homestead exemption would affect renters and options for phasing in the exemption over multiple years.
Next week the city will also release a list of suggested 5 percent spending cuts in various departments, totaling around $40 million, as options for making up the cost of a homestead exemption.
City budget writers have asked the council to decide whether they want to adopt a homestead exemption — and the amount of the exemption — by June 4. The City Council then amends the budget before passing it in September.
The prior council approved a smaller homestead exemption last year that knocks 0.01 percent, with a minimum of $5,000, off the taxable value of owner-occupied homes. Travis County offers a 20 percent homestead exemption.
Under the 6 percent homestead exemption scenario the mayor favors, the median District 2 homeowner would see the least in savings ($24) while the median District 10 homeowner would see the most ($98), compared with what they would otherwise pay in 2016.
Council Member Greg Casar, who represents District 4, said the difference might not appear that great in the big picture but noted: “It’s only going to 30 percent of people in my district” helped as opposed to other districts that have more homeowners.
Council Member Ellen Troxclair, who represents District 8, later responded, “Compared to zero, compared to nothing, compared to no help that they’re getting now — to me it’s not only 30 percent.”
Troxclair said by lowering property taxes the council could be “removing a barrier for someone being able to afford a home in Austin.”
Adler tried to stave off criticism that a percentage homestead exemption would most benefit affluent residents since they would get more value shaved off their homes. Adler argued wealthier residents are more likely to own business or industrial properties and would pay a higher tax bill under the homestead proposal.
“My gut tells me that if you were to look at the net impact, the real winners in this would be the Districts 1, 2, 3 and 4,” Adler said.
The City Council is also waiting to see whether a bill drafted by state Sen. Kirk Watson, D-Austin, passes, thus allowing cities and counties to enact a flat homestead exemption in future years.
Costly fix to permit backlog
City officials estimate it would take $400,000 to hire temporary workers and pay for overtime to eliminate Austin’s backlog on building and development permits in the next 90 days. Go to City Blog for the details at statesman.com/cityblog.