Mar 27, 2023 - News

State lawmaker proposal could slash Austin budget

Illustration of a hundred dollar bill stylized as an electric symbol.

Illustration: Aïda Amer/Axios

Austin leaders are alarmed about legislation they say could slash the city's budget and result in higher property taxes — but the bill's author, a Republican state lawmaker from Georgetown, says that's not his goal.

Driving the news: Senate Bill 1110 would in some cases prevent cities from taking revenue from electric utilities they own or operate.

  • State Sen. Charles Schwertner filed the bill after widespread power outages in Austin last month, as some key ratepayers complained about their electric bill payments supporting other important city services.

Context: As much as 9% of city-owned Austin Energy's revenue is shuffled into Austin's coffers, according to Ed Van Eenoo, chief financial officer of the city of Austin.

  • That amounts to about $115 million in fiscal year 2023, per the city of Austin.

Between the lines: In what might be a wily political move, Austin officials warned in legislative testimony last week that stifling the transfer of money from the utility could lead to the raising of property taxes — a third rail for Republican leaders.

  • "Cities need to maintain parks and pay police officers regardless of where the revenue comes from," Van Eenoo told the Senate Business and Commerce committee last week. "Without a general fund transfer, the likely outcome for cities with [municipal-owned utilities] means higher property tax bills."
  • The Legislature passed a bill in 2019, signed into law by Gov. Greg Abbott, that requires local voter approval to raise property tax revenue by more than 3.5%.

Details: Schwertner says he wants to prevent or reduce utility rate increases. He's concerned some cities take too much money from their utilities, leaving the utilities in a poor financial state.

Yes, but: Mark Dombroski, Austin Energy's deputy general manager and chief financial and administrative officer, said the measure would force the utility to slash the general fund transfer to increase rates down the road.

  • "All electric utilities provide a payment to their owners, just in different forms," Dombroski said in his testimony, adding: "Our general fund transfer is very reasonable. It is a benefit to our community."

The other side: Schwertner disputes that the bill would cut city budgets.

  • "That's not right. That's not the intent of the bill," Schwertner said during the hearing. "It just would prohibit transfers that cause a rate increase or cause indebtedness on the part of the utility."

Zoom out: There are 72 municipally owned electric utilities in Texas that the bill could affect.

What's next: The Senate panel would need to approve the bill before it goes to the full Senate for a vote.

  • It would also need to pass the House before going to Abbott for his signature.
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