Austin Eyes Tax Election as City Projects $33M Deficit

Austin faces a projected $33 million shortfall in next year’s city budget, which will lead to challenging spending and service choices.

A five-year financial forecast presented to the City Council this week revealed a gap resulting from slowing revenue growth and the expiration of federal COVID relief funds. City officials indicate that increasing expenses are surpassing revenue, especially in property and sales taxes, which constitute the majority of the city's financial resources.

“This is the precise moment for us to invest in people,” stated Council Member Ryan Alter. “It is clear that the federal government will not take action.” It is clear that the state will not take action.

Kerri Lang, the director of the city's budget office, highlighted a 2019 state law that limits the extent to which cities can raise property tax revenue without obtaining voter approval. Austin was previously able to increase property tax collections by as much as 8% each year. The cap currently stands at 3.5%, constraining growth despite increasing costs.

To exceed that limit, the city would need to seek voter approval via a tax rate election — a proposal currently being contemplated, although specifics are still uncertain.

The revenue from sales tax is also stabilizing, partly as a result of decreased consumer spending following the pandemic. 

According to Erik Nelson, acting deputy budget director, inflation and slower job growth have tempered Austin’s previously thriving economy.

The city's budget allocates resources for vital services such as police and fire departments, infrastructure development, parks, and initiatives aimed at tackling homelessness and housing insecurity. Lang stated that the elimination of one-time pandemic assistance from the American Rescue Plan Act is now revealing more profound structural budget issues.

“We are eager to support every single need within the community,” she stated. “However, that does not reflect the actual circumstances of anyone’s budget.”

As leaders consider possible spending reductions, certain programs — such as the emergency homeless shelter at the Marshalling Yard — are considered essential and beyond compromise.

Austin will begin formal budget presentations in July, and the City Council's final vote is planned for August.

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