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Austin’s City Council is considering holding a tax rate election later this year, potentially raising the property tax rate beyond the current 3.5% cap. This move is a response to a projected $2 million budget shortfall for the 2025-26 fiscal year, which is expected to grow to $6 million by 2028. With the current tax rate growth limited by state law, Austin’s leaders are exploring their options to raise additional revenue.
The city has faced constraints since 2019, when the Texas Legislature imposed a 3.5% cap on property tax growth without voter approval. Although the cap has limited Austin’s ability to raise funds, City Council members have now signaled that it may be time to put the issue to voters. A decision on the election would need to be made by mid-August, with an election date possibly set for November 4, 2025.
Budget Director Kerri Lang highlighted that without additional revenue, the city would continue to face a budget deficit. Lang noted that the current fiscal year saw a $160.8 million reduction in property tax revenue capacity due to the 3.5% cap. Austin’s budget staff is already preparing policy recommendations for the City Council to review in April, with final recommendations expected by mid-July.
While city officials have emphasized the importance of limiting tax rate elections to once every four years to avoid “voter fatigue,” they also acknowledged the need to address pressing city services, including mental health programs and homelessness initiatives. Mayor Pro Tem Vanessa Fuentes expressed concern about maintaining funding for vital city programs, especially after the city used federal ARPA funds to support homelessness services, which will expire at the end of 2024.
The City Council is expected to take a deep dive into the policy framework for the tax rate election in the coming months. If the election proceeds, it could set the stage for a significant shift in how Austin funds its growing municipal needs. However, any changes to the tax rate are contingent on voter approval, and the Texas Legislature could potentially alter the rules before the election takes place.
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