The City Council vote to expand the property tax homestead exemption (from 6% to 8%) is now settled – it passed June 29 on third reading, 6-5 (see "Council: No Marxism Around Here," July 8). But the arguments continue to simmer. The dais divisions are over who benefits most from the exemption, and whether it represents sensible financial policy. That Council had whittled the amount from an initial expansion proposal of 14% (to meet the full 20% allowed under state law) down to 2% suggests quite a bit about the enthusiasm for a budget cut before there is a budget.

And the vote split the 10 districts down the middle, geographically and economically, with western districts (5, 6, 7, 8, 10) and Mayor Steve Adler voting in favor, eastern districts (1, 2, 3, 4) and Mayor Pro Tem Kathie Tovo (D9) voting against.

That might have ended the matter for this year. But the mayor's office couldn't take yes for an answer. A week later, mayoral spokesman Jason Stanford posted a defense of the exemption on the mayor's blog ("Who Benefits From Upping the Homestead Exemption?" July 8).

Stanford's post says the 2% hike will save the owner of a $250,000 house all of $1.90 a month, while costing the city as a whole $3.8 million – thereby creating an estimated $2 million deficit in next year's operating budget. (The full 8% exemption will cost the city more than $15 million in appropriations for next year.) Stanford's memo repeats the mayor's argument that reducing a regressive tax like the property tax is by definition progressive – "because [lower-income homeowners] recover a greater share of their income."

Let's Go Warding

That is, if you're earning $30,000 a year (and you somehow have managed to own a home worth $250,000), $1.90 a month ($23 a year) means more to you than if you're earning $150,000 a year. The mayor's charts insist that there are thousands of low-income homeowners (including in Districts 1 and 2) – while ignoring the many more thousands of low-income renters tallied in the very same charts. Those renters will not only not get the benefit of the exemption – over time, under the guise of "commercial properties" (e.g., apartment houses), the relative tax burden will be shifted onto them.

The mayor's blog was followed, a few days later, by an Alberta Phillips editorial in the Statesman ("Homestead exemption helps rich – and benefits rest of Austin," July 11), borrowing heavily from the mayor's stats and insisting that the vote for the exemption "should have been unanimous." The exemption indeed "helps the rich," wrote Phillips, but it also helps "the rest of us ... who are a paycheck, layoff or illness away from tumbling down an economic ladder that we've clawed our way up." Rest-of-Us Phillips singles out the five mostly Eastside votes against the exemption – Ora Houston, Delia Garza, Pio Renteria, Greg Casar, and Kathie Tovo – and accuses them of "ward-style politics."

In other words, when you vote in favor of an exemption that will primarily benefit your districts (as did Ann Kitchen, Don Zimmerman, Leslie Pool, Ellen Troxclair, and Sheri Gallo – roughly 74% of the benefits go to their five districts), that's not "ward politics." If instead, you vote against rewarding the wealthiest districts with more wealth – you're just a ward politician.

The Cost of Cuts

I asked Council Members Garza and Casar for their reactions. Casar reiterated that most of the benefit will go to those who need it least, but added that the mayor's "strongest arguments are about community confidence – and homeowner-voter confidence – in particular. This is a challenging argument because it's not about policy: It's about politics." He noted that Adler has acknowledged that the exemption – because the city's proportion of residential expenses is so small and the exemption much smaller – does very little to improve "affordability." It's a "symbolic gesture" that politically enables (in theory) more effective action on other progressive programs – but it "doesn't come without a price tag," a lesson Casar says he learned during last year's budget cycle.

"The cost of the exemption," Casar continued, "can potentially cost us our ability to kick off meaningful, innovative, new city programs that actually take on our constituents' needs."

Garza compared the sudden enthusiasm for "tax cuts" to "the ideology we see frequently at the Capitol." Garza wrote, "I can't understand how any progressive can justify a minimal and meaningless tax cut that puts delivery of city services at risk. ... We put a big hole in the budget ... hindering our ability to provide the quality services like parks, libraries, and health and human services that our residents frequently tell us they need." She concluded, "If I have a choice between passing bad policy to say that I'm in favor of tax relief, or providing services that have a real impact for low-income families, I'll choose investing in people, especially our most vulnerable, every time."

See Mayor Adler's defense of the homestead exemption on his personal blog: www.mayoradler.com. The full responses provided by Council Members Garza and Casar are posted below.

CMs Garza and Casar on the Homestead Exemption

The Chronicle asked Council Members Delia Garza and Greg Casar for their responses to Mayor Steve Adler's defense of the homestead exemption ("Who Benefits From Upping the Homestead Exemption?," July 8), and to a related editorial by Alberta Phillips in the Austin American Statesman ("Homestead exemption helps rich – and benefits rest of Austin," July 11). Below are their full responses.

Council Member Delia Garza (District 2)

I understand the mayor's desire to respond to the criticism we've heard, largely from working families and progressives, that expanding the homestead exemption was a regressive approach to tax cuts that does little to address affordability. However, I believe those criticisms are fair given that our recent 2% increase is going to cost the city $3.8 million and save the average homeowner less than two dollars a month. Some argue that this is a step toward implementing a full 20% homestead exemption, which worries me even more, given the hole that would leave in our budget in future years. Our Budget Office gave a presentation that showed Austinites on average spend about 1.4% of their monthly expenses on City of Austin property taxes. The truth is that most of your property taxes go to other taxing entities. Given that statistic, it's hard to argue that even a 20% exemption would have any meaningful impact on affordability for Austin homeowners.

I understand why my Republican colleagues voted for the homestead exemption, which is similar to the ideology we see frequently at the Capitol. Our Legislature, in the name of fiscal conservatism, has cut taxes left and right, and what's left? A state where we have foster children sleeping on the floors in state offices and others living in dangerous environments, because they don't have the funding to care for these vulnerable children. We have (which I witnessed firsthand) child support officers and assistant attorneys general severely overloaded and handling more cases than one person should handle. We have state buildings in horrible conditions. We have a severely underfunded public school system. Is this the direction Austin wants to move in? I read an article just yesterday that the rate at which the state invests in its prisons is hugely outpacing any increases in public schools. It's not any coincidence that not properly funding our schools is causing us to have to invest more in our prisons. Again, is that the direction Austin wants to go in?

With all due respect to my colleagues, I can't understand how any progressive can justify a minimal and meaningless tax cut that puts delivery of city services at risk. I haven't heard from a single constituent since passing the 6% homestead exemption last year that their affordability challenges have lessened. We put a big hole in the budget, which will only get bigger at a full 20% exemption, hindering our ability to provide the quality services like parks, libraries, and health and human services that our residents frequently tell us they need.

It's ironic that some of the biggest proponents of the expansion of the homestead exemption are also pushing for a $720 million dollar transportation bond. Supporters have stated that an extra $5 a month is nothing and that we should all support the bond. But when it comes to talk of a homestead exemption, the same folks say a $2 savings a month is substantial and solving affordability. Both cannot be true, and we owe our residents an honest conversation about the impacts of our decisions rather than political pandering.

If I have a choice between passing bad policy to say that I'm in favor of tax relief or providing services that have a real impact for low-income families, I'll choose investing in people, especially our most vulnerable, every time. This is not a question of ward politics, it's simply about supporting effective policy that improves the quality of life for our residents, particularly our most vulnerable populations. We can't say we are trying to address being the most economically segregated city while passing meaningless tax cuts that will in turn hurt our most vulnerable.

Council Member Greg Casar (District 4)

The mayor's arguments have some clear flaws ... for example:

We shouldn't be comparing property taxes to sales taxes. The difference is self-evident, I think, between a tax on an asset and a tax on a purchase.

The mayor has already acknowledged (and I agree) that the worst of the affordability crisis is in our low- and moderate-income communities. Yet the vast majority of the dollars set aside for the homestead exemption are not for these communities. I've advocated in the past for matching any homestead exemption investment with an investment in protecting low-income renters, who receive the least in direct benefit from the exemption.

But, after reading and reflecting on Alberta Phillips' editorial, I'd like to focus on the less clear part of the debate. I believe both Steve and Alberta's strongest arguments are about community confidence – and homeowner-voter confidence – in particular. This is a challenging argument because it's not about policy: It's about politics.

The mayor has acknowledged (and I agree) that we cannot meaningfully affect the cost of housing through the homestead exemption: The city as a portion of your tax bill is actually relatively small. There are many more progressive things we can do that would help much more with affordability than the homestead exemption. The mayor argues that we earn more liberty to take on progressive government action through offering the homestead exemption. It's a hard point to prove or disprove.

But the exemption as a symbolic gesture doesn't come without a price tag. I only came to fully understand this during my first budget cycle last year. The cost of the exemption can potentially cost us our ability to kick off meaningful, innovative, new city programs that actually take on our constituents' needs. We only get so much leeway every year to fund new ideas. I'm still committed to working hard to comb the budget and find necessary dollars, if we can.

With the right kind of leadership, I believe that several of the ideas that we have on the table this year (e.g. the sobriety center, the homeless outreach street teams, the affordable housing trust fund allocation) can build confidence in city government for renters and homeowners alike – because they meaningfully can improve our city. I'm afraid that by insisting that the homestead exemption is necessary for building homeowner confidence, the mayor and the Statesman are creating a self-fulfilling prophecy. Our residents need smaller, cheaper, and more diverse housing types. Our residents need deep investments in affordable housing. Our residents need public transit, mental health services, and afterschool programs. If we can provide for these needs, I think progressive-minded homeowners and renters will gain confidence from real results from their local government, instead of symbolic gestures.