City council raises maximum tax rate, considers tax swap with AISD

August 10, 2017 - 8:33 am

AUSTIN (KJCE) - Austin's City Council took a step Wednesday towards what Mayor Steve Adler calls a "creative" idea to keep tax money collected in Austin working in Austin.

Council voted 6-4 Wednesday to raise the maximum tax rate from its current effective rate of 41.07 cents per $100 to 46.51 cents - a 13.2 percent increase. The move does not mean an actual change to the tax rate yet; however, Council faced a Wednesday deadline to set a maximum rate. The final rate would be set through the budget process, which needs to be finalized by October 1.

The "tax swap" proposal being discussed would, in theory, help lower the recapture payments Austin ISD currently sends to the state under the Robin Hood program - payments that currently total hundreds of millions of dollars. The city would raise its property taxes while the school district would lower its rate, with the additional money being collected by the city then being sent to the school district. By reducing the amount of taxes AISD collects directly, fewer funds are available for the state to redistribute to other districts across the state.

According to Council agenda, the proposal would have the city enter into an interlocal agreement with AISD to "provide funding for services that serve a municipal purpose."

Complicating the proposal, however, are the nearly 25 percent of City residents who fall within school districts other than AISD. Those residents, based on median-value homes, could end up seeing an increase of nearly $50 in their property tax bills, while an Austin resident within AISD boundaries could see their tax bill drop by up to $30.

Under current state law, if the final tax rate is raised more than 8 percent, residents would be able to petition for a referendum on the increase.

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