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.

Michael Hogue
When it comes to blaming someone for Dallas' budget troubles, many people point fingers at former City Manager John Ware.
Martin Menocal
When it comes to blaming someone for Dallas' budget troubles, many people point fingers at former City Manager John Ware.
Ware and Mayor Ron Kirk, pictured, ruled City Hall as the council handed out tax abatements freely.
Martin Menocal
Ware and Mayor Ron Kirk, pictured, ruled City Hall as the council handed out tax abatements freely.
Now, City Manager Teodoro Benavides is left to try to balance the books.
Martin Menocal
Now, City Manager Teodoro Benavides is left to try to balance the books.
Mayor Pro Tem Mary Poss was willing to settle for a budget that was "less than pure."
Martin Menocal
Mayor Pro Tem Mary Poss was willing to settle for a budget that was "less than pure."
John Briscoe, president of the Texas Public Workers Association, fears that a shortfall in the city pension fund might be made up on the backs of city workers and retirees.
Mark Graham
John Briscoe, president of the Texas Public Workers Association, fears that a shortfall in the city pension fund might be made up on the backs of city workers and retirees.
Dallas Police Association President Glenn White says that "something's not right" with city finances. He's right.
Mark Graham
Dallas Police Association President Glenn White says that "something's not right" with city finances. He's right.
City council member John Loza says trying to predict what will happen to the city pension fund would be like looking into a crystal ball.
Mark Graham
City council member John Loza says trying to predict what will happen to the city pension fund would be like looking into a crystal ball.
Dallas Public Works Director David Dybala must sell bonds this year to finance major city projects. Will he warn investors of the city's financial straits?
Mark Graham
Dallas Public Works Director David Dybala must sell bonds this year to finance major city projects. Will he warn investors of the city's financial straits?

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?

"That would exceed the rollback rate," Cook conceded.

It's that close. If they spend the little drip of funny money, they won't have to raise the tax rate by just over two pennies. If they raise it by even that tiny amount -- and if the taxpayers ever catch on -- then the taxpayers could force a rollback election.

In fact, while you were busy reading the Morning News' stories about the proposed tax cut, you may have missed the fine-print ad the city was required by law to publish in the Morning News on August 14 showing that a new tax rate of 62.3 cents would amount to no tax increase. That's the rate that would mean most homeowners would be writing checks for roughly the same amount they did last year.

Instead, the city manager is proposing a rate of 64.66. According to the law, that's a tax increase -- not a cut -- even if it is slightly less than last year's rate.

Don't feel bad if you missed the notice in the back pages of the News. Apparently the paper's reporters did too.

There are questions here. Certainly a tough one is why the city council and city manager would fudge with the public on such a crucial good-faith issue as whether they're trying to raise taxes. The Observer tried unsuccessfully over two weeks to reach City Manager Teodoro Benavides or his top assistant Mary Suhm to discuss the basic underlying issue of the tax cut as well as other questions. A number of city staffers below their levels were willing to discuss smaller details of the budget process, but the Observer was not able to reach Benavides or Suhm.

The biggest question the Observer would like to ask Benavides is, Why? Why does he or the city council have to play games at all this year? Why aren't they all so flush that they could afford to be honest?

"Everything's going up and up. The economy, the sales taxes, the property tax base. Yet everything is being cut," says Glenn White, president of the Dallas Police Association, which represents police officers. "Something's not right."

Cook, the city's budget director, says he's almost certain the city council will find a way to stay below the rollback limit: "I would be tremendously surprised if the city council adopted a tax rate above the rollback rate."

But all of the options under serious consideration are for a tax increase within nibbling distance of the rollback limit at 8 percent. So, for a tax hike close to 8 percent, what is the city offering taxpayers?

This increase will buy Dallas taxpayers a budget that eliminates dozens of jobs, gives miserly pay raises to city employees, and calls for cuts in the operating budgets in eight departments -- budget and management services, the city controller's office, city courts and jail, human resources, international affairs, police, public works, and sanitation.

In the ballyhooed Year of the Pothole, when the big nuts-and-bolts council was going to get out and fix those streets and repair those sewer lines, what this enormous tax hike promises is a 15 percent slash in the operating budget for public works. However long you thought you were going to have to wait to get your curbs fixed, move the date ahead by that much.

They're even going to cut the department that oversees the budget by 11 percent. Presumably that will make for fewer sharp pencils to keep track of what they're up to.

But what does all this mean about the city's financial stability? If they're trying to slip a steep tax hike by the voters and they still have to whack off major services, what should that tell us?

"We're in trouble," council member Donna Blumer says. "We're in serious trouble."


Give away

The mysteries here are not hard to solve. The biggest and most important one has to do with the growth of the tax base. Mayor Ron Kirk is fond of reminding audiences that the tax base in Dallas has grown by a third during his five years in office. So, given that the tax rate itself has actually stayed fairly flat during Kirk's tenure, shouldn't that mean the city's revenues from the property tax have also gone up by about a third? Bigger tax base, bigger tax revenue?

Then why is it that property tax revenues under Kirk have actually gone up by less than half that amount -- just over 15 percent?

Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas, suggests a simple answer for that one:

They gave it away.

"They give exemptions, TIFs [a type of tax break for developers], abatements, freeports," Weinstein says. "Therefore the coffers are not growing as fast as they might, given the change in the tax base."

Weinstein's take on where the money goes is strongly supported by numbers from the Dallas Central Appraisal District, the independent agency that keeps track of the tax base and any tax breaks handed out by the city. According to the DCAD, the city's tax base grew by $3.84 billion last year. Of that amount, the city of Dallas has given away $1.64 billion in exemptions, abatements, and freeports. (A freeport exemption says that you can bring goods here, store them or work on them for a while, and then ship them off somewhere else without paying local tax.)

They have given away half the growth.

It's not just Tom Hicks and Ross Perot Jr. who get freebies. They're giving away the company store to anybody who walks in. Do you have your own tax abatement yet from the city of Dallas? And if not, what's the matter with you? Too lazy to drive downtown?

You should get one. A tax abatement means that some percentage of the value of your property is deemed by the city to be tax-free. The amount abated ranges from 50 to 100 percent and is determined by the mayor and city council. The time frame ranges from five to 10 years. There are 107 abatements on the rolls this year, according to Ken Nolan of the Dallas Central Appraisal District.

The type of businesses that get abatements is also wide open.

"Basically the city of Dallas will give a tax break to just about any business that locates within the city limits," Weinstein says.

Is that good?

"There are certain types of businesses for which a tax break makes sense," Weinstein says. "Manufacturing, export, and so on. But there are types of businesses for which an abatement doesn't make sense."

That's a difficult call. Did the city need to give a tax abatement to Bud's Salads, a small vegetable processor that was allowed to shave about 20 percent off the cost of a renovated building in South Dallas five years ago? Proprietor Rosalie Budnoff says the abatement encouraged her to locate in South Dallas, where her company has grown from 14 to more than 100 employees.

How big a factor was the abatement? "It hasn't amounted to much in money," she says. "Maybe $100 a year. But every little bit helps."

Of course, Bud's Salads isn't the kind of business abatement that bites very deeply into the city's tax revenues. Texas Instruments, on the other hand, holds half a billion dollars' worth of property that is off the roles, some of it until 2007.

A year ago, a bitterly divided council voted to give a $3 million abatement to Hunt Realty Corp. for the expansion of the Hyatt Hotel downtown. Opponents of the tax break said it was an example of giving away the store to a rich company that had to stay where it was anyway. A Hunt spokesman declined to comment beyond saying the tax break was there and they took it.

The argument for the abatements is that they are not permanent and that they lure to the city businesses that will one day begin paying new taxes, thereby "growing the tax base." But Weinstein points out that there's nothing to stop a business from leaving Dallas after a 10-year abatement is used up. "In many businesses, 10 years is infinity. Ten years from now, they may no longer be here."

The other problem is that nearly 40 percent of the tax breaks dished out by City Hall this year alone are "freeport" exemptions, which are permanent. In 1999, the city of Dallas gave away $648 million worth of freeport exemptions. That tax base never comes back. It is permanently free of city taxation.

Some abatements have language attached to them requiring certain hiring quotas or investment in infrastructure. There are also abatements that require a business to stick around longer than the term of the abatement. But the city has no consistent mechanism for checking to see whether any of that gets done.

The city council voted recently to give the city staff more discretion in the future over granting tax breaks. The staff will be able to fine-tune the amounts given away, presumably making for smaller abatements. Mayor Kirk called the move "a subtle message to the staff that as the economy improves, let's not give incentives just for the sake of giving them."

Of course, the economy has been improving for the better part of a decade. Let's hope it's not done improving and that this isn't a subtle message to a horse already out of the barn.

City Auditor Robert Melton recently took it on himself to begin measuring compliance with the terms of abatement and freeport agreements. He hasn't started his audit yet, but says he expects to soon.

In whatever way the tax abatements and freeports and other give-aways are calculated, they represent a huge share of all the building, the work, the income, the getting-ahead Dallas taxpayers thought they had been banking since the recovery began in the early 1990s. When the downturn comes, that much of the nest egg will be missing.

But in terms of the mess the city is in financially, the problem of giving away tax abatements is probably only half the picture. The other bad news is debt.


Charge it

Two years ago, when the U.S. Army Corps of Engineers was doing its draft environmental impact statement for the Trinity River project, one of the issues government analysts had to look at was whether Dallas could afford to pay for its share of the project. What they found in their initial study was a little financial nugget that never made the news at the time.

Dallas, according to the Corps' economists, owed $1,267 in debt for every man, woman, and child in the city -- a disturbingly high debt burden that earned the city a rating of "weak" in comparison with national averages.

"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?


High rollin'

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

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.

In recent weeks, council members and members of the city manager's staff have been out on the hustings, engaged in an aggressive public relations campaign to convince taxpayers that Southwestern Bell Corp. is solely responsible for screwing up the city's budget.

At a town hall meeting at the Grauwyler Recreation Center on August 19, virtually every person who rose to ask questions or speak demanded to know why the new budget didn't do more for street repairs, libraries, parks, and other parts of the general infrastructure of communities.

Assistant City Manager Ramon Miguez replied by linking funding shortages for various projects to what he said was a threat by Southwestern Bell to withhold $20 million in annual franchise fees.

Councilman John Loza told the audience, "Dallas seems to be the first city where a utility has indicated they are not going to be paying franchise fees.

"I hope you will literally, now I do mean this, literally pick up your phone," Loza said, "and call Southwestern Bell and let them know you are aware of the fact they are basically holding the city of Dallas hostage, and that you don't agree with that, and you don't go along with that."

Loza, who would make the paper in the days ahead for his conviction on a drunk driving charge and for appointing to a city board a friend who was wanted on several outstanding arrest warrants, told the audience, "I really do think we need to let them know that this is an act of corporate irresponsibility that we will not stand for."

Southwestern Bell's version of the dispute is different. They say communications companies all over the country have been challenging what they call old-fashioned rate structures left over from Ma Bell days. In those days, when the phone company was thought of as sort of a public utility, cities required phone companies to hand over a straight percentage of their profits, known as the franchise fee. In these new wild and crazy times in the communication industry, phone companies and other utilities want to pay only the actual cost of running their lines on public land -- presumably a much smaller amount.

They say Dallas has known it was losing major lawsuits with all of its utilities over right-of-way franchise fees for the last year and has done little to get ahead of the game.

But mainly they say the city of Dallas is trying to make them promise they will continue to pay franchise fees through the city's current budget cycle, even if a court eventually rules that those fees are illegal. Bell says it will pay the fees, but it wants Dallas to pay back any fees the court says are illegal so it can pass the money back to its customers.

Otherwise, the customers can sue Bell.

On August 23, a federal judge in Dallas accepted Southwestern Bell's standing offer to keep paying its franchise fees to the city pending an outcome of the suit. But Southwestern Bell did not have to promise to keep making the payments if a court says they're illegal.

Bell is one of nine utilities that have sued the city over its franchise fees. Seven of those companies have already won. It appears utilities will continue to pay some kind of fee or rent to cities, but the calculation will be different and probably will not include any of the straight cuts from profits that cities got in the good old days.

The bottom line here, in spite of how the council and staff are spinning it to the public, is that the city is budgeting $20 million a year in revenue that it not only can't count on but may eventually have to pay back.

Of the shoes to fall, that's the ballet slipper.


The work boot

At the Grauwyler town hall meeting, Walter Pearson, a real estate appraiser who lives in council member Veletta Lill's district, raised his hand to ask Loza, Lill, and Miguez what their plans were regarding the city employees' pension fund. All three assured him the pension fund question is "still in litigation" and therefore not worth talking about yet.

"We would be trying to read a crystal ball," Loza said.

If they ever actually looked in that crystal ball, one of the first things they would see is state Sen. Florence Shapiro, chairman of the Senate State Affairs Committee, probably signaling madly for them to answer the telephone. Shapiro tried getting through to the council in an August 11 letter delivered to the mayor, the council members, and members of the board of the Dallas Employees' Retirement Fund.

The State Affairs Committee oversees the agency that oversees all state and local public employee pension funds in Texas. In her letter, Shapiro did not mince words:

"As you know, the fund is contributing $20 million less than the amount shown by the actuarial analysis as necessary to balance the fund."

Plain English? Dallas needs to find a way to put $20 million a year in new money into its pension fund, or it needs to take the money out of the pockets of its employees, or it needs to gouge it out of former employees now living on their pensions.

Nothing in Shapiro's letter would give anyone the impression that this issue can be put off. "My staff of the Senate State Affairs Committee met with the Pension Review Board Executive Director Rita Horwitz, and all agree that this issue must be resolved as soon as possible."

She wants a meeting next month.

This is one issue where Mayor Kirk really threw his arms around former City Manager John Ware and gave him his full support. Ware had hired his own expert. Ware's expert said the fund was fine.

But nobody seriously believed Ware's expert.

When Benavides took over as city manager in September 1998, he met with City Auditor Robert Melton, the ex officio chairman of the pension board, and the two of them decided they had better get busy finding $20 million a year to make the fund sound.

Haven't found it yet. Still looking.

But in a year when the council is trying to slip a tax hike past the voters without telling them, when they're already borrowing more money on the street than they borrow in bond sales, when they know they may not only lose the Bell franchise money but also have to pay it back, how likely is it that this city council will stoutly defend the rights of city retirees?

"Virtually nobody is totally protected from cuts," Melton says.

The retirees who have already given their working lives to the city may be protected by one thing: Any change in their benefits has to be approved by the voters. The question then will be whether the voters of Dallas have more of a conscience than their elected representatives do.

That does leave the current employees as a possible source for some or all of the $20 million a year, and they are only too aware of it. John Briscoe, president of the Texas Public Workers Association, says, "There are only three ways to fix it. The employees vote to increase their participation. The citizens vote to decrease benefits. Or the council votes to increase its contribution."

What makes the problem especially grating for employees, Briscoe says, is the blithe unwillingness of the council to face up to it, while they continue to talk of other ways to spend big money.

"They're just sticking their heads in the sand, hoping it will go away," he says.

Briscoe talks about the cost-of-living raise the council wants to give employees -- effectively 1.5 percent, against an inflation rate of 3 percent -- and then he talks about the council's enthusiasm for a plan to spend hundreds of millions on new suspension bridges downtown in order to make an aesthetic statement.

"Those bridges, in my mind, are a symbol. Those things will never happen, but the fact that they would even entertain the idea is so symbolic," he says.

"In the short term, the employees are going to get screwed, and ultimately the citizens will. They're already talking about laying off a bunch of employees. If there is no money, they won't do anything about the retirement fund problem. And good employees will leave."

Of course, that's if there's anything left to leave.


The cement tennis shoe

The really big shoe, the one that could sink the boat, is the series of lawsuits over police and fire pay policies ("Big-time payback," May 27). In 1979 the city council passed an ordinance linking pay levels for police officers and firefighters to the salaries of the police and fire chiefs.

Beginning in 1988, police and fire employees discovered that the city had not honored that ordinance and that it in fact appeared to owe substantial amounts of back pay to almost all of its "sworn" employees in the two departments. Different groups eventually hired lawyers, and several suits were filed.

On May 27, a judge in one of those suits ruled that the city owed 16 firefighters an average of $136,000 each in back pay. There are 824 plaintiffs in the suit, so if that average holds, the total hit to the city could be as much as $112 million

That's the little one.

A much larger class-action suit could bring a judgment as big as $800 million if the same average applies. Bob Gorsky, the attorney in that case, says the real significance of the ruling in the first case is that the judge didn't believe the city's main argument and ploy -- that it had established a retroactive pay scale and ranking system that solved the problem by bringing down the chief's pay.

"That just didn't wash with the court," Gorsky says. He clearly hopes the same argument won't wash with his judge either. In which case, his clients can look to a payday that may nip up in the range of a billion dollars.

The police and fire pay lawsuits are already serious enough that the city has to inform investors of them every time it borrows money with general obligation bonds. The law requires it to make an "official statement," attached to the prospectus for the bonds, warning investors of any big problems the city may face, including lawsuits.

The city's current "official statement" hasn't been updated since last year, the last time Dallas sold bonds. At that time, the statement described alleged damages of $94 million but said the judge was willing to let the city make the suit go away by lowering the chief's pay.

That truth is no longer operative. Dallas needs to sell bonds again this year, for the Trinity River and other projects. Presumably, given the unfavorable ruling in the first of the pay suits decided by a judge, the city will have to amend its official statement to warn investors that things aren't going so well.

The $800 million figure for the potential hit in Gorsky's case apparently hasn't been mentioned yet in the court filings. If that's still true when the city publishes its new official statement, the city may not have to include that number. If the number ever does get into the financial declarations, it won't be a selling point for the bonds. Eight hundred million dollars, after all, is half the current budget.

Gorsky insists the police and fire employees are the last ones to want to bust the city. What they want, he says, is serious negotiation toward a resolution.

What frustrates them, he says, is their perception that the city manager, mayor, and city council are unwilling to move realistically toward any kind of settlement. Like the pension issue, like the franchise fees, like the failure to contain borrowing, like the hemorrhaging of tax abatements, the council seems intent on pushing the police and fire pay problem back under the rug, hoping it will suffocate.

For police officers and firemen, Gorsky says, it's an important statement about what the council really thinks of them.

"It's an example of talking out of both sides of one's mouth," he says, "constantly praising officers and firefighters for their service to the city, attending all the fund-raisers and banquets. But when it comes to paying them for their work, it's a different story."


The bottom line

Especially galling to the employees -- none of whom seem to have liked former City Manager John Ware much -- is the attempt by Mayor Kirk and the rest of the city council to blame Ware for the city's current financial disarray.

"To blame Ware," John Briscoe of the Texas Public Workers Association begins. He stops talking for a moment and then begins again.

"I mean, I never did like him. He was abusive to his employees. But he was following orders. If the council had been upset by what was going on under Ware, they would have fired him."

Briscoe sees the problem as a mayor and city council that are separated from reality. "My personal opinion is that the city needs to stop trying to make itself into something it's not. Dallas is not New York City. It's not Chicago. It's not even Seattle. We don't need a world-class arena for a fifth-class basketball team."

Donna Blumer sees the problem as a city council too sternly dominated by self-seeking manipulators in certain quarters of the business community.

"We have a bunch of puppets on the council who really don't understand what's going on," she says. She thinks some of the problem, also, is a change for the worse in the city's traditional puppeteers, the men and women of the private Dallas Citizens Council.

The Citizens Council, a shadowy business group that meets in secret but whose contributions tend to dominate city council races, is not what it once was, she says.

"It's a different motivation from the old Citizens Council. I think they really used to be men and women who were interested in the best for Dallas. I think now it's people who are just interested in getting their piece of the pie."

Walter Pearson, the citizen and taxpayer who rose to challenge John Loza and Veletta Lill at the Grauwyler meeting, said on the telephone later in the week that he tries not to think about City Hall too much, "because I don't want to grow my ulcer."

But he revs up anyway.

"One thing about the arena deal that stuck in my craw," says Pearson, "was that all of that development over there was going to happen anyway. You start at State-Thomas and go west. It was all happening. All I saw was a big developer going to City Hall and getting lots of money for doing what somebody was going to do anyway."

He isn't fooled by the city manager's "tax cut." In fact, the tax cut really makes him mad.

"The smarmiest let-'em-eat-cake thing is this tax reduction they're throwing out there. It just smacks of politics," he says.

He's angry about the steady decline in the level and quality of city services over the last decade. "They trot out this stuff like the new garbage trucks, and it doesn't work. The trucks can't fit in the alley. Then it seems like every time there's a problem, their reaction is to say, 'Oh we need to restructure,' and they take away more services or more of our elbow room."

But mainly Pearson sees something terribly wrong, something so big he can't quite put his finger on it, something that looms like an oppressive, rumbling cloud.

The story City Hall tells doesn't add up.

"We keep hearing about record growth in the tax base," he says, "and it looks to me like we're broke. I'm just doing the math. My first point in all this, I think, would be that the emperor has no clothes."

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