Everything You Need to Know About Property Taxes. Presented by

Transcription

1 Everything You Need to Know About Property Taxes Presented by

2 2017 REVIEW KELLI MORRISON

3 Value Increases Values were up significantly for the 3 rd year in a row Property Type 2015 FINAL % Increase 2016 FINAL % Increase 2017 NOTICED % Increase 2017 FINAL % Increase Office 28.66% 20.99% 19.67% 13.15% Retail 30.70% 22.90% 25.20% 13.70% Apartments 11.44% 12.13% 16.31% 9.38% Industrial 39.90% 21.50% 14.34% 9.03%

4 Number of Protests Filed Total Protests Filed 109,141 Total Protests Filed 116,655 Total Protests Filed 126,301 Portfolio % of Total Portfolio % of Total Portfolio % of Total Residential 83.29% Residential 83.13% Residential 85.78% Commercial 11.73% Commercial 12.28% Commercial 11.28% Personal 4.98% Personal 4.59% Personal 2.94%

5 Commercial Litigation Stats Overall Filed Lawsuits Overall Filed Lawsuits 723 Overall Filed Lawsuits 881 Portfolio % of Total Portfolio % of Total Portfolio % of Total Hotels 6.47% Hotels 4.70% Hotels 3.86% Industrial 10.92% Industrial 12.13% Industrial 13.87% Land 18.84% Land 12.34% Land 11.72% Misc. 0.97% Misc. 1.05% Misc. 1.14% Multifamily 19.23% Multifamily 25.11% Multifamily 22.67% Office 17.00% Office 16.20% Office 16.78% Office Condo 0.68% Office Condo 0.35% Office Condo 1.01% Retail 25.89% Retail 28.12% Retail 28.94%

6 TCAD Sources of Data Costar, Austin Investor Interests, TREPP, Real Capital Analytics, Austin Business Journal, Austin American Statesman, CBRE, PWC, Fannie Mae, Freddie Mac, REIS, Korpacz, Capital Market Research, Weitzman, Brokerage Office Publications, RERC, JLL, SEC Reports, Internet, Owner Surveys, etc. In 2017, TCAD had 95 appraisals commissioned over all commercial property types TCAD performs annual inspections of many properties Attendance at local real estate conferences

7 2018 PREVIEW KELLI MORRISON

8 2018 is a Ratio Study Year: What is a Ratio Study? Every other year, the State Comptroller performs a study on the assessed values of properties compared to its estimates of market value Appraisal District s assessed value must be within +/-5% of the market value to pass the study If the Appraisal District fails the study, the State can withhold funding from the impacted school district(s)

9 2018 is a Ratio Study Year: What does this mean for values? The Appraisal District will likely argue for 100% of purchase prices for any recently-sold properties through the administrative appeal (ARB) level The Appraisal District will be under more pressure to be aggressive with its valuations and less willing to make changes

10 Top-lining A process of agreeing to disagree to a value, while preserving your right to further appeal (litigation or arbitration) Avoids the risk of going before the ARB, where the value could be sustained or increased. ARB members often do not understand the complexity of commercial appraisal, which puts the taxpayer at a disadvantage Has become a common practice

11 Binding Arbitration Lower-cost alternative to filing a lawsuit in District Court Intended for owners with lower-valued properties where filing a lawsuit may not be cost-effective Must be filed no later than 45 days after receipt of the ARB Final Determination of Value Agent/Owner, Appraisal District representative, and Arbitrator meet via teleconference or in-person meeting The value threshold for arbitration increased from $3 million to $5 million, effective September 2017 The filing fee ranges from $500 - $1,550, with all but $50 refunded (if successful)

12 How can you help us be the most effective in 2018? Client Meetings - we want to know everything--the good, the bad, and the ugly Information Request - there is never too much information you can give us - in addition to our information request if there are any appraisals or purchase offers, or if you are planning to take your property to market - we need to know! Open line of communication - if you ever have any questions, comments, concerns - CALL US!

13 OFFICE STEVE LAAS

14 Office Portfolio Travis County TCAD OFFICE PROPERTY TYPES USE CODE 50 HI-RISE OFFICE > 6 Stories USE CODE 51 LARGE OFFICE > 35,000 SF USE CODE 52 MEDIUM OFFICE 10,000 SF 35,000 SF

15 Office Portfolio Travis County How TCAD sees your office building:

16 Office Portfolio Travis County How we portray your office building:

17 Office Portfolio Travis County Reality:

18 Office Portfolio Travis County Total NRA 52,230,616 52,425,410 52,453,941 53,277,376 53,717,025 Value $7,004,316,780 $8,029,479,436 $10,336,527,888 $12,702,746,410 $14,491,264,951 # of Buildings Value/SF $ $ $ $ $ % Δ 14.21% 28.66% 20.99% 13.15% Class A NRA 27,982,713 28,177,507 28,206,038 29,029,473 29,441,335 Class A Value $4,469,652,315 $5,198,491,689 $6,870,997,151 $8,770,072,929 $10,101,165,543 Class A Buildings Class A Value/SF $ $ $ $ $ % Δ 15.50% 32.04% 24.02% 13.57% Class B NRA 22,786,736 22,786,736 22,786,736 22,786,736 22,786,736 Class B Value $2,450,594,604 $2,717,878,665 $3,337,905,584 $3,791,941,055 $4,264,832,587 Class B Buildings Class B Value/SF $ $ $ $ $ % Δ 10.91% 22.81% 13.60% 12.47% Class C NRA 1,055,259 1,055,259 1,055,259 1,055,259 1,055,259 Class C Value $66,051,879 $70,950,661 $80,488,433 $82,553,427 $90,742,037 Class C Buildings Class C Value/SF $62.59 $67.24 $76.27 $78.23 $85.99 % Δ 7.42% 13.44% 2.57% 9.92%

19 Office Summary by Class $11,000,000,000 $10,000,000,000 $9,000,000, % 15.1% $8,000,000,000 $7,000,000, % $6,000,000,000 $5,000,000,000 $4,000,000, % 13.5% 24.4% 18.1% 12.4% $3,000,000, % 7.6% $2,000,000,000 $1,000,000,000 $0 2.8% 11.1% 21.5% 20.6% 11.8% Class A Class B Class C

20 Office Portfolio Travis County 2018 Projection

21 Office Portfolio Travis County 2018 Projection 5% to 15% increases; depending on submarket and building class

22 Office Portfolio Travis County Why are Values so High?? - Notable Office Transactions 5 th & Colorado, 179,351 SF, built in 2016 $119,000,000 ($663.50/SF) 100 Congress, 411,536 SF, built in 1987 $245,000,000 ($595.33/SF) Domain 7, 221,973 SF, built in 2015 $98,907,284 ($445.58/SF) Capital Ridge, 216,511, built in 2015 $96,000,000 ($443.40/SF) Note: TCAD will time trend the sales

23 Office Portfolio Travis County Why are Values so High?? - Notable Office Appraisals 1001 Congress, 24,737 SF, built in 2002 $10,000,000 ($404.25/SF) 823 Congress, 181,351 SF, built in 1970 $62,000,000 ($341.88/SF) Terrace 7, 192,214 SF, built in 2002 $61,900,000 ($322.04/SF) Midtown Medical, 82,000, built in 2003 $32,500,000 ($396.34/SF) Note: TCAD will time trend the sales

24 Office Portfolio Travis County TCAD Sources of Data Costar, Real Capital Analytics, TREPP, Real Estate Alert, Austin Investor Interests, Austin Business Journal, Austin American Statesman, Korpacz, Capital Market Research, CBRE, Weitzman, Local Business Conferences, PWC, Brokerage Office Publications, RERC, JLL, Fannie Mae, Freddie Mac, SEC reports, Internet, Owners replying to Surveys,

25 Office Portfolio Travis County HOW CAN YOU HELP US?? Income and expense statements, rent rolls (as of ), capital improvement budgets, lease proposals for leases that were not accepted, etc. Details are important (lease summaries help us determine market rent) Client Interview helps us better understand your property. Recent appraisals, purchase offers or listings

26 Office Portfolio Travis County Income Valuation Model (CBD & SWE)

27 APARTMENTS JASON LEE

28 TCAD s Apartment Use Codes 08 Apartment with 50+ Units (but labeled as apartment with 100+ Units) 06 Apartment with 26 to 49 units 05 Apartment with 5 to 25 units Neighborhood Code then added to distinguish general location Examples: 08FNW; 08NE; 08SW; 05CEN; 06EAS; etc.

29 All Apartments Travis County 46% 42% 543 Apts 12% 143 Apts 486 Apts 08 (50+ Units) 06 (26-49 Units) 05 (5-25 Units)

30 Large Apartments (08) Travis County 486 Total 9.5% 32.7% 57.8% Class A Class B Class C

31 $14,000,000,000 $12,000,000,000 $10,000,000,000 Where we ve been Large Apartment Values % +9.81% +7.60% $8,000,000,000 $6,000,000, % % $4,000,000,000 $2,000,000,000 $ % % % % % +7.30% % % % % Class A Class B Class C

32 Where we ve been Medium Apartments (06 Apts 26 to 49 Units) $500,000, $450,000,000 $400,000, % $350,000, % $300,000, % $250,000, % $200,000,000 $150,000,000 $100,000,000 $50,000,000 $ Apts (26-49 Units)

33 Where we ve been $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 Small Apartments 05 5 to 25 Units) % % % % % $ (5-25 Units)

34 How the Taxing Jurisdictions see Value Increases:

35 How it feels to Property Owners:

36

37 Sales Prices vs. Assessment Value Canyon Resort Great Hills Jan-17 $44,500,000 $38,000, % Barton Creek Villas Sep-16 $51,250,000 $43,594, % Ridge at Barton Creek Jan-17 $51,750,000 $47,635, % RARE Oct-16 $20,000,000 $11,100, % TCAD REPORTED SALES VS FINAL VALUES - CLASS A Mandalay Dec-16 $35,550,000 $30,964, % University Estates Nov-16 $77,700,000 $57,347, % University Village Nov-16 $54,290,000 $39,152, % Promesa Nov-16 $45,050,000 $40,427, % Remington Hills Sep-16 $25,750,000 $22,640, % The Brodie Sep-16 $48,900,000 $44,931, % Bridges at Volente Sep-16 $25,500,000 $20,587, % Westlake Vistas Aug-16 $65,130,000 $57,594, % TCAD REPORTED SALES VS FINAL VALUES - CLASS B Canvas Oct-16 $24,500,000 $20,916, % Parker Sep-16 $22,800,000 $12,805, % Laurel Woods Jun-16 $16,800,000 $15,692, % OSLO May-16 $16,150,000 $14,484, % TCAD REPORTED SALES VS FINAL VALUES - CLASS C/D FELIZ Oct-16 $11,400,000 $7,637, % VIDA Oct-16 $15,150,000 $10,811, % AMOR Oct-16 $11,800,000 $8,873, % Mueller 51 Sep-16 $7,665,000 $3,640, % Joplin at Crestview Sep-16 $9,500,000 $7,903, % West Koenig Flats Nov-16 $39,800,000 $36,807, % Lantana Apts Apr-16 $7,400,000 $6,321, % The Arrangement Aug-16 $38,900,000 $25,270, %

38 All Sales reported by TCAD for 2017 Value Assessment Cap Rates range from 3.49% to 5.36% (excluding Tax Credit sales) 76 Sales: 6 reported with Cap Rates above 5%.

39 TCAD Income Calculations

40 Sticker Shock and Appeal Efforts $14,000,000,000 Noticed Values vs. After Appeal Values $12,000,000, % +7.60% $10,000,000,000 $8,000,000,000 $6,000,000,000 $4,000,000, % % $2,000,000,000 $ % % 2016 Final Values 2017 Noticed Values 2017 Final Values Class A Class B Class C

41 Sticker Shock and Appeal Efforts $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 Noticed Values vs. After Appeal Values % % % % $ Final Values 2017 Noticed Values 2017 Final Values 05 Apts 06 Apts

42 2018 What should we expect?

43 INDUSTRIAL MIKE MORRIS

44 Industrial Overview 2018 TCAD INDUSTRIAL PROPERTY TYPES USE CODE 60 - BULK WAREHOUSE < 25% FINISH OUT USE CODE 64 - OFFICE WAREHOUSE 25% TO 50% FINISH OUT USE CODE 65 - FLEX WAREHOUSE 50% TO 75% FINISH OUT USE CODE 66 - SERVICE CENTER > 75% FINISH OUT

45 TCAD s Industrial Value Changes 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Industrial Value % Increases 39.9% 21.5% 9.0% 10.4% $2.2 Billion $4.3 Billion

46 Value Per Use Type MILLION $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 USE CODE 60 USE CODE 64 USE CODE 65 USE CODE 66 < 25% FO 25% to 50% FO 50% to 75% FO >75% FO

47 2017 Use Code Value To Total Value 27 % 40 % 9 % 23 % USE CODE 60 USE CODE 64 USE CODE 65 USE CODE 66 < 25% FO 25% TO 50% FO 50% TO 75% FO >75% FO

48 TCAD Income Model 60NOR < 25% FINISH OUT 64NOR 25% TO 50% FINISH OUT

49 TCAD Income Model 65NOR 50% TO 75% FINISH OUT 66NOR >75% FINISH OUT

50 Why We Need Your Information Possible Reasons For Value Adjustments Physical Adjustments Size, Clear Height, Interior Finish Out, Sprinklers, Functional Layout, Dock-High vs Grade-Level Loading, Site Amenities, Parking Ratios, Truck Turning Radius, Accessibility, Soil Condition or Drainage, Foundation Issues, etc. Income Adjustments Rent Concessions, Tenant Improvement Allowances, Expense Caps/Stops, Capital Replacement Items (roof replacement, HVAC, repair/replace driveway or parking areas, bathrooms, ADA compliance cost), etc.

51 Industrial Market Indicators Vacancy Warehouse Flex/SC Rental Rates 7.50% trending up 9.80% trending up Asking Rates are trending flat Warehouse $0.45 to $0.75 NNN Flex/SC $0.80 to $1.25 NNN Cap Rates Class A 5.50% to 6.00% Class B 6.00% to 7.00% Class C 7.50% to 8.50%

52 New Construction 2017 / 2018 Free Port Tech South 280,000 SF Southeast Burleson Commerce Park 513,500 SF Southeast Commerce Center South (4 Bldgs) 328,570 SF Southeast Commerce Center South Bldg ,280 SF Southeast Tech Ridge Bldg ,200 SF Northeast Tech Ridge Bldg ,395 SF Northeast Heritage Crossing Bldg. 4 80,340 SF North 2017 TOTAL NEW CONSTRUCTION 1,498,285 SF 2018 NEW CONSTRUCTION (12 Bldgs) 1,676,756 SF Travis County

53 RETAIL LANCE LAWSON

54 Retail In Travis County Skyrocketing Values

55 Overall Value Change $9,000,000,000 $8,000,000, % $7,000,000, % $6,000,000,000 $5,000,000, % $4,000,000,000 $3,000,000,000 $2,000,000,000 $1,000,000, % 10.9% $ Total Value Values Increased 105% from 2013 to 2017 ($4.1B to $8.4B)

56 TCAD s Retail Value Changes 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Year over Year % Increases 30.7% 22.9% 13.7% 10.9% 5.3% Morrison & Head was the registered agent on 26% of the $8.4B in value for 2017.

57 TCAD s Retail Value Changes Total NRA 36,097,028 36,695,382 37,208,767 37,953,680 38,345,959 Value $4,128,581,023 $4,578,250,140 $5,982,389,904 $7,352,327,271 $8,359,725,511 Value/SF $114 $125 $161 $194 $218 % Δ 5.3% 10.9% 30.7% 22.9% 13.7% Class A NRA 13,815,503 14,384,641 14,886,276 15,588,751 15,981,030 Class A Value $1,906,996,908 $2,163,798,796 $2,999,558,470 $3,807,320,394 $4,382,588,817 Class A Value/SF $138 $150 $201 $244 $274 % Δ 7.6% 13.5% 38.6% 26.9% 15.1% Class B NRA 14,370,227 14,389,890 14,401,640 14,444,078 14,444,078 Class B Value $1,550,331,584 $1,668,639,714 $2,076,369,499 $2,451,488,964 $2,755,090,101 Class B Value/SF $108 $116 $144 $170 $191 % Δ 3.6% 7.6% 24.4% 18.1% 12.4% Class C NRA 7,911,298 7,920,851 7,920,851 7,920,851 7,920,851 Class C Value $671,252,531 $745,811,630 $906,461,935 $1,093,517,913 $1,222,046,593 Class C Value/SF $85 $94 $114 $138 $154 % Δ 2.8% 11.1% 21.5% 20.6% 11.8%

58 Retail Summary by Class $5,000,000,000 $4,500,000, % $4,000,000, % $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000, % 7.6% 3.6% 7.6% 11.1% 2.8% 38.6% 24.4% 21.5% 18.1% 20.6% 12.4% 11.8% $500,000,000 $ Class A Class B Class C

59 TCAD s Retail Type Codes 30; Strip Center < 10,000, SF 40; Regional Shopping Mall (Hill Country Galleria) 41; Community Shopping Center (Arboretum Market) 42; Neighborhood Shopping Center (Escarpment Village) 43; Strip Center > 10,000 SF 44; Grocery Store 45; Department Store > 25,000 SF 46; Discount Store > 25,000 SF

60 Notable Transactions (2016 & 2017) Shops at the Galleria, 498,834 SF $132,000,000 ($265/SF) Per TCAD Brodie Oaks Shopping Center, 322,590 SF $93,000,000 ($288/SF) Per TCAD Westwood Shopping Center, 183,655 SF $83,400,000 ($493/SF) Per TCAD Mueller Shopping Center, 10,912 SF $6,000,000 ($550/SF) Per TCAD Note: TCAD will time trend the sales

61 Sample TCAD Commissioned Appraisals (1/1/2017) Shady Hollow Village, 104,462 SF $27,050,000 ($259/SF) - CBRE Dillard's, 157,030 SF $17,150,000 ($109/SF) - CBRE Domain II, 370,697 SF $139,000,000 ($375/SF) CBRE Pleasant Valley Plaza, 18,188 SF $2,300,000 ($126/SF) CBRE Note: TCAD will time trend the appraisals

62 TCAD s 2017 Proforma Model Central (CEN)

63 TCAD s 2017 Proforma Model Central (CEN)

64 Looking to 2018 $10,000,000,000 $9,500,000,000 $9,000,000, % 10-15% $8,500,000,000 $8,000,000,000 $7,500,000, % 13.7% $7,000,000, % $6,500,000,000 $6,000,000,000 $5,500,000,000 $5,000,000, Notice 2016 Final 2017 Notice 2017 Final 2018 Projection Total Value

65 And This is When Morrison & Head Steps In Keys to success: Property Specific Knowledge and Information Market Knowledge Valuation Experience Comprehensive Analysis Relationships

66 LEGISLATIVE UPDATE RAY HEAD

67 John Kennedy Senior Analyst (512)

68 VALUE & TAX RATE HISTORY MARTIN MERCADO

69 Property Tax Valuation History 5 YEAR REVIEW CITY OF AUSTIN Yr Chg 10Yr Chg Real Estate - Land Market Value $32,544,046,139 $36,723,278,453 $42,548,402,379 $54,185,911,829 $60,306,557, % 118.1% 4.8% 12.8% 15.9% 27.4% 11.3% Real Estate - Improvement Market Value $54,247,808,842 $63,110,795,176 $76,202,881,365 $84,149,977,168 $93,222,685, % 91.8% 9.3% 16.3% 20.7% 10.4% 10.8% Real Estate - Total Market Value $86,791,854,981 $99,834,073,629 $118,751,283,744 $138,335,888,997 $153,529,242, % 101.4% 7.6% 15.0% 18.9% 16.5% 11.0% Bus. Personal Property - Market Value $9,849,489,407 $10,308,389,990 $10,850,140,079 $10,823,198,339 $10,964,905, % 19.9% -2.9% 4.7% 5.3% -0.2% 1.3% Total Market Value $96,641,344,388 $110,142,463,619 $129,601,423,823 $149,159,087,336 $164,494,148, % 92.7% 6.4% 14.0% 17.7% 15.1% 10.3% Agric, Homestead & Exemptions (Loss) $12,883,994,905 $17,238,414,758 $25,452,795,719 $30,591,998,638 $32,713,759, % 195.3% 12.5% 33.8% 47.7% 20.2% 6.9% Net Taxable Value $83,757,349,483 $92,904,048,861 $104,148,628,104 $118,567,088,698 $131,780,389, % 77.3% 5.5% 10.9% 12.1% 13.8% 11.1% Certified Values as of 01/03/2018

70 Total Value in Billions $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- City of Austin Property Tax Valuation History 10 Year Review Property Tax Year Total Market Value Real Estate - Market Value Net Taxable Value Land Only - Market Value Agric, Hmstd Cap & Exempt (Loss) Bus Prsnl Prop - Market Value

71 Property Tax Valuation History 5 YEAR REVIEW TRAVIS COUNTY Yr Chg 10Yr Chg Real Estate - Land Market Value $46,998,434,673 $51,867,840,494 $59,407,169,192 $72,830,502,606 $79,924,775, % 93.2% 4.0% 10.4% 14.5% 22.6% 9.7% Real Estate - Improvement Market Value $77,818,112,522 $90,306,286,492 $107,757,307,697 $118,965,458,695 $131,495,589, % 87.2% 8.8% 16.0% 19.3% 10.4% 10.5% Real Estate - Total Market Value $124,816,547,195 $142,174,126,986 $167,164,476,889 $191,795,961,301 $211,420,365, % 89.4% 6.9% 13.9% 17.6% 14.7% 10.2% Bus. Personal Property - Market Value $11,809,653,781 $12,368,958,407 $12,809,025,120 $12,855,469,629 $13,011,853, % 20.4% -1.3% 4.7% 3.6% 0.4% 1.2% Total Market Value $136,626,200,976 $154,543,085,393 $179,973,502,009 $204,651,430,930 $224,432,218, % 83.3% 6.2% 13.1% 16.5% 13.7% 9.7% Agric,Homestead & Exemptions (Loss) $30,004,449,806 $35,797,313,857 $44,078,013,373 $50,429,403,017 $53,469,005, % 103.6% 9.9% 19.3% 23.1% 14.4% 6.0% Net Taxable Value $106,621,751,170 $118,745,771,536 $135,895,488,636 $154,222,027,913 $170,963,213, % 77.8% 5.1% 11.4% 14.4% 13.5% 10.9% Certified Values as of 01/03/2018

72 Total Value in Billions $230 $220 $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- Travis County Property Tax Valuation History 10 Year Review Property Tax Year Total Market Value Real Estate - Market Value Net Taxable Value Land Only - Market Value Agric, Hmstd Cap & Exempt (Loss) Bus Prsnl Prop - Market Value

73 Austin, Travis County - Tax Rate History Tax Year Austin ISD Travis County City of Austin Travis County Healthcare District Austin Community College Total Effective Rate Total Percent Rate Change 1.2% 1.3% 5.0% 2.8% 1.5% 1.8% -3.4% -3.4% -3.5% -0.7%

74 Austin, Travis County Tax Rate History - 10 Year Review Primary 5 Jurisdictions Tax Rate per $100 Value Total Effective Rate Austin ISD City of Austin Travis County Travis County Healthcare District Austin Community College Property Tax Year

75 Texas Major Metropolitan Tax Rate Comparison Tax Rate per $100 of Value County, Hosp, CC, Etc Tax Rate City Tax Rate School District Tax Rate Total Effective Tax Rate Austin - Travis County Houston - Harris County Dallas - Dallas County El Paso - El Paso County San Antonio - Bexar County Fort Worth - Tarrant County City - County Jurisdiction

76 TAXING ENTITY IMPACT CHET MORRISON

77 Tax Rates Effective Tax Rate - The effective tax rate is a no tax increase tax rate for the tax roll as a whole. It is a calculated rate that would provide the taxing unit with approximately the same amount of property tax revenue that was received in the previous year on properties taxed both years.

78 Tax Rates The following is a simple example to illustrate the concepts in understanding tax rates: Maintenance & Operating Tax Rates Year 1 Taxable Value Tax Rate Taxes Property A $4, $400 Property B $3, $300 Property C $2, $200 Property D $1, $100 Total $10, $1,000 Year 2 Taxable Value % Δ in Value Effective Tax Rate Taxes Property A $4, % $436 Property B $3, % $282 Property C $2, % $200 Property D $ % $82 Total $11, $1,000

79 Rollback Tax Rate The Texas Property Tax Code allows taxing units (other than school districts) to increase the tax rate to the Rollback Tax Rate which is 8% over the Effective Tax Rate. Tax increases above the Rollback Tax Rate are not disallowed, but such tax increases may require voter approval. Seven percent of registered voters in the taxing jurisdiction must sign and file a petition to call for an election. Senate Bill 1 tried to limit the rollback rate to 4% and then negotiated to 5% with a provision that an election was required. It failed to gain the support needed to pass. Senator Bettencourt has vowed he will reintroduce the bill in 2019.

80 Actual New Construction Added to the Tax Roll for the City of Austin The City of Austin had new construction of $2,700,000,000 added to the tax roll for FY2018. New Construction Taxes = $12,009,600

81 Actual New Construction Added to the Tax Roll for Travis County Travis County had new construction of $4,062,303,391 added to the tax roll. New Construction Taxes = $14,989,900

82 Increases by Entity The cumulative increases in the adopted rates over the past ten years were 67.89% by the City of Austin, and 36.26% by Travis County. Actual taxes levied have increased 100% (from $307,929,055 to $617,275,588) by the City of Austin, and 55% (from $391,782,699 to $607,427,760) by Travis County over the past ten years. Budgets for the General Fund have increased 67.5% (from $613,300,000 to $1,027,100,000) by the City of Austin, and 66.18% ($450,754,725 to $749,062,401) for Travis County over the past ten years.

83 Increases by Entity Both the City of Austin and Travis County adopted budgets in September for FY 2018 that included property tax increases in excess of the Effective Tax Rate. The City of Austin increased the M & O Tax Rate by 7.886%, and Travis County increased the M & O Tax Rate by 4.98%. Over the past ten years, Assessed Taxable Value increased 81% (from $76,752,007,737 to $138,775,986,481) for the City of Austin, and 80% (from $95,269,235,051 to $171,000,908,622) for Travis County.

84 General Fund Budget Per Capita Comparisons One way to evaluate levels of government spending is to compare budgeted expenditures per capita to similar governments. Population numbers vary by source, so to use comparable methodologies for each entity, U.S. Census Quick Facts was used. The population numbers are estimated at June 2016 for all entities. Budget numbers came from each Governments budget documents for 2017/2018 which they published online.

85 General Fund Budget Per Capita Comparisons By City City Austin Fort Worth Dallas San Antonio Houston Budget Per Capita $1,084 $795 $970 $801 $870 Population 947, ,113 1,317,929 1,492,510 2,303,482 Expenditure Budget-GF $1,027,128,000 $679,166,273 $1,278,846,913 $1,196,017,236 $2,004,525,865

86 General Fund Budget Per Capita Comparisons By County County Travis Tarrant Dallas Bexar Harris Budget Per Capita $625 $263 $208 $275 $585 Population 1,199,323 2,016,872 2,514,984 1,928,680 4,589,928 Expenditure Budget-GF $749,062,401 $530,790,197 $523,230,620 $531,105,853 $2,687,324,000

87 Indicators of Growth in Spending City of Austin City of Austin 2009 to 2018 (Adopted Budget 2018) Population growth 770,296 to 947,890 (23%) General Fund Budget growth $621,032,000 to $1,027,128,000 (65.39%) The General Fund Budget grew 2.84 times the growth in population (65.39/23) Growth in Taxes Levied $307,929,055 to $617,275,588 (100.46%) The taxes levied grew 4.37 times the growth in population (100.46/23)

88 Indicators of Growth in Spending Travis County Travis County 2009 to 2018 Population growth 1,008,345 to 1,199,313 (18.9%) General Fund Budget growth $450,754,725 (2009 Adopted Budget) to $749,062,401 (2018 Adopted Budget) (66.18%) The General Fund Budget grew 3.5 times the growth in population (66.18/18.19) Growth in Taxes Levied $391,782,690 to $607,427,760 (55%) The taxes levied grew 2.90 times the growth in population (55/18.9) Cumulative tax rate increases over effective tax rate (36.26%)

89 So, Where are City of Austin Taxes Headed?

90 So, Where are City of Austin Taxes Headed?

91 City of Austin General Fund Forecast The revenue forecast is informed by economic and demographic analysis and conservatively estimated. As depicted in the graph the General Fund is projected to remain in balance over the course of the five year forecast horizon at or slightly below the roll back rate of 8%. (Adopted Budget 2018, Vol 1, p.34)

92 City of Austin General Fund Forecast The budget is proposed at the State defined rollback tax rate of $ per $100 of taxable value. I believe this is a fiscally prudent course of action in light of the risk of lower revenue caps being imposed in future fiscal years by the State. --- Elaine Hart, Interim City Manager (Adopted Budget 2018, Vol 1, p.18)

93 What Can Be Done?