By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
"This may indicate the debt service requirements [of the Trinity River project] are greater than the community can afford, especially since current expenditures exceed revenues," the Corps said in its draft report.
"The analysis of all these factors," the Corps concluded, "shows that the city should not take on any new debt in the very near future. The overall financial condition of the community is currently in a marginally weakened state due to the large amount of net debt outstanding."
As soon as that analysis was published, then-City Manager John Ware rushed forward with new data to show that the city really didn't have as much long-term debt as the Corps thought it did and that Dallas actually was operating at a surplus, not a deficit. Ware argued that bond money could be used to pay off some short-term obligations, and that that would improve the city's immediate debt picture.
Pretty good. Abracadabra, deficit to surplus. It was what the Corps wanted to hear, because they want to build the project.
Since then, the city has taken on massive new debt for the river and the sports arena, has given away almost half its new earning capacity from the property tax, and is even talking about more debt for a series of "signature bridges" downtown to be built mainly as a form of grand public art.
In recent weeks, however, the city council and even the mayor have implied that Ware misled, charmed, or seduced them somehow into thinking the city's financial status was better than it was and is. They have been especially critical of his having provided them with $33 million in one-time revenue for their "ongoing needs."
Some people think the bottom line here is that the city's debt picture is exactly what the Corps initially said it was -- bad.
"We've accrued a tremendous amount of debt," says Weinstein of the Center for Economic Development.
Some of the council made fun of Blumer when she questioned an even more Vegas-like style of borrowing that has come into vogue at Dallas City Hall since everyone decided it was OK to spend mortgage money on fun things:
"They snickered at me," she says, "when I said I didn't think it was a good idea to sell $11 million in certificates of obligation to fund the new police headquarters."
$11 million in whats?
Here is where the down gets down and the dirty gets dirty. This is probably what the Corps of Engineers economists saw, until they were told to go look at each other.
The city of Dallas owes just under $11 million in "commercial paper" -- that is, loans the council tells the city manager to go get from marketplace lenders. The current plan of the city manager calls for that amount to double in the next two years, to an outstanding balance of $23.8 million. That doesn't include interest.
The council intends to pay more than $11 million toward the cost of the $59 million police headquarters building in the Cedars area south of downtown with this kind of borrowing. Taxpayers had approved a total of $47 million for the headquarters in two previous bond elections. So this is a way the council can fudge a little on what the taxpayers thought they were voting on in those elections.
No new bond election. No big public debate on rising costs. Just go borrow the money.
In addition, the city now owes another $31.9 million in outstanding principal for "equipment acquisition contractual obligations."
What are those?
"Those are like a car loan," city budget director Dave Cook explains.
So. This is new. We have a $31.9 million car loan.
Cook says the certificates of obligation and equipment acquisition notes are not as bad as they might appear. He characterizes them as "bridge loans" or interim financing, merely needed to smooth out the cash flow between bond sales. Borrow it short-term, buy the stuff or start the construction project, then pay off the note quickly when you sell a major bundle of bonds in New York.
"Commercial paper is real short-term," he says.
That would be comforting if it were not for the actual terms of the borrowing the city has done under these arrangements. The city still owes principal of $1.9 million, for example, on a certificate of obligation it took out in 1992 to fix the Cotton Bowl. The full term of that loan? Twenty years.
Likewise, the city owes $2.75 million on a 1992 loan to help pay off damages assessed in a public-housing desegregation suit. The term of that loan is 20 years.
Obviously the $11 million-plus in borrowing for the police headquarters won't be repaid out of bond money, because no bond money has been voted for that part of the cost.
The city owes more than $1 million on a 4-year-old loan to fix the dump. It owes more than $5 million it borrowed two years ago to fix potholes. That won't be paid off until 2007.
They're borrowing money to fix potholes. Maybe it's appropriate, in a city where some people have to rent their tires.
Big shoes to fall
Big shoes to fall
Two aspects of the city's predicament are giving away the store and living on debt. But there is a third potentially catastrophic issue -- other shoes, waiting to fall.