They're calling it the "mistake on the lake."

Hundreds of homes along the shores of Lake Austin have remained off city tax rolls for decades. But City Council members Greg Casar and Jimmy Flannigan are hoping to change that.

"When we found out about this earlier this year ... at first, it felt impossible," Flannigan said during a news briefing at City Hall.

They unveiled their efforts Monday to repeal a 33-year-old ordinance that exempted hundreds of idyllic homes on Lake Austin from city property taxes. Those homes would have generated about $3 million in tax revenue in 2018, but have been left off the city's tax rolls since the city annexed the shorelines of the Colorado River in the late 19th century.

READ MORE: Why mansions on Lake Austin are exempt from city taxes

On Friday, the American-Statesman first reported the exemption to Lake Austin shoreline property that is now home to hundreds of waterfront homes with an average value of more than $2.1 million.

City leaders were unaware of the exemption until a couple who own a home on Lake Austin sued the city to have their property taken off tax rolls after learning their neighbors did not pay city taxes despite being in Austin's city limits.

"This was all news to us," Casar said at the briefing.

On June 20, the City Council will consider repealing the 1986 ordinance that exempted those properties. Casar, Flannigan and council members Delia Garza and Kathie Tovo are sponsoring the item.

Casar also is bringing a resolution to study how revenue generated from the estimated 400 Lake Austin properties could be dedicated to helping homeless people, mental health initiatives and child care. Both the repeal and the resolution are set for the June 20 meeting.

"I think there's an irony that we are talking about where we can find money to help get people into housing, and we've got some big, beautiful Austin homes that are exempt from paying taxes," said Ann Howard, head of the Ending Community Homeless Coalition. "This is a real opportunity to demonstrate how we can take a little bit of money and make it go a long way and help some of the most vulnerable citizens we have."

In 1985, the city attempted to place those properties on the tax rolls. However, the City Council voted in early 1986 to keep them exempt after receiving political pressure from homeowners there unsatisfied with the level of city services they received.

Today, the city still does not provide water, wastewater or trash service to those homes. However, their residents receive services from Austin police, Austin-Travis County EMS, watershed protection and code enforcement.

Austin Fire Department services to these homes are limited. Typically, the department will not respond to those properties unless automatic aid from other departments is not available. They do respond to all "large-scale events," according to a city document outlining city services to the affected properties.

The residents there vote in city elections, which Flannigan noted include bond elections that directly affect tax rates.

The services they do receive are those directly funded by property tax revenue, Flannigan said. Services from Austin Water and Austin Resource Recovery are funded through service fees.