Busted

Even in these boom times, Dallas is broke, thanks to a city council that has been giving away the store

The best clue to the shell game going on at Dallas City Hall -- an indicator of the desperation city officials might be feeling over the financial mess they've put themselves in -- is the tax cut they say they're going to give Dallas property owners. XIt's a major political fib. It's not a tax cut. It's a large tax increase.

It's so large that it threatens to bump up against limits imposed by the state on the amount of cash the city can take from taxpayers without opening itself up to a rollback election. In fact, the city council and the city manager have been playing around in recent weeks with minute fractional manipulations of the tax rate that would keep their stealth tax hike just barely below the legal rollback level.

What the mayor and city council have been telling the public over the last month is that they intend to rescind a recent boost in water rates; that they may get rid of the unpopular tax on automobiles; and that they may cut the property-tax rate by a fourth of a penny. In its coverage of the budget issue, The Dallas Morning News routinely describes this deal as "the fifth consecutive year of tax cuts" at City Hall.

But those are the numbers the News and City Hall give the public. Earlier this summer, council member Donna Blumer demanded the real numbers from the city manager. On August 13 she received a letter from Jennifer Varley, the city's chief financial officer, indicating what goes on in the other set of books. Using amounts that had been averaged citywide, this is what Varley's letter showed: Let's say you owned a house in Dallas that was worth $100,000 in 1993. You paid $539.52 in city taxes that year. If you still owned the same house in 1998 and you were right at the average, your city tax bill was $611.67. That means your tax bill went up by 13 percent over five years -- about 2.6 percent a year.

But wait for this one.

This year, according to the numbers originally proposed in the city manager's new budget, your tax bill on the same house would be $663.51 -- a one-year jump of 8.5 percent.

State law says that if a local government tries to take more than an 8 percent tax increase out of taxpayers' pockets, those taxpayers have the right to gather petitions and force an election to roll back the rate to where it was before the increase.

How can the council and the city manager be telling people they're going to hand out a tax cut if it's really a major tax hike? And how can the Morning News keep reporting five years of City Hall tax cuts?

Easy.

It's true the tax rate itself goes down. But the rate is only half the formula for the taxes you pay. The other half is the tax appraisal -- the amount the taxing authority tells you your house is worth. The reason the taxes kept going up on the $100,000 house in Varley's letter is that the city kept using a higher value for the house each year to compute the taxes. By 1999, the taxable value of the house was $128,870. The bottom line is that the check the taxpayer had to write on that house went up each year, no matter how city officials and the Morning News did the arithmetic.

It's not as if they don't know what they're up to. In recent weeks, the city manager, the mayor, and the council have been tiptoeing around the rollback limit daintily, without ever stating that that's what they're worried about. In an August 23 briefing on the auto tax, Mayor Pro Tem Mary Poss suggested that the council might even have to spend a tad of funny money to balance the books. She said it was to get rid of the tax on cars. In this case, according to the city's budget director, the money is a one-time surplus from various amounts the city thought it was going to have to spend but wound up not spending.

But that's just what they recently said they were never going to do again. They were never going to take one-time income and use it for ongoing expenses, sort of like bringing home $5,000 in winnings from Las Vegas and using it as the down payment on a Land Rover. Now how do you make the next payment?

Poss said using $3.41 million in one-time money for ongoing costs might make the budget a "little less than pure." But the sense was that, in a $1.59 billion budget, $3.41 million is such small change, you barely need to count it.

That precise number, however, happens to be very important change. In an interview with the Dallas Observer, city budget director Dave Cook said the other alternative presented to the council, if they didn't want to spend the funny money but they did want to get rid of the auto tax, was that they would have to raise the property tax rate a few pennies to 67.29 cents per hundred dollars of assessed value.

Guess what that number is?

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