The Emperor's Checkbook

Dallas City Hall finances could be our own little Enron

The Dallas system--weak mayor, strong city manager--is supposed to be businesslike. So why is the city in the financial ditch so badly? If Dallas City Hall is so businesslike, why wouldn't it have seen the economic downturn coming and hedged its bets just a little?

Maybe nothing is businesslike about Dallas City Hall.

What I'm going to tell you about is a fascinating lawsuit filed against the city by one of its own top auditors. Anybody can file a lawsuit. But this isn't anybody.

City Manager Ted Benavides is the personification of the Dallas City Hall system--calm, cool, collected, always businesslike. But a major whistle-blower says that's all a façade, and City Hall is a junk pile.
Peter Calvin
City Manager Ted Benavides is the personification of the Dallas City Hall system--calm, cool, collected, always businesslike. But a major whistle-blower says that's all a façade, and City Hall is a junk pile.

First, however, please indulge me for a minute while I discuss my personal issue with the city at the moment--my parking ticket.

Wait, now wait, that's not it: This is not some newspaper hack using his two-bit podium to settle a personal grudge. That's very unfair of you. There's nothing two-bit about my podium. In the end you will see that my parking-ticket problem is emblematic of Global Truth.

So enough about you, let's talk about me for a change: A couple of weeks ago I get a dun from the city of Dallas--"FINAL NOTICE!"--saying I owe 15 bucks for a parking ticket. The ticket was issued June 10, 1999. The car they ticketed was my 1990 Honda, the car that refused to die.

Long practice has taught me to treat all personal transactions with City Hall like invitations to a Mafia wedding: Take it seriously, be respectful, keep good files. But in this case I got swifted. I originally paid this citation on June 23, 1999, by check, just less than two weeks from the date of issue. The city cashed the check five days later.

Six months later, on January 18, 2000, the city of Dallas sent me a dun identical to the one I just received--"FINAL NOTICE!"--telling me that I had not paid the ticket and better hurry up. I called a number. They told me to bring my canceled check downtown for a "hearing." As Tony Soprano said several times at his mother's funeral, "What're you gonna do?"

I dug out the check and went to the "hearing." And here is where I got swifted. This is two years ago, but I remember it pretty well because it was so weird. When I get there, a bunch of people with canceled checks in their hands are muddling around in a corridor outside the locked windowless door of the office to which we all have been instructed to report--the inner sanctum of tickets. After a while this guy comes out and sort of wades into the crowd. We're all waving our canceled checks at him like a scene in the Bible.

When he gets to me, he looks at my check and maybe holds it up to the light or something, then tells me, "It's OK, you can forget about this." No notes, no nuthin'. How can I forget about it, when I don't get how he's going to remember it? I ask for some paper--a receipt, a letter, a note, anything, his thumb print on a bubblegum wrapper, whatever he can manage to show that I came to my "hearing" and was heard.

He leans into me and gets kind of confidential. That's a whole other matter, he says. If I want paper, then it has to go through a whole different process, and that takes a lot of time--oh, a LOT of time--lots of "hearings."

I went for it. I got suckered. He did a gypsy deal on me. I left City Hall without paper. Just get a big felt pen and write "MARK" on my forehead.

Because here it is again, two years later, the exact same "FINAL NOTICE!" So what do I do now? What is the pragmatic thing? I paid it once. Paying it doesn't make it go away. Who knows what goes on inside the inner ticket sanctum? Maybe they're all sitting around in there opening the mail in their swimsuits watching Jeopardy.

"Hey, we got a live one out on Bryan Parkway! Paid his parking ticket twice! Send this chump some more dun letters."

All right, now I will ask you to ride with me out to a pleasant, tree-shaded middle-class neighborhood in Arlington where I spent several hours talking to Robert W. Reynolds. Reynolds is the 65-year-old senior auditor with the city of Dallas who brought suit against the city. In his suit he claims his superiors at City Hall retaliated against him for trying to tell the truth about the kind of disastrous internal financial mess he says Dallas City Hall is in right now.

Think about Enron. Why didn't those accountants tell the truth? What happens to an accountant who does?

Taylor, a CPA with a law degree, went to work for the city of Dallas in 1995. Since then he has handled many of the city's biggest and most important audits. Until his recent problems, his job performance evaluations were not just good--they were glowing.

"This project was about as demanding as any...Bob responded better than expected.

"Bob has a positive out-going personality that demonstrated his self-confidence and willingness to accept challenges...

"Bob is continuously self-motivated...

"Experience, knowledge, excellent analytical skills...consistently present and on time..."

They loved this guy. He was a star. His superiors rewarded him with ever larger and more significant audits to supervise, and that was when things began to go south for him, because Robert Reynolds began to find ever larger and more significant problems at Dallas City Hall.

In 1999 Reynolds informed his superiors that the city budget prepared for the council by the city manager was seriously misstating expected sales-tax revenues. You remember this issue, right? It's why we are in the ditch right now. The city manager told the city council earlier this year that the city was facing a $95 million shortfall all of a sudden because of a shocking, totally unanticipated plunge in sales-tax revenues after 9/11. It was all Osama bin Laden's fault.

Was it?

Reynolds also carried out a major study of cash transactions at City Hall, and this is where we get back to my stupid parking ticket. What he found was that the city, according to his study, has no real control at all over receivables. It doesn't know who owes it what. It doesn't know whom it owes money. It doesn't keep track of who pays what. There are pools of money all over City Hall that nobody ever checks on or counts.

"These discrepancies made it more probable than not," the lawsuit states, "that city employees had either misappropriated funds or that city employees responsible for these accounts were grossly incompetent."

So my imaginary picture of people sitting around in their swim trunks dipping randomly into stacks of crumpled citations or invoices or whatever to see which one might pay--or pay again--is not a joke.

In his den Reynolds calmly laid out for me what he says is the general picture of City Hall finance in Dallas. He said the city maintains more than 200 separate bank accounts, almost none of which is ever truly reconciled or balanced down to the level of transaction detail.

"Nothing is analyzed," he said. "Nothing is reconciled."

Reynolds doesn't blame the staff for being lazy or stupid. He says the staff has been cut and cut and cut again over time, so that "the staff is so very very thin, I don't know how long it can go on." The people who are responsible, in many cases, are woefully undertrained, Reynolds says.

"The bank deposits are not totaled up correctly; they come from different sources; there are credit card charges unresolved; it's all just sitting out there. The problem is that if you don't resolve these things, you can't trust your own books."

The consequences of all this are fairly scary. Reynolds says the city basically would have no way of knowing if a city employee were skimming deposits, or if a debtor, say someone who owed 15 bucks on a parking ticket, had ever paid. He said there are many instances where the city owes people money, and he has pointed out those instances to the departments involved.

"They tell me, 'If they ask for the money, we'll pay it.'"

How's that for a first-class operation?

In Reynolds' suit, he claims the city retaliated against him--denied him a promotion--for telling the truth about these issues. He also has complained to a state oversight agency within the auditing profession and to subcommittees of the Dallas City Council. He has some interesting things to say about council members who have known chapter and verse on all this for years and have remained silent. More on that later.

I called Reynolds' superior, current City Auditor Thomas (Mike) Taylor, who called me back and said he couldn't discuss Reynolds or the lawsuit on instructions from the city attorney. Two members of the city attorney's staff called me back to say they also could not comment.

In the weeks and months ahead, I plan to delve deeper into some of the specific claims Reynolds has made. Claims in a lawsuit are just that, claims, but many of these happen to be backed up by major audit studies. And Reynolds is a very credible person with specific expertise. All of that lends this lawsuit a considerable amount of gravitas.

It also explains a lot, from my stupid parking ticket to the general randomness of city enforcement of ordinances and claims. And then every once in a while they get somebody so dumb he actually lets them talk him out of getting any paper. They must really love that. "Bye, Sweetie, see you in a few more months." Steam from my ears.

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