How does a city prevent a possible $300,000 budget shortfall for 2003?

It's a question that members of the Austin City Council will have to answer in the next few months and it won't be a pleasant process.

How does a city that has never had a budget shortfall suddenly experience something like this?

For the answer to that, one must look to the state.

According to Tom Dankert, director of administrative services, in 1993-94, the city had four bond issues for improvements in the community at a tax rate of 4.6 percent for commercial and industrial property -- a number set by the state.

By 2002, the state had lowered the tax rate on commercial and industrial property to 2 percent, which made it difficult to pay off the debt incurred by the bond issues. However, to assist cities with this problem, he says, the state created a grant pool that had $100 million by 2002. Cities that had issued bonds under the old rates, could simply apply for a grant to make up the difference.

"We weren't concerned until May 20 when the state balanced the budget and eliminated the grant pool," Dankert says. "Now, we no longer have the grant pool when the bonds are due … the state cut an essential funding source for us."

At current staffing levels, he says the shortfall is expected to be "roughly $300,000," and the city council will have to decide how to solve that by Sept. 15, which is when the city must have a preliminary budget and tax levy.

"We as council have to look at any and all levels … we're not ruling out tax increases, the use of reserves, the staff requirements -- do we need more or do we need less, the quality of life – we've always had a high quality of life and have enjoyed certain things because we can afford them, but we'll look at whether or not there's anything we can get rid of or compromise," Dankert says. "They've left the door wide open so they can look at all avenues before making a decision."

He also says there is land in the TIF district which could be developed by a business and taxes from that could help pay the city's debt.

Fortunately for the city, less than 5 percent of the tax base is in the TIF district. Other cities have 30 to 40 percent of their tax base in their commercial and industrial property, which means "they're going to be millions of dollars short," Dankert says.

The city council will be meeting with the heads of city departments between now and Sept. 15, and Dankert says "if there's anything citizens want or don't want, they should talk to their city council representative. Now is the time for the public to pipe in and say what they think the city should have for 2003."

Amanda L. Rohde can be reached at 434-2214 or by e-mail at :mailto:amanda.rohde@austindailyherald.com