City of Austin current MAYOR Kirk Watson Newsletter: What's in your Wallet + feedback button

 

Well, the budget discussions are really beginning in earnest this week. It’s not going to be easy. It fact, it could be a real dog fight. The City of Austin’s budget is a complex document for a complex operation. It includes 40 different departments. Some departments, such as fire, parks, police, and public health are funded with property and sales taxes. We call that the “General Fund” budget. Others, like Austin Energy, Austin Water, and the airport, are known as "Enterprise Departments" because they are funded by rates and fees. The budget process sort of officially began last February with the Budget Forecast. But it takes a big step when, according to the City Charter, the City Manager proposes an actual budget for consideration by the Council. He did that last Friday by releasing a draft $6.6 billion budget. $1.54 billion of that budget proposal (23.3%) is for the General Fund. $4.38 billion (66.46%) is for the Enterprise departments. What’s the Manager’s proposal? Early in the budget process, I asked the City Manager to show us what a budget would look like if we held property taxes at the “No New Revenue” rate—meaning no Maintenance & Operations (M&O) tax increase and keeping the tax revenue to the city at what it was last year. I wanted to have more discipline in budgeting and to daylight the inherent tension in meeting the community’s needs and also keeping Austin’s affordability top of mind. As part of good stewardship, I want Council and the public to see all the options—what services should go on the chopping block, how that affects quality of life, and how it all affects affordability. A No New Revenue rate scenario results in a large and compounding budget shortfall that starts at $26.4 million this year and grows to $122 million by 2030. The Manager’s current proposal doesn’t use the No New Revenue rate. He closes the initial $26.4 million funding shortfall through spending reductions, reallocations, and higher fees and M&O property taxes. He proposes using the “Voter Approval” tax rate. A city can raise property taxes to generate up to 3.5% more revenue than the previous year without an election. The Manager’s proposal would cost the average homeowner $346 more per year than the current tax bill or $29 per month. I want us, as part of our discussions, to look specifically at what would need to be changed or cut if we didn’t go up to the Voter Approval rate. Proposed Taxpayer Impact Statement for FY26-FY27. Are We Alone? Nope. Many Texas cities face challenges. Dallas, Arlington, Ft. Worth, El Paso, San Antonio, and likely Houston face budget issues given the state revenue caps, a cooling economy, and reduced federal funding. The state’s revenue cap of 3.5% really does create some difficulty. It ignores fluctuating inflation, rising cost drivers, increased interest rates, uncertain economic conditions, the economic downturn beginning in 2024, and falling federal funding. This causes structural fiscal pressures and the necessity for cuts and scaled back services. Specifically, Austin faces weak sales tax projections given mild growth in retail sales and the economic uncertainty. Also, we’re seeing declining property tax revenue from new construction, a 2.9% projected decline in Travis County property tax valuation, and a surge in property tax valuation protests. How Would a Bond Election Play Into This? I continue to put affordability first in my thinking. So, it’s important to look not only at the tax impact from the proposed budget, but also at the tax impact of debt repayment for bonds. By itself, the Manager’s proposed budget would cost the average homeowner another $346 per year. That includes FY27 debt repayment increases from past bond elections. There’s been a lot of discussion about another bond election this year with a proposed total of $390 million as a bridge to a larger, more comprehensive bond proposal in just two years. I oppose this idea. If a 2026 bond of $390 million were to be approved and fully implemented, the impact on the typical homeowner would be $56.73 more per year. If we also pass a budget with a Voter Approval property tax rate, the total cost to the typical homeowner would be $402.73. $346.00 + $56.73 = $402.73. Efficiency, Effectiveness & Innovation I’m pushing for Austin to manage this tough financial environment by shoring up fiscal stability and sustainability of services. Given the new reality of financial constraints, there are reductions that have to be made. The focus for the FY27 budget and going forward should be on reallocating existing resources to only pay for what’s working and what Austinites need. We’re working to better measure success with an outcomes-based framework tied to KPIs, milestones, efficiencies, and cost-effectiveness citywide. Examples of this include my initiative to restructure contracts and grants and hold them to a higher standard of delivery, my initiative (adopted by the whole Council) to do a systemwide, all city audit and efficiency assessment, an ongoing shared services initiative, and the technology services restructuring and implementation. How Do You Feel? Give me your feedback. Take this brief survey on the budget. Start Survey View email in browser Mayor of Austin · 301 W 2nd St · Austin, TX 78701-4652 · USA update your preferences or unsubscribe