The Austin City Council's recent budget work session revealed significant challenges ahead for the city's financial landscape, particularly concerning property tax and sales tax revenues. Council members discussed the heavy reliance on property tax, which is now constrained, limiting overall growth. While sales tax had previously been a bright spot, recent trends show a slight decline, with projections indicating a potential $15 million shortfall by the end of the fiscal year.

A key highlight from the session was the projected increase in the property tax rate to 52.76 cents, a 5-cent rise from the current rate. This increase is largely due to a decline in total taxable value in the city, projected to drop nearly 4% in 2026. Homeowners can expect their tax bills to rise by about 7.9%, as their property values are not declining as quickly as the city's overall taxable value. This situation is exacerbated by the diminishing effect of the assessed value cap on homesteads, which has decreased from 70% to 29% in the past year.

Seniors, however, may see a slight decrease in their tax bills due to an increased homestead exemption approved by the council. The discussion also touched on the city's growing debt from previous bond issuances, which contributes to the overall tax increase.

Looking ahead, the council anticipates continued economic uncertainty, with sales tax revenues expected to decline further in FY 26. Despite a forecasted moderate recovery in the later years, the city may struggle to return to the robust growth rates seen before the pandemic. The council's focus on these financial challenges underscores the need for strategic planning to navigate the city's fiscal future.