Lee Leffingwell says voters can approve bond propositions without raising taxes

Austin Mayor Lee Leffingwell floated a pocketbook reason to support bond proposals placed on the November 2012 ballot by the Austin City Council.

"These seven bond proposals offer Austinites an important opportunity to invest in our community’s future without raising taxes," Leffingwell said in an Aug. 31, 2012, press release from a group backing the bonds.

Leffingwell, who chairs the Unity PAC urging voter support of the bond propositions, aired his reference to taxes less than two weeks before he voted, alone among council members, against approval of the city’s new $3.1 billion budget.

At the body’s Sept. 11, 2012, meeting, Leffingwell said the council had failed to try hard enough to scale back a planned property tax increase. Under the budget, which took effect Oct. 1, the property tax rate grows from 48.11 cents per $100 of property value to 50.29 cents. That means a city tax bill of $897 for the owners of a median-value Austin home of $178,327, a $20 increase over the previous year.

So, would approval of the $385 million in proposed bonds not raise taxes?

The proposed bonds reflect what remains from an original wish list of $1.3 billion in possible bond-backed projects, the Austin American-Statesman has reported. The balloted bonds would pay to renovate libraries, improve parks, repair roads and build or repair low-income housing. They amount to Austin's first full-scale bond package since 2006.

By email, Unity PAC spokesman Mark Nathan said Leffingwell’s no-tax-increase claim stems from a December 2011 analysis presented by city staffers to the council showing that some $385 million in general-obligation bonds could be issued without requiring an increase in the city’s existing debt service property tax rate, meaning the rate needed to generate enough revenue to pay the bonds’ principal and interest costs.

Indeed, a chart in the presentation indicates that the issuance of $385 million in bonds would keep the debt tax rate steady. The chart indicates that issuing up to $725 million in bonds would require up to a 3-cent increase in the debt rate.

However, another chart in the presentation indicates that if $385 million in bonds were issued, the average homeowner would still pay $38 more in city taxes as of 2016. The chart says that would be the increase in city taxes on a $200,000 home, taking into account modest expected increases in assessed values.

By email, Nathan told us there is no certainty property valuations will go up, so it’s possible taxpayers would not pay more in taxes due to valuations.

The Statesman’s Dec. 17, 2011, news article drawing on the presentation quotes Greg Canally, a city finance officer, explaining that the debt tax rate could be kept steady despite the issuance of $385 million in fresh bonds because the city is continually retiring previously issued debt. Overall, the story says, the city's tax rate at the time was 48.11 cents per $100 valuation, including the 12.6 cents to pay debt on previously approved bonds.

Of late, the debt tax rate is 12 cents, an adjustment driven by an uptick in home valuations, the city says. In his email, Nathan reminded that council members only hold sway over the city’s tax rates. Property valuations are overseen by the Travis Central Appraisal District.

"That's why, in my experience, it's almost always the vernacular of elected officials, and very frequently of the media as well, to mean ‘tax rates’ when speaking of ‘taxes,’" Nathan wrote.

Nathan noted the Statesman’s Aug. 15, 2012, news article on the council giving preliminary approval to putting the bond issues on the ballot, which included: "The council wants a bond package no larger than $385 million because that number will not require a property tax increase."

The story also brings up the possible tax impact of the bond proposals not happening: "If the bond package isn't placed on the ballot or doesn't pass, the debt portion of the city's tax rate would probably stay roughly the same over the next few years, then could go down in 2015, 2016 and 2017, city budget staffers said. They have no estimate of what the decrease would be."

In a telephone interview, Canally told us that if none of the bond propositions pass, the debt tax rate would drop about two cents over about five years starting in 2015, "all other things being equal." On a $200,000 house, the resulting city-tied tax reduction would be about $40, he said.

A key factor would be changes in home valuations. If valuations surge, there would be less pressure on tax rates, while if valuations drop, there would be pressure to raise rates. Canally said that since the early 2000s, the city’s debt tax rate has dropped from about 21 cents per $100 valuation as a result of increases in home valuations.

By email, Nathan agreed the debt tax rate would drop two cents should the bond propositions fail, presuming the city issues outstanding bonds previously approved by voters as planned; city assumptions about assessed valuations hold true; and voters authorize and the city issues no additional general-obligation debt.

Our ruling

Leffingwell said the bond propositions offer an opportunity to invest "without raising taxes."

No tax-rate increase would be required. But this statement overlooks the fact that taxes paid by homeowners and others would still be going up a bit, presuming expected increases in property valuations. Also unsaid: The debt rate would decrease two cents as of 2015 if the propositions fail to pass.

Leffingwell’s claim leaves out important details. It rates Half True.

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Chain email

stated on October 7, 2010 in a chain e-mail.

Says Texas voters are being asked to act this November on a proposed constitutional amendment affecting property taxes.