Council gives first thoughts on $5.9B draft budget for 2025

The early draft of the city’s 2025 budget weighs in at $5.9 billion, a $400 million increase over the current budget. City Manager T.C. Broadnax said the balanced budget offers increases in city staff compensation and benefits despite lower-than-expected sales tax revenues that in recent months had raised concerns that the city may run a budget deficit or have to dip into reserve funds.

The draft budget was delivered during a special City Council work session on Friday, when Broadnax and financial staff expanded the budget timeline to include detailed projections of possible 2026 budget revenues and expenditures. That shift was welcomed by Council members, who said the two-year view offers a better road map for city spending and long-term projects.

The budget is expected to be approved by mid-August.

Budget officer Kerri Lang offered a detailed look at the many discrete sections of the budget – including the General Fund, utilities and the major cost drivers for the next two years. With the city’s annual property tax increases capped at 3.5 percent by state law, Lang said contributions from Austin Energy and other utilities will need to increase relative to the rest of the budget for the city to keep up with funding its many needs and priorities.

Related to long-term debt, she said payments for general obligation bonds are expected to begin dropping in 2028 when the bond packages approved by voters in 2016 and 2018 will be paid off.

Council members with differing views on the city’s financial strategy expressed their opinions during the presentation, signaling more inquiries in the weeks to come.

Council members Vanessa Fuentes and Chito Vela discussed the need for ongoing support for rental assistance and other programs to curb homelessness, with Fuentes saying the $4.9 million used to increase the city’s budget reserves to 17 percent could be used to fund other needed programs.

“When I think about how our budget is reflecting our commitment – not just to addressing the symptoms of homelessness, but to the root causes – I think we can be doing a lot more. I want us to have a conversation about what it would look like if we maintain the reserve policy at its current (level), at the level that we ended at last year,” she said, noting the prior reserve rate was 16.7 percent. “I’m unsure that we’re adequately investing not only in priorities as it relates to homelessness, but also to the priorities that we’ve received through the Community Investment Budget.”

Council Member Mackenzie Kelly said she’ll ask staff to run the numbers on what the budget would look like with no increase in the city’s portion of property tax levies and no increase in utility fees.

“These increases hit our middle- and low-income residents the hardest … homeowners, renters and small businesses alike,” she said. “Over the next few weeks, I’d like to see a strong effort to finalize a budget that includes no increase in property taxes and utility bills, giving people a break from the irregular cost-of-living hikes that are making Austin more unaffordable.”

Kelly said she also plans to ask for an analysis of the city’s expenditures for contracted professional service workers, with goal of reducing those costs.

Chief Financial Officer Ed Van Eenoo said that over the past 10 years the city budget has grown in specific areas to reflect Council priorities such as animal services, libraries and the parks department, with those areas’ allocations growing relative to the overall budget, or $75.6 million total. As context, Van Eenoo said the state’s 3.5 percent cap on property tax increases have put limits on spending for other community priorities. He said without the state caps and the ability to increase the tax rate by up to 8 percent, the city could easily fund everything asked for in the Community Investment Budget without reaching the previous maximum increases.

Council will have a comprehensive Q&A session with staff about the budget on July 24, with questions due by July 22. A July 30 session will focus on the enterprise funds that cover major entities such as Austin Energy, with those questions due by July 26.

On Aug. 1, Council will hold a public hearing on the budget and will also set the maximum tax rate for property taxes.

Photo made available through a Creative Commons license.

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