Here's the issue. DART uses the fare-box money for part of its operating expenses. Estrada told them if they borrowed against it, they would have to take about a third of the fare-box money in the future and use it to pay off the loan.
The main way DART gets money for operations is from the $370-plus million it gets every year in local sales tax revenues. Raymond Noah, the board member from the Park Cities, pointed out that if DART takes fare-box money out of the operating budget to pay off debt, then it just has to use more money from the sales tax to operate on.
"That means that the sale tax subsidy then would have to increase because the money from the fare box would have to go directly to the bonds. All we're doing is just moving one set of funds to get another set of funds," he said.
I think there's another big point in here that Noah didn't quite get to, although I'm sure he's aware of it because he's a sharp guy. I tried to call him last week, and he didn't call back.
What DART also would be doing with this and other borrowing schemes proposed to the board last week is taking money from the operating budget and using it for capital expenditures. That's a big policy shift.
Another scheme suggested by Estrada and Leary, for example, was borrowing money against the federal grant money that DART gets. The problem with both of those ideas, of course, is that the capital plan for a railroad needs to be very long-range. You have to be able to commit to and plan for projects decades ahead.
But fare-box revenues can go up or down with short-range economic cycles. And federal grant money can go up or down depending on which congressional committee chairman got caught with an intern at a bed and breakfast in Vermont over the weekend.
Using these financial reach-arounds to finance the long-range building of regional rail is flaky. Don't take it from me. Listen to what DART board members had to say to Estrada and Leary at last week's meeting:
Noah characterized the ideas being presented to the board as "funny financing activities." He said, "The reason I'm asking the questions this way is because this funky stuff kind of cuts you off when you get on down the line and you really want to get serious about financial alternatives."
Dallas board member Pamela Dunlop Gates said the ideas were being offered as a "panacea" that she described as "exotic."
Funny financing funky exotic panacea. You feeling better about this yet? I am not.
Another idea presented to the board was to finance future debt on longer notes—40 years instead of 25 to 30—as a way of getting smaller payments. Angie Chen Button, a member from Garland, was one of several who questioned why DART would start basing its future on paper-thin borrowing deals now, at a time when almost everyone expects a tough economic downturn ahead. She described the ideas as "too optimistic."
Even after Estrada and Leary tried to tell her more borrowing would have no effect on the agency's credit rating, Chen Button said, "I'm sorry, but it's very hard for me to believe that's not going to affect our credit rating."
So now we have a funny financing funky exotic too optimistic panacea with a bad effect on our credit rating.
DART staff floated another idea: getting private companies to build the rail lines themselves and then paying those companies for the use of the lines. A DART observer, who asked not to be identified because he does business with the agency, described this to me as "off-shoring debt."
He pointed out that the private companies have to borrow money to build the rail lines. And DART is going to have to pay them back for that, every penny and then some, some day. The money waits around the corner for you.
Of course, even to proceed with any of this funky funny off-shore business, DART will have to hope it won't be distracted by the problems of its board chairman, Lynn Flint Shaw, who is dealing with accusations of forgery, non-payment, campaign ethics, etc. There is also the odd little side deal with Deloitte Touche, the agency's auditors, who revealed last week they had been paying Shaw $20,000 a year to promote accounting as a profession among minority high school students.
Does this sound to you like a situation that is under control, a problem that has been solved?
Yes, the board said last week that it will build everybody's rail lines on time, and it doesn't have any real financial problems any more. Leary, the CFO, told the board, "We are not financially constrained, nor are we running a deficit. I am going to repeat that. We are not financially constrained, nor are we running a deficit. We actually have a debt constraint issue."