| Perspectives on Texas

The city of Austin plans to raise property taxes as much as it possibly can — 7.9% — without triggering a potential election to roll back the tax rate. There’s no new, unexpected and urgent need here. City leaders are just trying to circumvent the intent of a new state law that limits property tax revenue growth to 3.5% without voter approval, but which doesn’t go into effect until next year.

In passing Senate Bill 2, state lawmakers were responding to a very real sentiment on the part of Austinites — and all Texans. Property owners feel they’re drowning in taxes, and that they can never really own their own homes. Renters are also footing tax bills, indirectly feeling the pain when these costs are passed down. If homeowner falls behind on property taxes, due to sickness or job loss or any other reason, the taxing entities can swoop in and take their homes. Those tax sales happen on the first Tuesday of every month in Travis County.

One goal of the new law is to ensure that cities, counties and other taxing entities reasonably control their spending habits, and to bring their taxing ability more in line with the taxpayers’ ability to pay. That’s something Austin refuses to do. 

Instead, city leaders are focused on something else: an imaginary deficit they say they’ll face in future years if they don’t raise taxes now. The city’s revenues will continue to increase by tens of millions of dollars per year due to new construction and rising property values alone. Yet because they simply want to keep spending elevated, they have tried to argue the new law will create a deficit.

Austin officials say much of the new revenue will be spent on two of the city’s top priorities — housing and homelessness. But city policies are making those problems worse, and infusing cash into already-debunked plans won’t improve the situation. 

A recent audit of the city’s homeless programs found that, despite pouring in tens of millions of dollars, “homelessness service providers frequently did not meet contract performance goals.” The report also found that the city “did not measure the long-term success of its homelessness assistance efforts, and resources to prevent people from experiencing homelessness were not sufficient or effectively targeted to those most-at-risk.”

Yet little has been done to address these clearly identified concerns.

Homelessness is a complex problem, but the Austin’s policies have done nothing to reduce it; in fact, it continues to rise. The city now plans to spend $62.7 million on homelessness, a nearly three-fold increase from just 5 years ago. How will this money be used? Will it make a difference? Who will be held accountable if it doesn’t?

The city makes it harder and more expensive to build new homes, adding to the shortage that drives up the cost of housing. This hits the supply of starter homes and multi-family housing hardest. If you’re a builder, you have little choice but to focus on higher-end projects to help recoup your excessive city-driven costs.

In a real-life example, a 2016 comparison of city fees to build an apartment complex found that Austin’s fees can be eight (or more) times higher than similar fees in Dallas. This means the difference between handing over $100,000 and $800,000 before spending a dollar on labor or materials. That’s money that can only be made up by demanding higher rent. 

Excessive building costs and taxes are making Austin less unique; we’re losing the restaurants and venues that have made the city different and less corporate. We’re losing families who can no longer afford to live where they work and play, forcing them into surrounding areas and compounding our traffic problems.

If we want to address the affordability crisis, raising taxes isn’t the way to do it.

The fact is that Austin’s proposed tax hike will make these problems worse, not better. And low-income Austinites will be impacted most — from more expensive housing to higher prices for the goods and services they need. 

Government isn’t the solution to every problem. In Austin, government too often is the problem. Lower taxes and less burdensome regulations would be a great place to start in truly addressing the affordability crisis.

Disclosure: The Texas Public Policy Foundation has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.