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Repealing the revenue cap is only part of the answer

Repealing the dumb revenue cap charter amendment from 2004 won’t solve the impending fiscal problems by itself. It’s still a good idea to repeal it.

Mayor Annise Parker

Mayor Annise Parker

With an estimated $144 million budget shortfall looming next summer, the city’s finance director delivered a harsh message Tuesday: even lifting a voter-imposed revenue cap will not save the day.

Instead, city officials will have to cobble together a package of contentious reforms, including possible service cuts, layoffs and new revenue sources, to close a budget gap that could swell to more than $200 million by fiscal year 2018 if nothing is done. Though the city’s revenue cap is among the problems facing the budget, removing or reducing that cap would not solve the city’s spiking pension costs and debt obligations.

Surging property tax appraisals are expected to run the city into the voter-imposed revenue cap next summer, forcing a cut in the property tax rate. But projections put the revenue lost to the cap at just 12 percent, or $17 million, of the deficit next fiscal year, which begins July 1, 2015.

Changing or modifying the cap, which would require going to the voters, may be part of the city’s solution. But budget chief Kelly Dowe warned the budget and fiscal affairs committee that it can’t be the whole solution.

“There’s no silver bullet for bridging these gaps going into the future,” Dowe said.

So city officials are left with a long list of possible fixes, from service cuts to a garbage collection fee to a shift in health care costs to ambitious pension reforms.

See here, here, and here for the background. I never expected eliminating the revenue cap to eliminate the short-term fiscal problems the city faces, but the point is that having the cap in place makes the hole deeper than it needs to be. The last thing in the world anyone would suggest at a time like this would be to cut the property tax rate and thus reduce the funds available to the city to meet its obligations, but that’s exactly what the revenue cap would do. It forces a priority on the city at a time when there are many other things that should come before it. It’s stupid and short-sighted, and that’s why I have always opposed it.

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  1. Jules says:

    Tax breaks for the wealthy in the form of 380 payments will carve $14.5M out of the 2015 budget. This is 10% of the projected shortfall. This number will only go higher for many years as the City starts making payments to downtown developers to build apartments that rent for over $5,000 a month; and making payments to the developers of an upscale shopping center so that Cartier and Dior can move from one high-end shopping center to another.

    The property tax cap will help lower income and middle class people whose taxes have skyrocketed due to higher appraisal values.

    Are you against the 380 tax breaks for the wealthy too or only against the tax breaks that help the poor and middle class?

  2. Jules, this isn’t a property tax cap, by which I think you mean an appraisal cap. It’s a revenue cap, which limits the total growth of city tax and fee collections. If it remains in place, it will force an across-the-board rate cut, which will be of much greater benefit to the people that own expensive homes and commercial properties than it will be to poor or middle class folks. It will also force cuts to city services, and those will affect the poor and middle class much more greatly. These are two different things.

  3. Jules says:

    Charles, yes, it is a revenue cap and will affect everyone. But only because appraisals are going through the roof. The cost of living isn’t keeping up with appraisals – people aren’t getting raises equal to the increase in their property valuation.

    Do you support the tax breaks via 380’s that only benefit a wealthy few? These tax breaks are equally forcing cuts to city services. A dollar in tax breaks is a dollar in tax breaks.

  4. Jules says:

    While both the 380 tax cuts and the revenue cap were both known to the current administration, the 380 tax cuts were something the administration could have easily done something about – not granted them.

  5. Paul kubosh says:

    I can’t understand, after all that bad news, why dowe would be in favor of a 800,000,000 justice complex? Why is Parker pushing that? Does anyone really care?

  6. Ross says:

    The City actually received something of value for the 380 agreements, like roads and infrastructure. The 380 is how the City pays the developer back for building things that belong to the City.

    I would rather see the tax rebates to apartment developers in Downtown go away.

    Paul, do you think we need a new justice center to replace the crappy buildings we currently have? If so, how much do you think it should cost? If not, then do you think we need to do some amount of renovations to the existing buildings, or do you just want City employees to work in bad surroundings?

  7. Paul kubosh says:

    Ross….can’t afford it plain and simple. 800,000,000 is theft and political payoff plain and simple. You do not need any of the crap they are saying. You sure don’t need a new municipal court.

  8. Paul kubosh says:

    Finally I think the employees would rather keep their job and pension then have a new building.

  9. Jules says:

    Ross, the tax rebates to the downtown apartment developers are 380 agreements.

  10. Steven Houston says:

    I agree with Paul on this one. Most major building projects should be put on hold, all those million dollar council slush funds should go back to the general fund, and all 380 agreements should be ended if legally able. Further, all TIRZ’s should be dismantled and spending on frills that are unsupportable after this year should be cut now, as well as change the arts funding ordinance to send the money to paying off debt.

    Look, it’s not like these debt payments coming up from 2015 to 2018 were a big surprise. Kelly Dowe, the head of city finance has talked about them publicly since he took office (and those pay raises) since 2011 on a very regular basis. To suggest they were all a big surprise is simply a lie from those in the know and pure ignorance on the part of those who would not listen. Yet the city continued to spend increasing revenue streams like sailors on shore leave and were re-elected because of it.

    That so many have been in denial about so much is amazing to me because all of this is publicly available. ..

  11. Jules says:

    Steven, yes! Even those 380’s that do pay for infrastructure (not all do) are at best leap-frogging improvements to the front of the line and bypassing the “worst first” policy.

    The City should post all projected 380 payments by year on the internet. Council members are essentially voting on these in the dark, only hearing about the “benefits” and none of the costs. Steven, if a list of projected 380 payments is publically available, I would love to see it. I only know the 2015 projected 380 payment total, $14.5M, because it is a line item in the budget.

  12. Paul kubosh says:

    Steven and I are in agreement. 🙂

  13. Steven Houston says:

    Jules, I’ve pointed out in the past how some of the money in the TIRZ’s is spent, often on silly little things at great expense or on things that would make a councilman blush if tied to him. This is all while a number of issues continue to get worse.

    Paul, even a broken clock is right twice a day. Now, which of us is the broken clock would be a matter of personal opinion but a lot of these matters are tied to term limits, something you don’t have out in the county. Every elected city official feels the need to leave a mark in their allotted time, and they’re gonna do it by cracky regardless if the conditions are right for whatever they champion. I don’t a problem with Parker’s equality ordinance, contrary to what her opponents claim, it wasn’t overly expensive. I have a problem with the fiddling while Rome is burning attitude she took to restore all sorts of previous cuts knowing full well that even with a garbage fee, removing the revenue cap, and all sorts of other suggestions made, the city would be in trouble in the next several years. Every mayor in recent history has taken this stance and it’s going to come back and haunt us all, even those who only have businesses in the city like you. 😉