TRE, Budget, and an Affordable Austin

[Marc Duchen]

Colleagues,

Like the Mayor, I have tremendous concerns about affordability related to the budget and Tax Rate Election (TRE), especially with yesterday’s news that the County may pursue their own 8% rate increase amounting to an additional $200 tax. I have urged caution in this process for many reasons – including potential action by other taxing jurisdictions that will compound local affordability challenges.

This will be a long post, but I have a presentation that visually sums up a lot of my concerns about where we are and why I’m wary about of the impact of a TRE on affordability: https://drive.google.com/file/d/1ydJKmS ... sp=sharing

The Short Version:
I’m against a TRE. We have a fiduciary responsibility to look out for all Austinites and the city’s vitality, and to create a city that welcomes businesses and families who in turn help bolster the sales taxes which support our programming (social, environmental, etc.). A TRE that spends generously on new programming unfortunately places that spending on the backs of those least likely to afford it. This is the complex aspect of social service spending: the benefits for some are well-intentioned but the costs are borne by everyone else, including the working poor and those already on the verge of being priced out of Austin. As the slides indicate, we raised property taxes about 13.5% just last year, plus other fee and utility increases. We have asked a great deal of local residents – homeowners, renters, and small businesses – who are affected by property taxes. AISD, the County, and others have done the same and are likely to continue on that path. We need to be mindful of this impact and where it will take us as a city.

If there was an interest on the dais, I would explore a compromise and support a modest one or two cent TRE that includes priorities that I believe we can all agree on, including public safety, parks, wildfire mitigation, and preserving a healthy reserve fund. I welcome any collaboration on this. However, what I heard yesterday was “go big or go home”. And when presented with a 5+ cent ($200+) TRE I fear Austin taxpayers will tell us to “go home”.

The Long Version:
I have been told that in years past, under prior leadership and managers, our city took the needed and painful steps during slowdowns to weather those periods. Perhaps freezing civilian hiring and salary increases and cutting vacancies and discretionary spending like travel, vehicles, etc. I applaud the City Manager’s approach to asking departments to cut 1.5% - but we may need to consider a further cut or changes if we can’t address the structural challenge in the budget where expenses are outpacing revenue. Spending more is not that answer to that challenge. We are not the federal government and cannot print money, and there are consequences to spending without restraint. The idea that we are in a “rainy day” seems disingenuous since the more we spend without addressing the structural budget challenges, the more we will find ourselves in future similar situations. We are at risk of normalizing our current predicament, where we must return to voters again and again with additional tax rate elections - and will back again next year for a substantial bond.

Family Friendly City – Safety and Affordability
Our future – and I believe any city’s future – depends on attracting families and businesses. These are the entities who ultimately provide the greatest share of financial support for city services and programs. If we cannot find ways to attract or keep families and businesses, we need to explore ways to course-correct. The data in the presentation clearly shows people are coming to the Austin region, but rarely settling in Austin – just 7% of those recently coming to the Metropolitan Statistical Area (MSA) settle in Austin. AISD has shed about 9K students since 2019 and their own demographic reports point to fewer people having children here. People want to raise families in cities that are safe and affordable, and they are “voting” with their feet to live in Lakeway, Kyle, Manor, and everywhere else but Austin.

By spending without restraint, we risk becoming a city that hollows out the working and middle classes, where the majority of residents are the wealthy and those supported by social services that the wealthy subsidize.

I have heard the same sentiment from my District – via a survey we ran - that they want Austin to prioritize safety, affordability, wildfire mitigation, and parks. 92% of those surveyed indicated that they felt the city either does a combination of over/under spending (roughly budget neutral but spending on the wrong things) or overspends. And any way I slice the per capita spending data, we already spend more per person than other Texas cities, including those who own public utilities. One comment from our open-ended question on the survey stood out: “Stop spending like children with Dad's credit card.”

Tale of Two Cities – Austin and Fort Worth
This may all be better understood by examining two big Texas cities, Austin and Ft. Worth. Just a few years ago Austin was briefly the 10th largest city in the country and 4th largest in Texas. We have since traded places with Ft. Worth, where their ascent has matched our descent. Austin has fallen to 13th largest city while Ft. Worth has taken the 11th spot and will likely soon be 10th. The City’s data shows that Austin’s 2025 sales taxes are down -1.5% this year while Ft. Worth’s grew 4.7% (From staff’s July 15th Budget Report).

These aren’t the only differences. Austin has spent generously on social programs. Going back 20+ years, Austin has spent $720M on Affordable Housing and Ft. Worth has had no similar bonds. Austin presently spends at least three times what Ft. Worth spends operationally on homelessness (Ft. Worth’s numbers are buried in a different department and hard to disambiguate). I have often said that if I was a stranger seeing these numbers for the first time, I would assume Austin would be years ahead of any other Texas city in addressing these housing and homelessness challenges - yet it’s not clear we are. What is apparent is that we rely on the City of Austin to step in to try to address these challenges because we haven’t cultivated the non-profit, philanthropic, business and private/public partnerships, etc. that other cities have successfully built over time. I’m not sure we will ever build out this space if we continue to rely fully on the city to fund major social and infrastructure projects. What incentive have we given them to participate when they are assured, again and again, that “the city’s got this”?

Bottom Line
Ft. Worth is growing and attracting commerce and families in a way that we are not. This is true for the other big Texas cities where Austin is the outlier. As a result, we should look closely both at what they are doing that’s working, while being introspective about our approach to spending and priorities here. From where I sit, this is not a problem we can spend our way out of, no matter how tempting or fulfilling it may feel to do so. Moreover, a family or business in a time of economic constraint can’t just tax their neighbors, but the city can. We need to use this authority with incredible prudence.

This is a critical moment because our legacy will help decide whether Austin is an affordable and sustainable city. Or whether we go down the path of a city like San Francisco, where there is a vast income divide separating the wealthy residents and the people who are barely hanging on through social services support. I know which future is the one I want for the city, and that’s why I believe we should do everything in our power to avoid burdening residents before they, too, consider “voting with their feet”.

-Marc