Austin City Council Raises Maximum Tax Rate As It Considers 'Swap' With AISD

Aug 9, 2017

Austin City Council voted Wednesday to raise the maximum rate at which it can tax homeowners, as it considers a "tax swap" plan that would divert that extra money to the Austin Independent School District.

Council members approved a 13.6 percent increase, from 44.51 cents to 46.5 cents per $100. The city had faced a Wednesday deadline to set the tax rate. The 6-4 vote does not guarantee the rate; it simply allows Council to adopt it later. If the tax rate is raised to the maximum, state law would allow residents to petition for a referendum because it is higher than 8 percent.

Under the tax swap proposal, the city would raise property taxes while AISD lowers its tax rate. The additional money collected by the city would then be sent to the school district. As the city collects more money in property taxes, the school district would collect less – ensuring that fewer funds are available for the state to redistribute to property-poor districts in the state.

AISD is currently paying hundreds of millions of dollars to the state under this so-called Robin Hood program.

The complicated plan could result in lower tax bills for most homeowners in the long run. Austin residents living within AISD who own a median-value home could see property bill savings of up to $30.

Potential losers in the deal would include residents who live outside AISD’s boundaries. Under several scenarios the city is considering, these taxpayers could see an increase in property taxes of up to $50.

Mayor Adler said he's not sure he supports the idea, but wants to see all possible scenarios before closing the door.

“If it’s too complicated, if it’s not equitable to the community, then it’s not something that, I think, I and my colleagues would support," he said. "But this conversation that happens over the next 30 days has to be one that’s very broad.”

Four Council members opposed raising the maximum tax rate, including Jimmy Flannigan, who said 80 percent of his district in Northwest Austin is outside of AISD boundaries.

“This is a massively problematic proposal, not just for my district, but for 25 percent of the city,” he said, referring to the 25 percent of taxpayers who do not live in the Austin school district.

Council member Ellen Troxclair said she’ll be the first to sign the petition opposing the rate hike. 

Council members need to set this year’s budget before the new fiscal year begins on Oct. 1.

KUT's Nathan Bernier contributed to this report.