Naked City

City Faces Debt, Tax Hikes

As Austin city officials finish totaling up the bill for new, post-Sept. 11 homeland security measures, the City Council will this week consider swallowing hard and agreeing in advance to raise next year's property taxes. That increase would pay for up to $3.57 million in tax anticipation notes, to be issued this year to cover security expenses and declining sales tax revenues. Depending on the state of Austin's tax rolls, next year's tax rate could increase by about one cent.

The sticker price on tax anticipation notes has been steadily dropping since December, when city finance director John Stephens first announced that Austin would end the year about $8 million in the red. Instead of using notes to cover the entire amount, the city will pull $2.4 million from its reserves, issue $800,000 in short-term debt (specifically for public safety equipment) to be reimbursed this fiscal year, maybe with help from the state or federal governments, and make $1.2 million in as-yet-unspecified cuts to other department budgets -- if council approves. An oft-mentioned strategy is to reduce library and park operating hours.

Perhaps to its credit, council -- not the usually more parsimonious city management team -- was the first to suggest spending cuts instead of borrowing to cover the entire shortfall. That's because next year's budget looks to be ugly enough, without the council's already having committed to take next year's tax rate perilously close to the level where the public could demand a rollback. At the present rate of growth, city expenditures should outpace revenue by up to $150 million over the next four fiscal years.

The problem facing the council is that most of this growth would be in public safety- and public health spending -- exactly the areas that are most difficult politically to cut, and exactly where spending is ballooning post-Sept. 11. The city estimates its bill for new police, fire, EMS, and health spending since the WTC attacks at $19.5 million -- for everything from gas masks and bomb-sniffing dogs, to new police officers and firefighters, to $8.8 million in security equipment for Austin's power- and water plants. Indeed, the utilities are paying for the lion's share -- $14.3 million -- of the homeland-security tab.

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