By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
Whenever I come across news accounts of sudden shocking budget catastrophes at DART, our regional transit agency, I think back to the sudden shocking budget catastrophes a reporter friend of mine used to have. This was at the beginning of my newspaper career when I was still young and dumb enough to loan money to a newspaper reporter.
He was always going to pay me back double, no sweat. The ship was coming in. He pointed to the ship on the horizon. I could never quite see it.
My former colleague always told compelling, sometimes spine-tingling tales about what happened to that ship—unanticipated distant funerals, catastrophic car motor explosions, gruesome dental emergencies, pirates. But a consistent theme ran through all. My colleague was always stunned and humiliated to discover—once again—that there was no ship and that he was, therefore, a person of quite modest means.
Too modest to pay me back. One time he even did the pockets-inside-out pantomime.
So I thought of him again a week ago when DART started doing the pockets-inside-out pantomime—shocked and dismayed to find that it must slash 300 jobs, cut service on all of its rail and bus lines and bring to a squealing halt almost all of its capital program to build new rail lines in the region—the lines that are on the drawing board but not under construction yet.
And that's what will happen if the agency's more optimistic projections prove true. DART staff has informed the DART board of directors that if certain less optimistic projections prove right, the damage and the cuts will be twice as bad.
So how bad would twice as bad be? No trains at all? Citizens required to give DART employees free rides in their cars? How bad can it get?
Look at their history. DART has a more preposterous track record for over-optimism about its finances than my former friend, the reporter.
Most of the money DART operates on is from sales tax revenues. The fares paid by passengers amount to barely six percent of the budget. More than 75 percent comes from a one-percent sales tax that you pay on every single item you buy within the DART service area. The rest of it pretty much comes from your income taxes.
Sales tax money is DART's life-blood. Buy a new car for 18 grand, you just paid DART $180.
In the most recent round of DART financial disclosures—we might also call them true confessions—DART admitted that it had been over-optimistic about its projected revenues from sales taxes for the next 20 years. How over-optimistic? About $3 billion over-optimistic.
The total amount it had been saying it would collect in sales tax subsidy in that period was $14.6 billion, so its projections were fat by 20 percent. Does a 20 percent goof seem pretty wide off the mark to you? Nah, not for DART.
Remember that only two years ago DART had to reveal it had been over-optimistic about the cost of its current building campaign. By how much? In that case DART was over-optimistic by 100 percent.
They had told the public the cost of completing new rail lines already under construction would be only $1 billion. As it turned out, it was two. Billion.
Maybe when they published their financials and the results of their external audit, they should have said the cost of building the new lines would be "one or two billion." But I don't know if you're allowed to say that in an official audit.
Which is not to say that DART was failing any audits or ignoring red flags from its outside auditor, Deloitte & Touche. There were no red flags.
In the same period when the billion-dollar over-optimism problem was discovered, DART also revealed that its board chairman, the late Lynn Flint Shaw, then under investigation by the district attorney for forgery, was the beneficiary of an undisclosed contract with Deloitte & Touche, paying her to address Dallas schoolchildren on the merits of careers in auditing. Ms. Shaw and her husband died soon after in what police called a murder-suicide.
By consistently overstating the amount of sales tax revenue it could anticipate in years ahead, DART has been able to paint rosy pictures in the face of gloom, promising to build train lines and provide service with money that is always about to come in. By ship.
This latest incident is far from the first time DART has done the pockets-inside-out pantomime on sales tax. Let's go back to the year of the September 11 attacks. Sales tax revenues for 2000-2001 were down by four and a quarter percent, according to numbers provided to me by DART. The national economy was stunned and stagnant. That was not DART's fault.
But how did DART respond? Did DART leadership go to the public and say that times were terrible and nobody knew how long digging out would take, so DART would have to adopt a more conservative approach to service levels and new construction? Nah.
Instead, DART projected a growth in sales tax revenue the very next year of more than 20 percent—three times more optimistic than past projections. Optimism on steroids! Super-optimistic!
How much too optimistic? Well, sales tax revenues the next year, instead of going up 20 percent, plunged again by more than nine percent. Depending on how you do the math, that puts them off by about 30 percent.
Now, the next year, DART did want to show that it had learned its lesson. It scrunched up its fists and forced itself to be way less optimistic, projecting a growth in sales tax revenues for the following year, 2003, of a measly three percent. The city of Dallas, which shares the same pot of sales tax money, projected a drop of 6.5 percent for that same year.
In fact DART's sales tax revenues fell by just over four percent that year, which meant that even its most scrunched-up-fist, self-controlled, teensy-bit optimistic projection was fat by seven percent.
Thirty percent too optimistic one year plus seven percent too optimistic the next: that's 37 percent too optimistic in two years. You begin to see how you could work your way up to 100 percent too optimistic, otherwise known as pockets-out.
And shocked! Shocked and dismayed!
I remember this about my friend when he pulled his pockets out to show me. No one in the world could possibly have been more stunned than he.
About this time, I think you would be justified in asking why. Why would a body like DART demonstrate such a consistent and even flamboyant penchant for exaggeration, knowing that eventually the piper must be paid? In fact, not just eventually. In DART's case, the piper shows up like the mailman, almost like he's got a route.
But the why is easy. Look, for example, to the city of Irving, now suffering the tortures of the damned—if public statements by local leaders are to be believed—because DART may have to delay construction of a new rail line to D/FW Airport.
Irving has a fair point. For decades its citizens have been paying sales tax into the DART kitty, and private investors have been lining up holdings near planned rail stations. There is real pain for Irving in any significant delay in construction of the line DART has been promising them.
Or look to downtown Dallas for what always seems to me like a much less reasonable complaint. At some point, hopefully sooner than later, DART must build a second set of train tracks across downtown to handle all of the new and additional trains coming through downtown from the new far-flung lines.
The alignment hasn't been chosen yet. But a lot of research has been done on possible routes—how many people would ride one versus another, how much the various routes would cost to build, how many stations each would accommodate and so on.
For the last two years The Dallas Morning News has been campaigning for what I call the Decherd Line, named by me for Robert Decherd, CEO of A.H. Belo Corp., the company that owns the Morning News.
The Decherd Line through downtown would attract the lowest number of riders of any of the possible alignments under consideration while carrying far and away the highest cost of construction. It would cost $839 million to build, compared to the line with the highest number of riders, which would cost only $511 million to build.
So why would the Morning News favor the Decherd Line? Because that line would run to the doorstep of the Morning News. The Decherd alignment reaches all the way across downtown to take in Belo-related properties and the new city-owned convention hotel, which Belo successfully campaigned to have built on its own property line in the otherwise moribund southwest corner of downtown.
For people like the beginner politicians appointed to the DART board, saying no to big shots is really hard.
Imagine them having to tell Robert Decherd, the Duke of Belo, that the cupboard is bare. I hope they know they won't be able to start by saying, "Sorry, Bob." Know why? We're not allowed to call him Bob.
Someone steps forward from a discreet shadow, takes one by the elbow and reminds one in a whisper that no one calls Mr. Decherd, Bob. It's Robert. Just to be safe, Mr. Decherd.
I don't know how much time you've spent around beginner politicians. I have a lot. Do you know what that does to them? Take a DART board member by his elbow and whisper in his ear, "Mr. Decherd is very disappointed that you have expressed a negative attitude toward DART's ability to raise the extra $328 million needed to build the Decherd Line." I can tell you exactly what the response will be:
"Me? Negative? Who said that? Who told you that? Tell me the bastard's name! Let me tell you something, Buster. You tell Mr. Decherd I'll put my optimism up against anybody's optimism! I'm so optimistic, as soon as I'm done talking to you I'm going to call Angelina Jolie and ask her for a date. That's how optimistic this guy is, Mister."
I guess I could regain my faith in DART some day. Next time you see me loaning money to reporters, you'll know I'm about ready to believe again. But by then, if you really want to see me, you might do well to call ahead for visiting hours.