It wasn’t all bad news on Wednesday, as San Antonio City Council was briefed on the high and low points in the recently concluded Texas legislative session, but two losses, in particular, could end up costing the City millions in lost revenue.
Governor Greg Abbott is expected to sign both Senate Bill 1152, which will let telecommunication companies off the hook for millions in right-of-way fees they pay to the City, and Senate Bill 2, which caps the number of increased revenue cities can collect from property taxes without asking for voter approval.
Abbott has until June 16 to sign, veto, or allow automatic approval of the 1,434 bills that were approved by the state House and Senate.
Of the 1,600 bills that City staff tracked, 83 percent were considered successfully blocked or fixed in San Antonio’s favor, said Jeff Coyle, director of Government and Public Relations.
“All told we’re pleased that it’s over,” Coyle said.
The City anticipated that senate bills 2 and 1152 would be approved, City Manager Erik Walsh told City Council and accounted for them in budget projections. The city’s fiscal year 2020 budget, which starts Sept. 1, will take a “significant hit,” Walsh said.
The telecommunications bill will reduce the City’s general fund by more than $7.3 million as telecommunication companies successfully lobbied the Legislature to lower the franchise fees cable and internet providers pay to local governments.
Currently, these companies, if they offer both cable and internet, pay two different fees to the City amounting to a double tax, they argued. Starting this summer, they will only have to pay whichever fee is higher.
“It’s not a double tax,” Coyle said. “Those fees are not based on the cost … of providing the real estate for [these companies] to run a line. Those costs are based on the percentage revenue of what you charge the customers to use public land for [their] private service.”
That’s money that could be spent on filling sidewalk gaps or hiring more police officers, Councilman Rey Saldaña (D4) said. Saldaña chairs the Council’s Intergovernmental Relations Committee that helps formalize the City’s legislative agenda.
“I don’t remember having conversations about that [bill] early on as a threat,” Saldaña said. “How did we miss that?”
Typically legislation goes through a rigorous conversation between stakeholders and lawmakers in the Legislature, Coyle said. That didn’t happen with SB 1152.
“There was no negotiation,” Coyle said. “It was a sneak-attack bill that ultimately will really hurt us and other cities across the state.”
It’s also unclear if the savings will be passed on to the customer, Coyle said, as the bill does not include a way to ensure that.
Cities wanted to work with these companies on a compromise that accommodates new technology that combines cable and television lines, Coyle said, but they weren’t interested in dropping this bill in favor of having that discussion. It’s possible that the bill will face a legal challenge in connection with a state law that calls for appropriate compensation for use of public land and facilities.
The success of the telecommunication lobby in this case “speaks to the worst kind of politics,” Saldaña said, where policy can be purchased.
As for the 3.5 percent property tax revenue cap, San Antonio and other cities lobbied to secure a provision in the bill that allows cities to “bank unused tax capacity” if it collects less than the cap and use it up to three years later, Coyle said. The cap was previously set at 8 percent. If the City wants to collect 3.5 percent more than it did in a previous year, it will have to call an election for voter approval.
Under a 3.5 percent cap without the ability to “bank” its revenue, the City would have had $137 million less in revenue, and the savings to the average homeowner would have been $1.65 cents each year during the past 10 years. The provision cuts that negative revenue impact in half, Coyle said.
“We walked away in fairly good shape,” Mayor Ron Nirenberg said. But this session “was a mixed bag.”
But it also was “historic,” Nirenberg said, in that “we finally turned the tide on school finance reform” that could lead to meaningful property tax relief.
The $11.5 billion House Bill 3 increased the state’s share of public education from 38 percent to 45 percent, which means school districts can lower their burden on taxpayers.
“It could have been a whole lot worse, and I call that a success,” Nirenberg said.