City Budget: First Forecast

It's still very early in the city's budget process, but last Wednesday, April 22, city budget staff presented to City Council the city's five-year financial forecast, with an emphasis on the anticipated budget for Fiscal Year 2016 (beginning Oct. 1). The staff presentation was preceded by economic consultant Jon Hockenyos' generally upbeat report, slightly less so than recent years if only because Austin's recent economic performance has been so positive – there's some cyclical presumption that the good times can't last forever. The five-year budget forecast echoed Hockenyos' report specifically for city finances in more bureaucratic terms, noting, "Continued structural financial stability is forecasted through FY 2019-20."

That doesn't mean everything remains the same: Austin continues to grow rapidly, property values continue to rise just as quickly, and the city's structural "cost drivers" – staff growth, wages, health care, other expenses – put pressure on the city's revenues, primarily from property and sales taxes, supplemented by utility income. Although these are very preliminary numbers, the budget staff estimates the median home value will rise to $221,086 (from $202,254, or up roughly 9%), and the property tax rate estimates are based on that median value home. For its initial forecast, staff is estimating a property tax rate of 47.59 cents per $100 assessed value; presuming Council eventually concurs, that would be a half-cent lower than FY 2015, but would mean (for the median homeowner) a $6.63 per month increase ($79.56 annual). Utility and other fees are also expected to rise, giving a combined property tax and fee increase of $18.11 per month, or $217.32 a year (see box).

Property taxes represent about 42% of the city's revenues; staff is also expecting sales tax income (23% of revenues) to rise 5% over FY 2015.

Again, all these numbers are forecast estimates – the final budgeted numbers will depend not only on the city's overall economic performance, but also on the ultimate decisions of Council in response to staff recommendations and public input. Those factors are more volatile than in recent years: The new 10-1 Council will be grappling with its first budget, and some members support a 20% homestead exemption on property taxes (roughly a 4% revenue cut, if implemented immediately), and at least a couple have endorsed an "effective" tax rate only (a rate equivalent to last year's income, plus new construction). Any new Council initiatives that would increase costs (e.g., on traffic or permitting) are not yet included in these forecasts.

Finally, it's important to remember that the city's property tax represents only about 22% of the property owner's tax bill; these forecast numbers do not include other jurisdictions (AISD, Travis County, Central Health), and those numbers are yet to be determined.

What happens next? Council gave some preliminary feedback to budget staff last week, and are beginning to post questions on the budget web site. Next week, Wednesday, May 6, Council will hold another work session on the forecast. May and June are devoted to "stakeholder engagement" – city outreach to the public, and board and commission review of specific budget areas – and the staff recommendation on the homestead exemption will also come due (the state deadline for that decision is June 30).

Through June 5, Austinites can request a "Budget in a Box" – designed to facilitate discussion and response on budget priorities by small or large community groups. It includes "a literature mailer box, instructions, a DVD of the Budget Basics video, discussion materials, and comment cards," with the results of the exercise submitted to the city. Request one at www.austintexas.gov/budgetbox.

On this page are additional breakouts of the major budget numbers, the city's cost drivers, and budget decision timeline. Look for further budget reporting in the Chronicle's News section as well as Daily News online.