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


The goal of the swap would be to keep more dollars locally and to send less money back to the state.

Council Members Ellen Troxclair and Jimmy Flannigan said they would fight against the plan, if it’s enacted.

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.

The Austin City Council approved the maximum rate in a 6-4 vote Wednesday, despite Council Members Ellen Troxclair 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.

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

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.

RELATED: Austin school district board approves $1.46 billion budget

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.”

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