City Hall

Coronavirus Set to Tear $25 Million Hole in Dallas' Budget

Potholes: Always a priority, even in a pandemic.
Potholes: Always a priority, even in a pandemic. Paige Skinner
The Dallas City Council got its first significant look at the havoc the novel coronavirus pandemic is likely to wreak on Dallas' budget Wednesday. The short-term outlook for the city isn't great. The long-term could be even worse.

Here's the big takeaway: According to city staff, Dallas' budget for fiscal year 2020, which runs through October, is likely to take a hit of somewhere between $25 and $35 million thanks to COVID-19. The biggest chunk of that shortfall will come from a decline in sales tax revenue. The city expects as much as $9.4 million of the shortfall could be covered by reduced expenses including a hiring freeze.

The city is unlikely to feel much this year when it comes to property taxes because the vast majority owed to the city was paid before the pandemic hit. Other coronavirus-specific costs incurred by the city will be covered by money Dallas received from the federal government's CARES Act stimulus.

Dallas will really start to feel the effects of the virus-caused budget crunch during the next fiscal year. The city's CFO, Elizabeth Reich, said she expects a $50 million decline in sales tax revenue during the 2021 fiscal year, but reserved the right to change expectations based on April sales tax numbers.

Property taxes will likely remain fairly steady next year, Reich said, because the appraisal districts that serve the city have already sent out property valuations for next year. Decreases in property values, if they happen, will be felt in 2022 and beyond.

Dallas Mayor Eric Johnson said the sales tax revenue loss in 2020 is higher, in gross dollars lost, than the sales tax Dallas lost during the 2008 housing crisis.

It's imperative for the city that Dallas County shares some of the city's coronavirus burden, Johnson said. The county, he said, is likely to be in better financial shape as the crisis moves forward because it doesn't rely on sales tax revenue. He's not willing to sacrifice the city for the sake of the county when it comes to things like enforcing state, county and city coronavirus orders.

"(If) you're reliant on to the extent that we are on sales taxes, we're talking about major, historic devastation." — Eric Johnson

tweet this
"If you're reliant on property taxes, like the county, then you have essentially no fiscal impact this year, but if you're reliant on to the extent that we are on sales taxes, we're talking about major, historic devastation," Johnson said.

While no one on the council outlined any cuts they'd like to see to make up the shortfall — Reich said she'll be back for another briefing with more numbers June 17 — several said that they hope the city won't cut the budget for street repairs, which they said was a frequent concern for residents.

Council Member Omar Narvaez, who represents portions of West Dallas, Northwest Dallas and the Design District, emphasized that Dallas' poor neighborhoods frequently bear the brunt of budget crunches.

"As we're looking at places that we have to cut or things that we have to change or really look it, (I'd ask) that we not forget to put our equity lens on each of the budget items that we have to look at, because we know what happens traditionally," Narvaez said.
KEEP THE DALLAS OBSERVER FREE... Since we started the Dallas Observer, it has been defined as the free, independent voice of Dallas, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Stephen Young has written about Dallas news for the Observer since 2014. He's a Dallas native and a graduate of the University of North Texas.
Contact: Stephen Young