Rail Bond Vote: Greatest Risk in History and Historic Tax Increase
COST Commentary: Bill Oakey’s Blog continues to uncloak the hidden tax burdens buried in the City of Austin’s light rail proposal. The article below and others expose the truth that this rail proposal is unfordable and will result in increasing tax burden for all citizens.
This rail will double the Austin debt per capita and allow little remaining bonding capability for other community needs over many future years. In fact, there will be no capability to finance planned rail expansions beyond this “initial investment.” Yet, the City states: This system will only be effective with “much more to come” and they present a 20 year ‘build-out” concept, costing more than $5 billion. In reality, this first bond will ‘tie the hands’ of the new 10-1 City Council and prevent them from addressing key challenges of mobility and affordability which will make Austin more livable.
In addition to being unaffordable, this light rail is a major transportation detriment to Austin and its citizens, as described in many postings on this site.
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Rail Bond Vote Would Bring Historic Tax Increase
By Bill Oakey – July 30, 2014
If anyone thinks the property tax impact of an annual City Council budget battle is something to worry about, please consider this. For the last two years, the budget discussions have centered around changing the City’s tax rate by a tiny fraction of one penny. That’s because our tax appraisals have skyrocketed, meaning that even a zero change in the tax rate would yield a considerable tax increase.
Well, make sure you are sitting down when you read this. If voters approve the $1 billion urban rail and road bond package in November, they can say hello to a 6 cent increase in the property tax rate over the next five years. The sobering details are contained in a City document called “General Obligation Bond Capacity Analysis.” You can read it here.
What Would Happen to Our Bond Debt If the Rail Bonds Pass?
That’s an easy question to answer. It would flat out double! Our current general obligation debt, made up of previous bond votes for roads, parks, libraries, open space, and housing stands at about $1 billion. So, in one fell swoop we would double our debt by voting for the rail and road package. And the worse part is that it would do essentially nothing to relieve traffic congestion for most existing residents.
In fact, Austin won’t even come close to attaining the ridership levels needed for Federal funding for the urban rail line unless we reach extremely optimistic, massive growth projections. The developers pushing for the rail line from Riverside to Highland Mall would need to convince voters of the “miracle” in economic development potential that the project would bring. And yet, as one Austin American-Statesman reader wrote to the editor recently, “Well, thank goodness they are building a line from Riverside to Highland Mall, because I travel between those two points all the time. SAID NO ONE EVER!”
What the City Report Says About Taxes, the Debt and Our Bond Rating
Here is a snapshot of some of the report’s most significant facts and conclusions:
1. Our current general obligation debt is about $1 billion.
2. We still have an additional $425 million in 2006-2013 bonds left to issue.
3. The City estimates that another $425 million will be needed in a separate bond election in 2018, on top of the $1 billion in rail and road bonds to be voted on this November.
4. In order to preserve our AAA bond rating, we would need to raise property taxes by 6 cents between 2015 and 2020 if all of the bonds pass.
5. Not only would the property tax rate increase by 6 cents, but the City estimates that property tax appraisals will jump by over 25%! Their example shows a $200,000 home being assessed at $255,000 by 2020. So, the tax impact would multiply exponentially.
Don’t Forget About All the Other Tax Increases!
None of the above estimates include the back to back tax increases for the main part of the City Budget, plus utility rate increases and add-on fees, and taxes for AISD, Travis County, ACC, and Central Health. And don’t forget that ACC will be asking for a $386 million dollar bond package this November as well.
So, as long as your career is rocking along with huge pay raises every six months or so, or your retirement income is zooming past inflation and leaving you with extra piles of cash, then you can easily afford to vote for the rail bonds. But if you’re like the vast majority whose income is flat or even decreasing, then make sure you pass this information along to your friends and ask them to cast a resounding NO vote in November.