Property Tax Time

Choosing a reasonable rate

Currently making up nearly 40% of General Fund revenues, property tax is by far the largest contributor to the city's bottom line. It's more dependable than sales tax (which is rapidly subject to fluctuating economic growth and "consumer confidence") and utility transfers (slowly but steadily declining as the utilities try to reconcile their business models with an emphasis on conservation). However, the annual tax increase that's been a hallmark of recent budgets has begun to impact more homeowners, as economic growth, exacerbated by a slowdown in commercial development, hasn't yet returned Austin to precrash prosperity.

The property tax rate can't be finalized yet, as it is dependent upon the Travis Central Appraisal District's certification of the tax rolls (which, in a poor economy, has already seen an upswing of formal protests, delaying the rolls until late summer). However, as is customary, the city provides a tentative projection of three potential rates to guide the budget planning.

The budget discussion is ordinarily based upon three different rates: 1) the effective rate: calculated to bring in the same overall amount as last year; 2) the nominal rate: the same rate as the previous year which, dependent on growth and property valuations, can bring back more or less revenue than the previous year; and 3) the rollback rate, an 8% increase to the operations and maintenance portion of the tax rate and the highest increase allowed under state law without a special (rollback) election.

However, this year, the projected 5% dip in assessed property valuation is wreaking havoc on growth-predicated numbers. Remaining at the current rate of 42.09 cents per $100 valuation – the nominal rate – would this year mean a projected loss of $16.6 million. To garner the same overall amount as last year would require an increase to 44.97 cents, while the rollback rate sits at 47.21 cents.

While the rollback rate hews closer to expenditures (see graph in "Hitting the Budget Barbells"), the city still projects an $11.4 million shortfall from its anticipated budget needs.

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