After over 100 years of exemption, hundreds of Lake Austin properties must pay taxes

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AUSTIN (KXAN) — In a unanimous vote Thursday, Austin City Council opted to put more than 300 properties on the city’s tax rolls.

An exemption that had been around for more than 100 years allowed these properties to avoid paying city taxes, despite the fact that they were within the city limits.

Council also moved to ask the City Manager to look into the possibility of using the new tax dollars this move would generate for high priority city issues like addressing homelessness and improving early childhood education.

The properties that received this exemption exist both north and south of the Colorado River and extend as far west as Mary Quinlan Park and as far east as Tom Miller Dam. Many high-priced homes are included in these properties. City staff found that they had an average market value of $2.5 million with some of these homes valued at more than $10 million.

City staff also estimated that if these properties were on the city’s tax rolls in 2018, they would have generated $3 million in property tax revenue given the year’s tax rate.

However, property owners who came to speak to the council on Tuesday objected to the assumption that everyone who received this exemption lives in a mansion. Many property owners cited financial struggles they’d had in paying property taxes, some mentioned the difficulties seniors in the area face who live on a fixed income.

Properties that had received this exemption are highlighted in red on this map. Map provided by the office of Council Member Greg Casar.

History of the exemption

The exemption was put in place in 1891 when the property was annexed into the city. 

A 1986 ordinance put this exemption formally on the books in Austin after an earlier attempt by the city council then to remove it. At that time, the city said these properties should not have to pay taxes, because they weren’t receiving full city services and because there was confusion over whether they could vote in council and bond elections.

Council members became aware of this exemption last year when they were sued by property owners in the area who wanted to get the same tax break their neighbors were getting.

Austin Mayor Steve Adler said that this lawsuit was what brought the issue to his attention.

“I think with that presents to the city is a forced choice because we have to treat people similarly and equally,” Adler said.

“But I don’t think we can be on both sides of that issue,” Adler said. “I think it would be imprudent for the city to adopt a policy that said that you don’t pay city taxes unless you are receiving all of the services that the city provides.”

This notion was supported by the city’s legal department who said at Thursday’s meeting, “the state law doesn’t link the authority to tax to the level of services that the city provides to these properties.”

The rationale behind the vote

Council acknowledged that these homeowners do not receive full city services. But they noted that there are other places in the city that still pay city taxes and don’t receive full services. Council moved to repeal this historic tax exemption in the interest of making things equal for all City of Austin residents, the council noted that these Lake Austin property owners get to vote in local elections and benefit from services like Police, Fire, and EMS.

Analysis by city staff on these properties shows that while some of them may not be receiving Austin Energy or Austin Water, they are receiving the main services paid for by property taxes such as Austin Police, Austin Fire , and Austin Travis County EMS.

Casar noted that previous councils have tried to address this issue with no success.

“This is not about demonizing anyone, but it is about fixing a status quo that has been broken for a long time,” Casar said. “It’s my view that we’ve been in an unconstitutional situation for decades.”

Objections from property owners

Property owners impacted by this previously told KXAN that many in their area do not receive Austin Water or the city’s trash service and that when they call 9-1-1, the Travis County Sheriff’s Department responds

At the meeting Thursday, Austin Police clarified that they respond to these properties, but if all their units are occupied, they will call the Travis County Sheriff’s Department for help. APD said there are 333 properties included in this exemption that they respond to and that repealing this ordinance will not change their response protocol.

One resident, Diana Johnson, came to the council meeting to express concern about the emergency services in her area.

“We have no fire protection because there are virtually no fire hydrants,” she said of her neighborhood on Ski Shores Terrace. “My house burned down in 1985, I watched the house next-door to me burned to the ground in 1998 with the firemen on my roof.”

Several other residents at the council meeting expressed worries about a lack of adequate fire hydrants and about fires that had occurred previously in their area.

Johnson wanted to make it clear she is not evading taxes, as she already pays taxes to Austin Independent School District, Austin Community College, county healthcare, and Emergency Services District No. 4. She said her taxes are assessed at over $30,000 per year and that adding this new city tax will increase her tax bill by $8,000. She noted that she doesn’t receive city garbage or wastewater service.

But it turns out, receiving wastewater or trash service from the city is not what determines whether you pay city taxes.

Greg Meszaros, Director of Austin Water, explained that there are 1,500 properties on septic tanks that pay property taxes to the city and approximately 300 service providers other than Austin Water inside the city limits. He also noted that drinking water and wastewater services are 100% funded through rates and fees, not property taxes.

Johnson pays for her own septic service as well as annual inspections and maintenance. She said the Travis County Sheriff’s Department is who responds if there is an emergency and that their response time is delayed.

“And now I have to fight zebra mussels,” she said with frustration, adding that this new invasive species are adding thousands of dollars to her bill as well.

“I find it egregious that we were informed of this decision less than two weeks ago, in the paper,” she said, speaking of the Austin-American Statesman’s initial reporting on this exemption. “It was divisive and inflammatory as if we were stealing from the poor.”

Some residents told the council that they will now be asked to pay the city tax on top of the taxes they already pay to an Emergency Service District in the County.

What happens next

Council Member Alter said she wants to prevent residents from being doubly taxed. Alter represents most of the impacted residents.

City Staff noted that residents with concerns over being doubly taxed will may need to sort their situations out with the city. Staff also noted that those with concerns over their ability to vote in local elections or access public libraries should also contact the city.

As Alter noted, this issue is complicated by the fact that some property owners have part of their land in the city and part of their land in an area that would be taxed by an ESD.

“My commitment to you as your representative is to work as much as I can to make sure that you have services and that we do everything we can to reduce your public safety risks,” Alter said to the impacted residents.

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