[ed: Apologies, CM Ellen Troxclair. I mistakenly labeled you as the sponsor of this resolution rather than CM Sheri Gallo. Corrected now – many thanks to @DanKeshet ]
CM Sheri Gallo has proposed — and likely has the votes to pass, perhaps this week — a property tax freeze for Austin homeowners aged 65 and older. The freeze includes disabled homeowners, regardless of age. Though the freeze sounds like a great way for those homeowners to avoid property tax increases, it is actually a wolf in sheep’s clothing.
The local option property tax freeze — which is sometimes referred to as a tax cap or tax ceiling or tax limitation — was added to the Texas constitution in 2003. Many city and county governments quickly adopted property tax freezes in the mid 2000s, with seeming disregard for the stipulation that once enacted, freezes are permanent and cannot be rescinded.
Most of the largest Texas cities wisely avoided property tax freezes entirely. Though, in some cases, such as with San Antonio, citizens bypassed the City Council by acquiring sufficient signatures on petitions to put the freeze to a popular vote, where it usually passed. If CM Gallo’s resolution [ed: link corrected, name corrected] passes, Austin will be the largest city to enact a freeze by voluntary act of the City Council.
Many of the cities that passed property tax freezes early on were targets of a lobbying and organizing effort from the Texas Silver-Haired Legislature (TSHL). Their website has a long list of cities and counties where they successfully pushed property tax freezes. In recent years, property tax freezes have fallen out of favor as their effects on city budgets have become clearer, and as city councils reconsidered making a significant budgetary choice that future councils could not undo.
For retirement communities and small towns like Georgetown, for example, property tax freezes may be a good choice. For medium and large cities with diverse and dynamic populations, property tax freezes may do lasting damage to a city’s tax base. Additionally, they may needlessly transfer tax burden from typically wealthier, older residents, to the often less affluent, younger residents.
When a city enacts a freeze, homeowners having an over 65 or disabled exemption pay the same amount of property taxes every year as they paid in the year of their freeze (i.e. when the homeowner turned 65 or, if already 65, the date the freeze resolution went into effect). This “freezes” the homeowner’s tax burden at that dollar amount until the homeowner dies or makes improvements to the property. The benefit may continue for surviving spouses who are at least 55 years old. If a homeowner sells his home and moves to a new home within the same jurisdiction (county or city), then the homeowner’s existing freeze will transfer to the new home. (Note: do not confuse the “local option” over 65/disabled property tax freeze — enacted in 2003 — with the decades-old over 65/disabled property tax freeze offered by every school district. Though similar, the two types of property tax freezes are not identical).
In 2010, the Dallas Morning News reported on the effects of property tax freezes for some Texas cities, such as Plano. The article quotes Dick Lavine, a senior fiscal analyst for the nonpartisan Center for Public Policy Priorities in Austin, as saying, “All of these cities, they are going to cause themselves imminent trouble in the future. That’s all property value that’s no longer able to support schools, fire, police, roads, and sewers.”
Currently, Austin’s seniors represent less than 8% of the city’s population. Austin’s demographer expects that percentage to double within the next 25 years. Because of the permanent nature of a freeze, in combination with Austin’s quickly growing senior population, city financial staff have repeatedly recommended against implementing a property tax freeze.
CM Gallo’s resolution mentions the report, Embracing an Age Diverse Austin, from the Mayor’s Task Force on Aging Report and Recommendations 2013. From the report, she quotes a section about a 38 percent rise in Austin’s property taxes in the 10 years immediately preceding the report. She also mentions that the report cites continued increases in property taxes as one of the challenges for seniors. What she fails to quote from the report, is that the report does not recommend implementing a property tax freeze for Austin. Nor does she mention items the report does recommend, such as the need to support low-income housing projects for seniors — anathema to fellow conservative, CM Zimmerman.
Since there has been near silence about the property tax freeze resolution, CMs and the public are less informed about available options for seniors and the disabled than they should be. There are less drastic measures available than a permanent tax freeze. Here are a couple of options:
- CMs could simply raise the over 65 and disabled homestead exemption beyond the current $70,000 mark, which the previous council put in place in 2013 (raising it from $51,000). In fact, they could adjust this amount up or down every year, as needed (and as suggested by staff).
- Council could educate themselves and the public about tax deferrals. Tax deferrals allow anyone claiming an over 65 or disabled exemption to not pay any property tax. The tax debt accumulates and an interest rate of 8% is applied, but the city will never take the house for lack of payment while the homeowner (or surviving spouse 55 or over) is alive. After passing, heirs inheriting the home must pay the tax debt within six months, or enter into a payment plan. Learn more about property taxes, deferrals, payment plans, and more by clicking around in the property tax area of the Travis County Tax Office. Note that the link is to a Travis County page, not a City of Austin page. If I can find a City of Austin page with explanations of property taxes, tax deferrals, and so on, I will add it here. Update: receiving a property tax deferral defers property taxes from all taxing jurisdictions – no need to apply separately.
Though the general homestead exemption received weeks of debate on the dais, in committee, in the press, and on the comment boards, very little has been said or written about the property tax freeze resolution, even though it is the riskier of the two tax breaks and could legitimately be described as potentially dangerous to Austin’s future.
Despite the lack of debate, Gallo has secured four cosponsors for her bill: CM Houston (D1), CM Kitchen (D5), CM Pool (D7), and CM Troxclair (D8). Assuming CM Zimmerman (D6) supports the measure, which seems like a safe bet, then Gallo already has the six votes required for passage. Given CM Renteria’s (D3) somewhat questionable vote for the 6% local homestead exemption adopted last week, there may even be seven votes.
The best way to stop her resolution’s momentum is an outpouring of communications from the public to council members’ inboxes and to their phones in the form of phone calls (remember those?). Hopefully, people who agree that this is too risky, under-discussed, and unnecessary, will contact their CMs and/or sign up for Citizen Communication on Thursday.
Austin’s City Council — ten of eleven of whom are rookies with only 6 months on the dais — stands poised to vote as soon as this Thursday on Gallo’s dangerous property tax freeze resolution. It is Item 13 on Tuesday’s work session agenda (June 9th, AKA tomorrow) and again as Item 13 on Thursday’s full city council meeting agenda.
If passed by this neophyte 10-1 Council, the property tax freeze will affect Austin forever — effectively making the decision on behalf of all future Councils.