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Policy brings city in line with IRS guidelines

A new policy set to be introduced by the Austin City Council addressing the city’s take home vehicle policy has caused concerns among department supervisors and a determination by the council to make sure employees are treated fairly.

The City of Austin allows a handful of supervisors to take city-owned vehicles home, allowing them to respond to emergency calls or situations falling outside of regular hours.

The city provides gas, insurance and vehicle maintenance.

However, a discovery in March showed that the city wasn’t in line with IRS guidelines like it thought it was based on what constitutes an emergency and forcing a change to the existing policy that will add a tax burden to employees.

This newly changed policy would require the city to pay those supervisors a commuting tax method that would set a commuter rate of $3 for each trip or $1.50 per one-way commute.

Supervisors with the vehicle would be required to keep track of trips that meet the requirements of emergency or after-hour calls and then the total is multiplied by $3. The amount would then be added to the employee’s paycheck.

However, employees are effectively being taxed for money they won’t be seeing as it’s considered supplemental income and is used by the IRS to determine how much a person will be taxed.

“Early on this year we got reviewing IRS regulations,” said Tom Dankert, director of Administrative services. “We dug into this deeper and the city attorney confirmed that these are indeed taxable benefits.”

Depending on the employee’s tax bracket, how much they will be taxed will vary.

At the heart of the issue is what’s considered an emergency response. In the past, calls requiring supervisors to come in were considered emergencies, but after digging into the matter the city discovered that the term “emergency” was being defined too broadly and that it only really applied to fire and police, which are exempt.

Prior to going into a closed session Monday night to discuss the situation, council members were united in finding a way to help the employees noting that being able to take vehicles home is a benefit to the city.

“My hope is we can find a way to reduce the tax burden,” Council member Laura Helle said.

“Because you’re willing to do this, I’m not willing to nickel and dime you,” member Jason Baskin added, speaking to supervisors in attendance.

But while the council committed to looking into alternatives that would be fair to employees, the city is also in the midst of its current union contract with employees and can’t make solid changes until it comes time to negotiate a new contract.

City Administrator Craig Clark did say Tuesday that they can essentially create an addendum to the currently contract as they work through the process.

“The council was receptive to looking at an accommodation which recognizes how the federal tax implication for this group of employees applies,” Clark said. “As this is a term and condition of employment, we will be working with the bargaining group to develop a workable solution.”

“We want to do something to address this,” he added.

Other news:

• The city approved a tax levy increase for 2024 of 5.66% totaling $8,752,000, which was set as preliminary at a Sept. 5 City Council meeting. Proposed revenue sources for next year are $46,002,529. The vote was 6-1 with Baskin being the sole dissenting vote.

• The council also approved Austin Utilities’  expansion of its coverage area to a pair of plots on the fringes of Austin that were taken into the city prior to this.