City Hall Insider: How Austin plans to tackle projected budget deficits, Marshalling Yard shelter

Editor's note: City Hall Insider is a roundup of items on which the Austin City Council is voting, other local government news and an inside look at the reporting process.

This story was updated after the Austin City Council voted.

I was recently thinking about one of the first stories I was assigned in journalism school. It was nearing July 4 weekend, and my new editor told me I was going to write about gas prices.

Determined to impress her, I spent a ridiculous amount of time crafting a lede I was very proud of. Something to the tune of: Fireworks aren't the only thing skyrocketing this weekend. Gas prices are expected to reach their highest July 4 weekend rates since 2014. (It's terrible, I know.)

It's safe to say my editor did not feel as strongly about the lede as I did and immediately replaced it with something much more straightforward, and she was 100% correct in doing so. That same editor, who grew to become one of my closest mentors, taught me that sometimes less is more.

Sometimes you don't need an extra-wordy sentence or a snappy lede; you just need to show why and how something will impact people.

I thought a lot about that this week coming out of the city's financial forecast meeting. There was so much data, so many numbers that to an onlooker could make no sense whatsoever, and I could feel a reader's eyes glaze over trying to take in all the information.

So, rather than try to explain the specific ins and outs of the precarious financial situation the city is likely to be in over the next few years, I tried my best to paint the bigger picture of the issue and what this could mean for Austin residents.

I'll also break down some of the other big ticket items the Austin City Council has voted on.

Let's get into it.

Austin has a money problem

The bottom line is: Money is going to get tight for the city over the next few years.

Sales tax revenue is falling short of projections after a post-social distancing spending surge; a state-imposed property tax rate cap hinders the city's ability to adopt an annual rate 3.5% greater that the previous year without voter approval; and one-time federal funding such as American Rescue Plan Act dollars will dry up over the next few years.

The city is looking at a structural imbalance in its general fund budget, which means its expenses are projected to exceed revenue.

General fund expenses cover everything from employee salary and benefit increases — which city staff members on Tuesday projected would be a large cost driver — to money for several departments such as police and fire.

For the current fiscal year, which began Oct. 1 and will end Sept. 30, the city estimates it will receive $1.4 billion in general fund revenue but come in $3.8 million below what was projected. While this isn't ideal, it is a small fraction of a growing deficit officials are projecting over the next five years.

The city's general fund deficit will increase fourfold from next year's budget to fiscal year 2028-29, coming in at $59.9 million in the red that year, according to city staff projections.

Property taxes are critical for the general fund, expected to account for 47.2% of its revenue this fiscal year, according to city projections. Sales taxes come in second, estimated at 26.6% of general fund revenue this year.

While the city will look for cost-cutting and revenue-generating measures in the short term, Kerri Lang with the city's financial office said Tuesday that there will probably need to be further conversations with the City Council about periodic tax rate elections, which would allow the city to adopt rates higher than the state limit and could help offset costs if approved.

All of these changes will rest on the shoulders of Austin's next city manager, who will start in early May, just a few months before the City Council will vote on next fiscal year's budget.

Marshalling Yard extension

The council voted Thursday to extend operations of the Marshalling Yard, a warehouse the city converted into a homeless shelter last year.

It was initially slated to be open only until July 1, but the City Council approved a $500,000 contract to extend that to March 2025. The shelter is owned by the city and operated by the nonprofit Endeavors.

The city initially asked for $1 million to keep the shelter in operation. That number was cut back by an amendment filed by District 5 Council Member Ryan Alter.

David Gray, the city's homeless strategy officer, said he thinks $500,000 is the floor for keeping the shelter open through the agreed upon date and said he supported the amendment.

While discussing the item, some council members said they would like to see a plan for replacement sheltering before the city begins the process of closing the shelter.

Alter's amendment also directs the city manager to provide a ramp-down plan and regular updates to the Public Health Committee.

In February, residents of the Marshalling Yard voiced concerns about the shelter's living conditions, complaining about a lack of nutritious meals and an unsanitary state.

Gray, after that meeting in February, said he took those concerns seriously but disputed claims of uncleanliness.

In March, the city announced it was partnering with the Central Texas Food Bank to provide healthier meals.

Airport expansion project funding

The council approved a $162 million design-build contract with JE Dunn Construction Co. for a new central utility plant facility to support the expansion of Austin-Bergstrom International Airport.

Read More: Austin airport kicks off construction of $164 million, 3-gate expansion

"It will utilize current efficiency technology, equipment, and operational processes to provide reliable, redundant, and resilient service for the existing and future cooling and heating loads," city documents state.

The current heating and cooling plant is not big enough to meet the expected load that will come with the expansion, and equipment cannot be added to the current building, according to city documents.

My colleague, American-Statesman transportation reporter Chase Rogers, will have more on this soon.

More time for speakers at council meetings?

If I had to guess, I'd say Bill Bunch is probably having a good week.

Bunch, the executive director of the Save Our Springs Alliance and a frequent speaker at City Council meetings, has had judges take his side in two lawsuits against the city within a matter of days.

The first lawsuit, on which Bunch was one of the attorneys, put the brakes on Austin's plan to use up to $354 million in tax revenue for infrastructure projects in the redevelopment of the South Central Waterfront area.

Read More: Judge halts Austin's plan to use tax revenue for Lady Bird Lake redevelopment

The second lawsuit, at least on Thursday, gave speakers at the City Council meeting more time to share their thoughts on items up for vote.

Bunch had filed a lawsuit against the council and the city claiming that the Texas Open Meetings Act was being violated because members of the public were not being given enough time to speak on agenda items.

Travis County District Judge Madeleine Connor granted a temporary restraining order for Thursday's meeting, and speakers had three minutes apiece to testify about each agenda item on which they had signed up to speak. No speakers maxed out the time, but several spoke longer than usual.

A hearing to extend the order is expected to be next Thursday, according to a news release from the SOS Alliance.

If you've made it this far, thank you for following along! I hope you'll continue reading "City Hall Insider," published the day of every Austin City Council meeting, which is usually biweekly. In the meantime, I will continue my coverage of local government and politics. To share additional tips or insight, email me at emccarthy@statesman.com. You can also find me on X, formerly Twitter, @byEllaMcCarthy.

This article originally appeared on Austin American-Statesman: Austin, Texas: budget deficit, Marshalling Yard extension and more