Austin property tax trends between 2000-2012.
The property tax bill for a typical Austin home rose 38 percent between 2000 and 2010, adjusting for inflation, while the median income remained stagnant, an American-Statesman analysis has found.
For an average-value home, the bill was $5,590 in 2010, up from $4,053 a decade earlier, using 2010 real dollars, according to figures provided by the Travis County tax office. The figures also account for the tax exemptions and appraisal caps granted to most homeowners.
The data bolster a complaint that seems to be getting louder and that was a rallying cry for critics during the spring City Council campaigns: Austin’s growth isn’t paying for itself.
As Austin’s population has exploded over the past decade, with the city’s relatively robust economy and cultural attractions drawing people of all ages, longtime residents could be bearing the brunt of the costs associated with that growth, those critics say. There are numerous theories about what drove the tax increases. But as the leaders of various local taxing entities head into the meat of budget season this summer with tax increases on their mind, one thing is clear: All jurisdictions share responsibility for the rising tax burden.
“There is no taxpayer advocacy group monitoring the (overall) cost of our government, inside or outside the government,” said Bill Aleshire, a former tax-assessor collector and county judge who is now a leading voice against local government spending. “Each of these bodies just contemplate their own navel.”
He paused, then added: “That said, voters also do it to themselves. I don’t know that voters really understand the cumulative impact of the things that they approve.”
Explaining the rates
Five taxing jurisdictions are responsible for the property tax bill that most Austin homes receive. Those jurisdictions — the City of Austin, Travis County, the Austin school district, the Austin Community College district and the Central Health district — are run by 28 elected officials, nine political appointees and numerous high-level staffers who have come and gone for more than a decade, complicating the task of apportioning responsibility for rising taxes.
Some communities in other parts of the country have consolidated local government responsibilities, for the sake of simplicity and accountability. For instance, New York City’s schools are overseen by the mayor, and Jacksonville, Fla., has combined its city and county governments. But that approach also concentrates power — something Texans have viewed suspiciously since Northern carpetbaggers seized control of the political system for profit during Reconstruction.
Collectively, their increases have been sizable, as measured in 2010 dollars:
» Austin Community College raised its property taxes 184 percent on the typical Austin home from 2000 to 2010. This increase was largely in response to a growing civic emphasis on educating the area’s workforce, particularly those who did not attend a four-year college or needed new skills to keep pace with a changing world. ACC charged homeowners $86 in 2000 and $244 in 2010.
» Travis County, which mainly builds roads and manages the criminal justice system, raised property taxes on the typical home 46 percent, from $667 to $975.
» The City of Austin charged 44 percent more, from $833 to $1,196.
» The city and county raised taxes despite stripping out the cost of the local health care system, which they had jointly operated. The hospital district was formed in 2004 — and Central Health added an additional $150 to the typical property-tax bill in 2010.
» The Austin school district, which makes up about two-thirds of most property tax bills, increased taxes on the typical home a relatively modest 23 percent, from $2,467 to $3,025. But that increase happened despite a 2006 state-mandated 33 percent cut in tax rates for school operations.
“Structurally, we’re designed to have to absorb some enormous financial pressures” that can only be resolved by going to the voters, said Nicole Conley-Abram, the school district’s chief financial officer.
In 2008, district officials wanted to build more facilities and give teachers a pay raise, but they could not afford both without a special election. They did not choose between the priorities, however, or let voters choose. Instead, the district spent its windfall from rising property values on new buildings and programs, then said voters needed to approve an extra tax hike or teachers would not get a pay raise.
The strategy prompted Republican activist Don Zimmerman to declare that district leaders “pad their budgets and starve teachers, so they can come back and make the taxpayers feel guilty.” Voters approved the increase.
Recent history is replete with such anecdotes. But no one seems to have a definitive picture of what factors, exactly, drove the tax increases of the past decade. Various watchdog groups focus on one or two jurisdictions or issues. The litany of theories varies accordingly.
Some observers focus on rising health care and pension costs. Some point to a ravenous community appetite for parks, libraries and other government services. Some say local officials have been forced to pick up the slack for state cuts in transportation, health care and education. Some blame developers for paying less than their fair share for new roads and electric and sewer lines. Others blame additional city staffing to enforce what they consider a cumbersome regulatory regime. Plain old wasteful spending comes up.
But lately, one cause is getting more blame than any other.
The deciding factor
A city “comprehensive plan” adopted in the early 1980s calls for growth to pay for itself. By the late 1990s, many East Austin activists complained that longtime residents were being forced out by rising taxes. They attributed rising property values to newcomers buying up and remodeling homes. The complaints have spread to other parts of town, fueled by the perception that incomes are not keeping pace.
Data gathered by the Real Estate Council of Austin support this conclusion. In 2000, 6.7 percent of the income of a family earning the median income went to local property taxes and Capital Metro sales taxes, according to the real estate association’s estimates. In 2010, it was 8.8 percent. This is partly because from 2000 to 2010, the median family income in the Austin metropolitan area dipped slightly, from about $75,850 to $73,800, as measured in 2010 dollars.
In May’s mayoral election, challenger Brigid Shea focused on Austin’s rising cost of living — and, despite starting her campaign late, she nearly forced a runoff against better-known, better-funded incumbent Lee Leffingwell.
“I met people on the campaign trail who have figured out exactly how long they can afford to stay in their homes,” Shea said. “For some of them, it’s not very long.”
Rick and Jessie Kaven’s experience is typical among longtime residents of Austin’s urban core.
In a letter to the city, Rick Kaven, a construction manager for the state, acknowledges the family is not entirely a victim of circumstance. They had two kids, Jessie Kaven quit her job to care for them, and in 2006, the couple doubled the size of the home by adding a second floor.
But before the expansion, the value of the home rose from $153,958 in 2000 to $232,255. After the expansion, it rose from $381,444 in 2007 to $507,702 in 2010, and is now worth $532,862. Rising property values are also a mixed blessing, because they can enrich those who choose to sell.
But Rick Kaven said that his family does not want to move and that taxes should not be the deciding factor. The Kavens have a “Save Zilker Elementary” sign out front and say that if families are taxed out, efforts to keep the highly regarded school open could be undermined.
“If the city wants people to live here, how can they keep up with these fantastic taxes?” Kaven said. “I’m in the same boat as a lot of my neighbors.”
Kaven did not mention newcomers bidding up the land around him, but they are a common outlet for frustration over rising taxes.
But Brian Rodgers, a real-estate investor and civic activist — and no fan of Austin’s approach to growth — said the tendency to focus on newcomers can shift the spotlight from the elected officials who are ultimately responsible for the tax burden.
“You can’t blame the new guy. Population growth shouldn’t affect the tax burden,” Rodgers said. “Don’t the people down the street bring their checkbook with them when they move here?”
Who should cover cost?
They need to pave roads, hire police, build schools, string power lines, run sewer pipes and generally provide more services. Austin is no exception, having added 20 percent to its population between 2000 and 2010.
And the pace of growth is continuing. Between April 1, 2010, and July 1, 2011, Austin added more than 30,000 people, a 3.8 percent increase, third highest among the nation’s cities with at least 100,000 population, according to census figures released last week.
But in many cases in Texas — for example, a new school, which is one of the biggest growth-related expenses — much of the cost is not borne by the people whose arrival made it necessary. It is spread across the entire community.
How to apportion the cost of growth is a long-running debate across the country. The closest thing to a definitive study of Austin’s growth and tax burden was done by Eben Fodor, a national land-use consultant and author of the 1998 book “Better Not Bigger,” which found a correlation between expanding populations and rising taxes in cities across the country.
Fodor, whom Rodgers hired two years ago to study Austin, concluded that a typical new house here requires $36,523 in public infrastructure that the rest of the community pays for. The typical apartment unit costs about $17,912, according to Fodor’s analysis. He also concludes that Austin charges far less than its national peers in “impact fees,” which are intended to defray the cost of infrastructure built to serve their projects. In some cases, such as for water and wastewater lines, Austin charges less than neighbors such as Hutto and the Lower Colorado River Authority.
“While growth in and of itself is good, unfunded growth can be a fiscal disaster for any community,” said Jim Duncan, a former assistant city manager who now advises communities on how to implement impact fees. “Isn’t it interesting that during this period (of rapid growth), we are constantly being told by the real estate and development industry that this growth is a financial windfall for the city?”
Could impact fees help?
Texas restricts the use of impact fees.
Because the fees are generally passed on to the buyer, they raise the cost of a new home or commercial property. What some see as a buy-in fee that can shift such costs from people like the Kavens, others view as a barrier to entry. Critics also argue that if developers pay higher fees, a lower tax bill for homeowners won’t necessarily follow because governments may simply see the fees as another way to reach into peoples’ pockets.
Hank Kidwell, the chairman of the city’s Impact Fee Advisory Committee, said there are a variety of reasons for that. For instance, the city discounts the fees it charges for new homes and commercial buildings in East Austin, to lure developers away from the environmentally sensitive watersheds to the west. Making new development more expensive can also make older developments more valuable. Kidwell said isolating growth-related costs is less science than art.
Still, Kidwell said the fees are likely to go up this year. This is partly because the city staff found that the discounts for water and wastewater lines had little effect on where development happened and will probably be eliminated. Austin is also raising its development review permits after a consultant determined the city has been charging far less than it spends evaluating them.
But Kidwell cautions that there is a limit to what can be accomplished. Even if Austin can triple its fees to what Fodor estimated is the national average of $11,796 per house, the community would still be collecting far less than a new house costs in infrastructure.
“Impact fees are important. But will growth entirely pay for itself? No. The law is not written so you can recoup everything,” Kidwell said. “And on a more philosophical level, growth brings good things, too. It’s probably not fair to make growth pay for everything.”
The incentives debate
During the spring city campaign season, challengers focused their ire on several tax incentive deals, possibly more than any single issue, saying they’re contributing to the rising cost of living.
Duncan, the impact fee adviser, wondered the opposite. Why not up the offer? Why not ask Apple in exchange to build the facility in or near downtown instead of near its existing facility in far Northwest Austin, in the Round Rock school district?
The company may not have gone for it. But a downtown-area campus, Duncan contends, would help curb sprawl and the associated costs. And — more importantly, he says — it would mean that Apple’s considerable tax revenue would be flowing into the Austin school district’s coffers, not Round Rock’s.
“It was Austin tax dollars we waved in front of Apple,” Duncan said. “Why should another city reap the benefits?”
Like impact fees, there is no definitive study of how incentives have affected the property tax burden. An unassailable answer may not be possible, because it involves guessing what companies would have done absent an offer.
But the drumbeat prompted the City Council this spring to start a top-to-bottom evaluation of when and how incentives should be offered — and signaled the electorate seems to be paying more attention to the tax burden.
Leffingwell pulled his support for a 2012 urban rail referendum partly because of the cost. He also pledged to try to keep the rest of a likely November bond package below $400 million, the approximate mark at which the property tax rate would have to rise. (The tax rate would drop if the bonds were not approved.)
Those financial officers put together a possibly first-of-its-kind spreadsheet projecting the tax bill of a typical Austin home over the next five years: another 5.9 percent increase, if the inflation trends of the past decade continue.
“We have a lot of needs: medical care, education, parks, public safety and transportation,” Council Member Sheryl Cole, chairwoman of the committee, said in an interview. “We can do them all. But not all at one time.”
More generally, Cole said of the lack of coordination between jurisdictions, “That’s exactly what we’re trying to fix.”
With Austin’s recent history, some are skeptical.
“The voters keep approving every bond package, and they keep re-electing people who only think about their piece of the pie,” Aleshire said. “If they don’t pay more attention, you’re writing this story again in 10 years.”
Contact Marty Tooheyat 445-3673
Marty Toohey has written about local government since 2005. His report today is part of the American-Statesman’s continuing focus on the handling of public money; previous stories have examined the diversion of revenue from court fees and fines, Travis County’s use of property tax overpayments, and $250 million in planned state incentives for Formula One.
About this story
To assess the long-term trend of rising property taxes, reporter Marty Toohey started with an average-value Austin house whose owner lives in it, taxed by the City of Austin, the Austin school district, Travis County, the Austin Community College district and the Central Health district. That home is eligible for the typical tax breaks those jurisdictions provide and is covered by the state’s 10 percent cap on annual property-appraisal increases. The idea was to track how the combination of rising home values and tax rates was affecting typical homes. (The city did not begin tracking the median value of an Austin home until midway through the decade, but officials in the planning and housing departments said the median and average probably saw similar increases.)
Using this calculation as a baseline, Toohey, with the help of the Travis County tax office, applied the tax rates for each jurisdiction and then adjusted for 10 years’ worth of inflation, using the All Urban Consumers Consumer Price Index in a manner verified by the city’s budget office.