City Hall Hustle: Twisting the Knife

Is Austin heading for a double-dip recession?

I asked Chief Budget Officer Ed Van Eenoo that question as a kind of joking throwaway at the end of a preview his office had arranged for us media types, walking us through the city's preliminary budget figures.

First of all: For the upcoming fiscal year, Austin's facing a deficit of $9.8 million. And that number is already assuming we bump up property taxes to the "rollback" rate, the highest tax increase – in this case, 3.1 cents above the current tax rate of 45.71 cents per $100 valuation – allowable without a special election.

Moreover, that budget covers only the city's current expenditures – our current, council-approved practices, or "what it is going to cost to fund what we currently do," says Van Eenoo. And those obligations include some $44 million extra in estimated "cost drivers" raising the budget sum. Unsurprisingly, the need for "uniformed personnel" leads that charge, accounting for more than half – $22.5 million – of the increase. A 3% raise for police, fire, and EMS personnel is factored into this budget, along with a 3% raise for the civilian work force, adding up to part of the $9.6 million in cost drivers represented by nonsworn employees. Other indicators of our current economic predicament – like $2.4 million in additional estimated fuel costs covering the price of rising gas, as well as rising health insurance costs – are also included in the drivers.

So that's just to keep things as is: questionable (albeit previously agreed-to) practices like our gold-plated public safety contracts, combined with council directives like continued no-kill policies for city shelters and the installation of digital video recorders in police cars. If you factor in additional unmet needs across various city departments, you end up with another $15 million in potential costs, including everything from perennials like additional park maintenance to more dire needs, like more 911 operators. Van Eenoo told the Hustle on Tuesday that City Manager Marc Ott had asked all the city departments to present potential 5% reductions to their budgets by the end of the month. The thinking seems to be that potential reductions can then be weighed against new service additions by the citizens at public forums, as they have been in the past.

That's the view from 10,000 feet – something that will come into sharper focus as the budget cycle continues, a process that should be quickened by a council directive calling for more work sessions on oft-neglected areas of the budget, like the city's enterprise funds. And Van Eenoo is quick to point to the interconnectedness of the document he rolls out this week: Should the city's decidedly financially conservative estimate of fuel costs (budgeting for an approximately 25% increase over last year) prove overly gloomy or property values increase at a quicker than expected clip, lots of the doomsaying in this budget could prove unwarranted. (Let's only hope.)

But here's what raises the Hustle's antennae: While taxable property values are down, the strongest growth has been in "personal property" – all store inventory, cars on car lots, and the like, which has shot up 24% over last year (for a total of $8.6 million in projected value). It's a measure of companies stepping up orders in anticipation of customer demand, says Van Eenoo. But what if that demand doesn't come? It's a question that's reflected in our broader budget debate, with liberal economists like Paul Krugman questioning the supposed importance of business "confidence" – not to mention the invisible bond vigilantes – when the most effective confidence boosters are wage growth and job creation. Locally, Van Eenoo points to solid sales tax growth over the last year as an indicator of Austin's improving economic performance. But still one has to wonder what else could be done to gird the city for the worst, especially as she looks to ride out ill-informed "austerity" measures from the feds and the state.

One such state measure, Senate Bill 720, would cap growth on the "operation and maintenance" portion of municipalities' tax bills at 5% vs. the currently allowable 8% (basically the "rollback" rate). Doing so on this budget, for instance, would essentially double the budget hole we're in, adding another $9.2 million to the $9.8 million gap at the rollback rate. But one need not even look for as obvious or torrid an example as that bill; for example, cuts to the city's Community Development Block Grants this year are expected to be equally drastic.

Between the billions in scrubbed dollars in the "compromise" budget in D.C. and the reactionary antics still afoot at the Legislature, it seems the pain caucus is intent on making the dreaded possibility of a double-dip recession a painful reality.

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