Some local media have suggested that a Tax Rate Election (TRE) may occur for the 2025-26 City of Austin budget. Recent Council activity indicates it’s all but decided. The Audit and Finance Committee meeting on July 22nd, along with the City Council Message Board posts, are pieces of evidence worth paying attention to. The Council is taking the formal steps that lead to a TRE, per both city procedure and Texas law.
A Tax Rate Election is triggered when the City proposes a tax rate that is above the 3.5% voter-approval threshold set by state law. If voters approve the rate, a budget with the new tax rate will remain in place. If not, it must be reduced proportionately. Through Senate Bill 2, in 2019, the Texas Legislature decided on the 3.5% cap, intentionally lower than the previous 8% limit. Due in part to this change, local governments have had a difficult time keeping up with rising costs, and Texas’s restrictions on fundraising tools commonly used in other states have only fueled this dilemma. According to Texas Tax Code Section 26.07, the Council is only authorized to adopt one budget per year.
Recent Council Message Board Updates
On July 21st, a post from Council Member Mike Siegel clarified that the Council must adopt a single budget, rather than a base and an add-on. Siegel asserted that if the Council majority supports a TRE, they must proceed on that basis now. In his post, Siegel also noted various consequences if the TRE fails, including, for example, reductions in police contracts, writing that failure to raise revenue would mean “renegotiating police contracts downward to maintain core services.”
Mayor Watson’s post after the July 22nd Audit & Finance Committee Meeting is also telling. He shared a “Tax Rate Election Decision Tree” which has been adopted by the Council. While the tree may appear visually complex, it ultimately funnels toward a TRE.
Tax Rate Election Decision Tree posted by Mayor Kirk Watson on the City Council Message Board.
In a Watson Wire email the mayor also highlighted the tax burden from all local taxing jurisdictions combined, indicating that the average homeowner’s property tax bill increased by over $2,000 in the period between 2018 and 2023. Watson refers to these figures to highlight the importance of weighing affordability concerns against service needs.
For the average household under Broadnax’s proposed budget, the city’s portion would increase by about $138.
For a TRE the Council is considering tax increases between one and eight cents per $100,000 valuation, beyond the increases proposed by Broadnax. According to a slide presented by the Finance Office on July 22 the additional City tax increase on a “typical homeowner” would range from $195 to $477 annually.
City Financial staff present a slide to Council detailing the range of potential tax hikes if the Council chooses to pursue a Tax Rate Election.
July 22nd Audit & Finance Committee Meeting
Staff presentations and Council discussion during the July 22 Audit and Finance Committee Meeting also show clear direction toward a Tax Rate Election (TRE). During the meeting, various potential tax rate increase scenarios were reviewed, along with possible items to be funded by a TRE. Mayor Watson outlined the upcoming timeline, including a public hearing scheduled for July 31, followed by final budget readings and tax rate hearings between August 13 and 15. The new fiscal year will begin on October 1.
Austin City Manager T.C. Broadnax proposed a record $6.3 billion budget for fiscal year 2025–26, based on a 3.5% property tax revenue increase. While this is the maximum allowed under state law without triggering a statutory tax rate election, and therefore technically balanced, it relies on various controversial public service cost reductions, which have stirred concern among many Council Members. Rising costs are being driven by several factors, including the expiration of pandemic-era federal funding, inflation in public safety and health services, and increasing personnel and contract costs across city departments. “While the Proposed Budget is balanced,” Broadnax declared, “it does not fully fund our needs. The loss of one-time federal dollars and the continued impacts of inflation have put significant pressure on our ability to maintain existing service levels.”
This concern prompted Mayor Watson to ask the City Manager to prepare alternative budget scenarios that include tax rates above the threshold. His immediate action serves as a direct signal of the possibility of a TRE, suggesting it as a necessary alternative to prevent service erosion.
Next Steps
The City Council plans to vote on a maximum tax rate by late July or early August, with the final adoption of the budget and any TRE resolution scheduled for mid-August. If a TRE is ordered, the election will take place on the November uniform election date, and if approved, the proposed budget will be implemented. If defeated, the City will enact a proportionate reduction in services and spending.
In conclusion, although the next steps remain technically undecided and unannounced, the Council’s process, messaging, and procedural moves indicate a clear leaning toward a TRE.
Kaitlin Reed has joined the Austin Independent as an intern. She will contribute news stories as well as help strengthen, or create, our social media presence. For examples of her work in the latter area see our new Instagram page. Daryl
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