City Council will vote on a homestead property tax exemption for some homeowners on Monday, but the budget is slated for a vote on Sept. 12 that may trigger an increase in property taxes for non-homestead residential and commercial properties.
Property tax relief, street maintenance, public safety, affordable housing, and family services emerged as top priorities for most City Council members Friday as they discussed next year’s budget.
There are always more needs than there are resources, but San Antonio faces additional budgetary constraints due to recent State legislation regarding property tax revenues and telecommunication fees, City Manager Erik Walsh said. So far, CPS Energy revenues are also lower than expected as the City enters into its planning process.
“We have a strong team and we will manage through these issues,” Walsh said, as long as priorities are clear and the Council and community have “realistic expectations.”
One by one, during an eight-hour meeting that included a nearly two-hour team-building session for the newly installed 2019-2021 Council, members sounded off their top three priorities from a list of eight established by previous budget conversations. Those were property tax relief, financial priorities, affordable housing, streets/sidewalks/transportation, family services or “strong families/children,” police, firefighters, and staff compensation – raising the cost of living increase that non-uniformed employees receive.
It will now be up to Walsh and City staff to produce a draft budget to reflect those priorities, which represent millions in additional spending – and the City can’t afford all of it.
“There are unlimited needs and limited resources,” Walsh said. In affordable housing, for instance, Council will need to decide whether to maintain its current level of funding and programming or increase it by up to $15 million to follow the aggressive policy and work plan it adopted last year.
Affordable housing also emerged as a top priority for residents who participated in the City’s public engagement initiative SASpeakUp.
Of the 8,693 residents that took the survey online or in person, 28 percent ranked affordable housing as a top priority, 51 percent said funding should be increased for streets and infrastructure, and 43 percent ranked code enforcement as the area in which funding should be decreased.
That feedback will also be taken into consideration, Walsh said. Click here to download the full survey report.
The “strong families/children” funding priority refers to programs associated with improving quality of life on a personal scale for residents, including the creation of a comprehensive domestic violence plan, establishing a trauma-informed care entity, and implementing a Positive Parenting Program, Too Good for Violence school curriculum, and mental health urgent care clinic.
When it comes to transportation, several City Council members emphasized the need for street maintenance and the improvement of walkability and bike infrastructure. City staff proposed maintaining the street budget at $110 million (the same level as last year), decreasing the sidewalk budget from $19 million to $17 million, and updating the Bike Master Plan while continuing to implement the 2011 document.
The San Antonio Police Department will likely see staff increases to its neighborhood patrol and SAFFE (San Antonio Fear Free Environment) officers after several City Council members signaled support for increased spending in those areas.
The San Antonio Fire Department proposed adding 25 firefighters and one ladder truck to its network.
The true fiscal impact of Senate Bill 2 remains to be seen or calculated, Walsh said, and will likely be felt in future years. The legislation takes effect in 2021, and cities and counties across Texas will have to live within a 3.5 percent rollback tax cap in accordance with SB 2. City staff has recommended that Council consider annual adjustments to the tax rate to manage within the state-imposed revenue cap.
After hearing for months (before and after the campaign cycle) that residential property owners want property tax relief, City Council directed staff to look into some kind of homestead exemption, which applies only to the primary residence of a homeowner. City staff calculated how providing the minimum homestead allowed by the State – $5,000 – would impact the budget and tax bills.
That $5,000 exemption would cost the City’s general fund $3.7 million. If the City increased its effective tax rate to make up for the estimated revenue decrease, the exemption would save homeowners annually anywhere from $22 (for a home appraised at $100,000) to $11 (for $300,000 homes) or end up costing $2 more (for $500,000 or more).
Increasing the effective tax rate by 8 percent would increase revenues by $6.8 million. The City has the ability this year to generate up to 8 percent more revenues without holding an election – until Senate Bill 2 restricts it to 3.5 percent in 2021, said Ben Gorzell, the City’s Chief Financial officer.
“This is just an option,” Gorzell said. “[City Council could select an option] where the net impact to the general fund is zero. There’s all kinds of scenarios we could run in between.”
Once the new property values come in, whatever rate would apply to values to generate the same amount of revenue as last year is the effective tax rate. The effective tax rate is the baseline established for budget calculations and is not determined by City Council.
The actual tax rate is the one that City Council controls, and which hasn’t increased for decades. Property appraisals are what increases tax bills.
Because of the revenue cap, City Council agreed on maintaining existing financial policies and creating new ones to review its property taxes and fees in the context of SB 2 every year.
“It was good to reaffirm the financial policies today,” Walsh said. “That’s a big takeaway from today because it really sets that framework on how we deal with all these issues.”
The Council is required by the State to vote on homestead exemptions by July 1, thus the vote next week that is separate from the budget.
This will be the third budget that focuses on equity when allocating resources as it’s the third since Nirenberg took office and won re-election. The equity budget is an attempt to rectify the uneven distribution of investment across the city.
“The test of that and whether or not we can actually make long-term change and reverse the socioeconomic inequities that have built up for generations is whether or not that process can survive a political cycle,” Nirenberg said. “What I heard today … is that we’re still committed to the equity principle … and that we are still committed to reversing generational cycles of socioeconomic inequity. That is a big, big deal in a City that has two-year election cycles.”
It takes the willpower of the people and their elected officials, he said, to make sure “those values survived the political cycle.”