A First Look At The City’s Budget

A First Look At The City’s Budget


What's Inside...

City Council is back from their summer break and that means one thing – it’s time for budget season!

Here’s how the budgeting process at the City of Austin works. First, staff at the city’s Budget Office gather information from city departments and the public on budget priorities. Then, they take all that data and write the first draft our city’s budget for the new year. This process is run by the City Manager, Austin’s highest unelected official.

Earlier this week, the City Manager presented the draft budget to City Council and now, City Council will spend the next several weeks editing and revising it. Public hearings will be held and a new budget will officially go into effect on October 1st. 

During all of these budget talks and negotiations, a term that you will often hear is the General Fund. The General Fund makes up about 25 percent of the city’s total $3.9 billion budget. However, it usually gets the most attention because it’s where a majority of the city’s discretionary spending lies. A bulk of the rest of the money goes toward our city’s two major utilities (Austin Water and Austin Energy), but those revenues usually come from utility bills paid by customers (as opposed to property taxes).

All Funds Budget 2018

All Funds Budget for FY 2018. photo from the City of Austin Budget Office

So what does the proposed budget look like?

This year’s General Fund is just over $1 billion, which is about $59.8 million higher than last year’s budget. That’s a 6 percent increase.

Here’s where that money is being spent:

  • Public Safety (police, fire, EMS) – 66.5 percent
  • Community Services (parks, libraries, animal services, public health, neighborhood housing & community development) – 23.6 percent
  • Development Services/ Planning and Zoning – 6.5 percent
  • Transfers and Other – 3.4 percent
2018 General Fund Budget

Proposed General Fund Budget for FY 2018. photo from the City of Austin’s budget office.

So how much will this cost me?

About 44 percent of the city’s General Fund comes from property taxes. Another 22 percent comes from sales taxes and 15 percent comes from utility transfers. Since our utilities (like Austin Energy and Austin Water) are publicly-owned, their profits go back into our budget to be used for city services.

General Fund Revenue

General Fund Revenue Sources for FY 2018. photo from the City of Austin Budget Office.

The slice of the pie that gets the most attention this time of year is property taxes. The proposed property tax rate for the new budget is 0.4451. That is actually a slight increase from last year’s property tax rate of .4418. However, it is a decrease when compared to FY 2015 (.4809) and FY 2016 (.4589).

But what do these numbers actually mean?

They might look confusing, but essentially they amount to the percentage of your home’s worth that you must pay in taxes to the City of Austin… but it’s only a piece of the puzzle. The taxes you pay to the City of Austin make up about 20 percent of your total property tax bill. More than 55 percent goes to the school district, about 15 percent goes to the county, 5 percent goes to the community college system, and 4.4 percent goes to Central Health.

Average Tax Bill

Proposed Tax Bill for Median-Value Home in FY 2018. photo from the City of Austin’s Budget Office.

The way you calculate your own property tax bill is by adding together the property tax rates of all these different entities (which is estimated for this new fiscal year 2.2189). That’s the percentage value of your house that you have to pay in taxes (minus any available homestead exemptions).

So what does that look like in actual dollars and cents?

According to the city’s budget office, for someone living in a median-valued home in Austin ($305,510) the tax bill next year will be $6,070. That’s a $531 increase over last year. Again, a majority of that increase ($319) is coming from the school district, but the median homeowner will still see a $118 increase in their property taxes from the City of Austin.

When fees and water/electricity rates are added into the equation, the average homeowner will be paying $178 more in taxes, fees, and rates this year. 

City of Austin Rates and Fees

Major Rates and Fees for City of Austin residents. photo from the City of Austin’s Budget Office

An important thing to note – Property taxes in Austin are rising rapidly. There’s no debating that, but it’s not necessarily because all of these government entities are rapidly increasing their tax rates. The only jurisdiction that has proposed a raise in its property tax rate this year is the City of Austin and the increase is fairly small, at .0033. Before this year, the city had actually reduced its property tax rate for three years in a row.

One of the major drivers of rising property taxes is rising property values, which has affected the entire city. If your property is worth more, then even if the property rate technically goes down, you still might end up paying more in taxes.

That’s something the Texas Legislature is trying to do something about right now during their special session. There are bills in both the House and the Senate aimed at capping annual revenue increases that local governments can bring in from property taxes to 6 and 4 percent respectively. Under these bills, an election would be triggered if a local government wanted to raise revenues higher than the set six or four percent cap. This rule would apply regardless of whether taxes are increasing because of rising tax rates or rising property taxes.

Currently in Texas, residents can petition to hold an election for property tax increases of 8 percent or more, but elections aren’t automatically triggered.

Not surprisingly, many members of City Council are opposed to these bills, especially considering the fact that (as the Austin American-Statesman reportsAustin has raised its property tax revenue by nearly 8 percent in seven of the last 10 years.

So how do schools factor into all of this?

In Texas, we have a system called recapture, which means that the state takes a portion of the school property taxes collected in rich school districts and redistributes them to poorer districts. Sometimes this is called “Robin Hood.” Earlier this week, Austin Mayor Steve Adler spoke passionately against this system, saying that it amounts to a state property tax at a time when the state government is blaming local governments for rising taxes.

In particular, he expressed anger at the rise in the amount of money the state has been recapturing from Austin. As the chart below shows, in 2014, the state recaptured $355 from the tax bill of an average homeowner. This year, the state is expected to recapture $1,3978, which is more than the entire City of Austin property tax bill.

Components of a Property Tax Bill

photo from the City of Austin’s Budget Office


“If the legislature wants to do something about increasing property taxes, they need to fix our broken school finance system,” Adler said in his email newsletter. “That’s the only thing, the real thing, that people all over our state want our state legislature to do. And it appears to be the only thing they are not doing this special session.”

Municipalities from across Texas have complained about this “Robin Hood” system, saying that instead, the state needs to increase funding from its own budgets to help out struggling school districts. As the Texas Tribune reports, over the past 10 years the state’s share of the cost of public education has dropped from about 45 percent to about 38 percent.

While also pointing out that she has problems with the state’s school finance system, Austin City Council Member Ellen Troxclair shot back at the mayor’s statements during a Council work session earlier this week. Troxclair, who has been very critical of Council’s spending, called the mayor’s words hypocritical.

“The way that you feel right now is the way that a lot of my constituents feel,” Troxclair said. “They feel that the City of Austin has identified them as so rich that they have extra money to give back to the city, to the tune of an extra $100 just in this year’s budget alone.”

So what comes next?

City Council has only just begun to sink their teeth into this year’s budget, so there will be many more meetings and opportunities for public input. City Council will continue to have budget work sessions throughout the month of August, as well as public hearings on the proposed budget and tax rates on August 17th and August 31st. A new budget is expected to be adopted by September 13th.

FY 2018 Budget Adoption Calendar

FY 2018 Budget Adoption Calendar. photo from the City of Austin’s Budget Office

Even though it might sound complicated, getting involved in the city’s budget process is extremely important. After all, this is your money they’re spending and you should have a say in where it goes. The budget impacts everything from affordability, to parks, to the environment. You can get involved in helping to shape it by attending a public hearing or by reaching out to your City Council member. A list of their contact information is available here.

And if you’d like a deeper dive into the budget, you can read through the entire draft right here.

Meet the Author

Like what you just read? Click below to share.

Share on facebook
Share on twitter
Share on linkedin

Share here!

Share on facebook
Share on twitter
Share on linkedin