Mayor Rawlings Talks Municipal Bankruptcy for Dallas. So. Wow. Really?

Municipal bankruptcy is now open for discussion in Dallas.EXPAND
Municipal bankruptcy is now open for discussion in Dallas.
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Just in case somebody wants to accuse me of tortious mismentionment or some other crime that doesn’t exist, let me point out at the top that I’m not the one who’s been blathering about the B-word.

No, the person who has been talking about the city of Dallas possibly going bankrupt — first, in front of the state pension board three weeks ago and then Sunday, for goodness sake, in an interview with The New York Times — is Mayor Mike Rawlings.

And did the Times love it much? Based on that article alone, the name of that newspaper could be changed to the Schadenfreude Bugle: “Dallas has the fastest economic growth of the nation’s 13 largest cities,” the Times story says in the setup. “Its streets hum with supersize cars, and its skyline bristles with cranes.”

You know the line: big cars, big hair, big cranes, big idiots. Then the gut-punch. Referring to our police and fire pension catastrophe, the Times story says “Dallas has a problem that could bring it to its knees …”

Big idiots with big hair getting out of their big cars and falling to their knees, bankrupt and el-bust-o all over town, to the delight of the smartpants nation. What a picture.

Just remember, I didn’t paint it. First. Mayor Rawlings is the one who started saying it. In the Times piece he gets a big backup from one of his chorus-persons, City Council member Lee Kleinman. Kleinman boldly tells the Times there’s no way Dallas can write the $1.1 billion check that the state pension system says the city owes to the Dallas police and fire pension system:

“The city of Dallas has no way to pay this,” Kleinman says. “If the city had to pay the whole thing, we would declare bankruptcy.”

So what’s my beef? Do I think they shouldn’t have said it, because now people will know? Like nobody noticed we had problems? Oh, that’s rich. Believe me, the people who notice have been noticing for a year or more.

Just read the headlines. Oct. 28, 2015: Moody’s downgrades Dallas bonds. Oct. 7, 2016: Fitch lowers rating on Dallas bonds. Oct. 15, 2016: Moody’s lowers rating again on Dallas bonds.

That’s three loud knocks. Knock, knock, knock. Hey, I think there could be somebody at the door. Go and see. No, you go and see. No, you go and see. That’s about where we’ve been with this for a year.

So, no, I don’t think Rawlings and Kleinman have let the cat out of the bag. That cat’s long gone. What I do think is that this new looser use of the B-word is going to invite tighter scrutiny, and the scrutinizers may discover that our pension fund problems are only a canary, or buzzard, in the coal mine.

The pension problem is not our only potential billion-dollar-plus hand grenade. A lawsuit over police pay has been up and down the Texas court system for a decade but is finally back before a trial court. It is being tried in, of all possible venues, suburban Collin County, a place with less pity in its heart for Dallas than The New York Times. The plaintiffs are claiming that their suit could ring up on the municipal cash register at $2 to $3 billion.

I could go on. I still think the Lockey and McKenzie litigation over fair housing has the potential to deliver its own devastating financial blow to City Hall. And then we have the recurring very scary issue — it scares my socks off — in the legacy of unsound bookkeeping and accounting practices at City Hall, as uncovered in repeated investigations by City Auditor Craig Kinton.

When Kinton asked city housing officials for records to show how they spent $54 million in federal funds, they told him they didn’t have those kinds of records because they rely instead on what they called the “ad hoc” system of accounting, which, if I have to explain, is not a system. Ad hoc is a Latin term that means “whistling Dixie.”

So, no, I don’t think it’s wrong for Rawlings and Kleinman to publicly discuss the same thing the bond rating companies have been discussing publicly for a year now, that Dallas has serious problems. I’m all for discussion. I’m in the discussion business. But as much as I may admire discussion, I do think there’s an even more important question, which is what in the hell we’re going to do about it. And there is where I think our mayor, like most American mayors, falls far short.

When the city was negotiating the recently concluded pay deal with police and firefighters, Rawlings was asked whether that multi-billion-dollar lawsuit up in Collin County would cause him to go at all carefully on a proposed new public safety budget, which he had promised to greatly expand. The headline in the daily paper was, “Billion-dollar pay lawsuit won't deter Dallas mayor from hiring more police, raising wages, he says.”

How are we to take that, from a guy who was only a month away from going down to Austin and threatening municipal bankruptcy? What do we call it? Courage? Opportunism? Ad hoc?

I had a great hourlong chat yesterday with the only person I know personally who has a global view of municipal bankruptcy. Washington lawyer Haven Pell, proprietor of a blog called “LibertyPell,” dinged me by email because he had noticed The New York Times story.

Pell has enjoyed a long successful career in various corners and high echelons of the financial world. In the 1970s and '80s, as a lawyer with Kutak Rock & Campbell, he was involved in the creation of bond insurance but also was involved in the crafting of what is now the nation’s basic municipal bankruptcy law.

He talked to me about the long slow squeeze we’re really talking about when we even begin to mention municipal bankruptcy in connection with a pension problem. On the one hand, he said, bankruptcy may seem at first like a way out:

“Obviously a bankruptcy will allow a city to reorder its finances, just as it would a corporation or an individual.” But then all of a sudden the choices begin to look less good.

“One choice is to scale back the retirement benefits,” he said. “That will be interesting.” The people whose pensions would be cut, he said, will immediately go to war. “They’re going to trot out these nice 74-year-olds who are on respirators and say, ‘You’re going to throw this nice man out the street.’”

But turning in the other direction, toward raising taxes to pay off the obligation, doesn’t necessarily work out very well, either: “The interesting problem is that you can’t actually raise taxes without limits to rate or amount, because people will move away.

“It doesn’t do any good for Dallas to suddenly have the highest taxes in the world, because, guess what, there won’t be anyone left to tax.”

All of this — and Pell sees the Dallas situation as part and parcel of a national dilemma — moves toward the same point on the moral compass. Forget about bankruptcy. I mean, do it, don’t do it. The bankruptcy proceeding itself won’t change the core problem.

“As this moves toward some sort of resolution, you will be faced with someone having to look someone in the eye and say no, which is not a noted strength among elected officials.”

Mike Rawlings told The New York Times the truth about the threat of municipal bankruptcy in Dallas. Some of it.EXPAND
Mike Rawlings told The New York Times the truth about the threat of municipal bankruptcy in Dallas. Some of it.
Jim Schutze

No it's not. Not that I have ever seen. Well, I might carve out an exception for some of the younger elected officials I have seen coming to the dais in Dallas in recent years, in part because they seem to have less gaudy material ambitions and appetites than their older predecessors. But other than that, saying no is not a skill I have seen much of around this town.

Pell is — I think — sort of optimistic about that. Well, I’m not sure I should assume it’s optimism. His attitude could be grim determination. But he seems to think the girls and boys who “jes cain’t say no” can learn how if they have to.

“Coming forward, I’m not sure you and I will still be thinking or writing about any of this stuff, but there will come a moment where the skill of saying no becomes so important that people will begin to have it," he says. "At this moment, nobody has it. Nobody knows how.”

He thinks people will learn not only how to say no but even how to hear it: “The moment will arrive when people will understand about scarce resources, and people will be guided toward saying no nicely.”

That’s almost Pollyanna next to what I was thinking — more like a bunker, barrels of dried beans, a lot of water and a machine gun. But, remember: The mayor started this, not me.

CORRECTION: Scott Goldstein, the mayor's spokesperson, has informed me that The New York Times did not interview the mayor. His remarks as quoted by the Times were taken from his earlier testimony before the state pension board. Goldstein said the mayor's discussion before the pension board of possible bankruptcy was in the context of both the pension problem and the pending Collin County lawsuit.


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