Dallas City Council may consider diverting DART funding to address pension crisis

The Dallas City Council is considering reallocating some of its funding to Dallas Area Rapid Transit to combat the city’s pension crisis — a move that transportation officials say would negatively impact DART.

Council members explored ways to more quickly close the city’s pension deficit. One approach would be to send DART 25 percent less in sales tax revenue, according to council members Tennell Atkins and Paula Blackmon, who both serve on the city’s pension committee.

DART collects a penny sales tax – a 1% tax on every dollar spent – ​​in its 13 member cities. The transit agency has collected more than $400 million from Dallas annually over the past two years, according to sales tax data.

Atkins, who chairs the retirement committee, said The Dallas Morning News that city officials examine whether the transit agency is collecting more money than it needs to provide its services. “It’s just a discussion at the moment,” he said.

Dallas must propose a 30-year financing plan to solve its pension problem. The city faces a $3 billion shortfall in its police and fire fund, which manages the retirement program for more than 10,000 current and retired officers. The civilian employees’ pension fund also suffers a billion-dollar deficit, according to city officials.

The city has until November to develop a plan that it can submit to the Texas Pension Review Board.

The funds were on the verge of collapse nearly eight years ago before the Texas Legislature passed a law to overhaul the system in 2017 and keep the funds afloat. Most of the pension problems emanated from board-approved decisions that supported unsustainable employee benefits and bad investments, such as owning a 3,100-acre California resort purchased for nearly $111 million in 2006, according to Dallas Police and Fire Retirement System Director Kelly Gottschalk said The news in 2018. The resort was later sold for $22 million in 2018.

Blackmon and council members Chad West and Gay Donnell Willis, all members of the ad hoc committee, said they were willing to evaluate different revenue sources, including that related to DART, in order to make ongoing payments to offset some of the burden.

Blackmon, who previously discussed DART funding at a meeting in April, said funding could return in the coming weeks.

In the past, city officials have considered liquidating more of its real estate portfolio to put more cash into the fund. They also recommended seeking voter approval to change employee retirement fund contribution rates.

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Impact on vulnerable populations

In a May 6 memo to transportation committee members, DART CEO Nadine Lee warned that any sales tax reduction “would negatively impact the transportation agency’s services.”

Lee said the net impact of levying a 0.75 percent sales tax instead of the current 1 percent represents a $6 billion reduction in revenue over the life of his current 20-year financial plan. years.

“For context, an amount of this magnitude is equivalent to the entire capital budget for bus, light rail, and agency-wide facilities and technology projects for the next 20 years , including mission-critical items like modernizing our nearly 30-year-old factory. light rail system, replacing our aging light rail and bus vehicles, replacing hundreds of bus shelters and benches, and investing in bus lanes to improve speed and reliability,” said Lee said in the note.

In the memo, Lee warned that fixed-route bus and light rail services could experience frequency deviations of 30 minutes and that most customers might have to wait an hour for local buses.

The North Park Shuttle, or DART 402, which serves three bus stops from the Park Lane station to the NorthPark Center entrance, would be interrupted. GoLink coverage, which transports customers to DART stations, would decrease by 30%, according to the memo.

DART also anticipates that reductions in its services, particularly in areas where routes intersect, could impact areas of South Dallas, West Dallas, the Inner Harbor and Legacy West areas, between others.

“I cannot emphasize enough the detrimental effects these types of service reductions would have on the most vulnerable populations who rely on DART for access to employment, health care, education and much more,” Lee said in the note.

Lee also warned that disproportionate and disparate impacts on low-income and communities of color could violate federal guidelines in Title VI of the Civil Rights Act. Meanwhile, the state law that created DART binds member cities to DART debts and that is unlikely to go away despite a reduction in sales tax, according to the memo.

At an April 11 retirement committee meeting, Blackmon asked whether DART still needed all of the money to fund its plans. She said DART’s integrated system today is different than in the 1980s, when the system was first created.

Blackmon said The news it was unclear how the transit agency was using its money.

“You have money, you can’t tell me where you spend it, you give money back,” Blackmon said of the transit agency. “Are you actually creating opportunities to expand public transportation or are you just spending money? »

Jeamy Molina, DART’s communications director, said DART’s budget and financial plan are approved by the DART Board of Directors at public meetings and are subject to financial audits that have passed review listeners over the past 20 years.

“We have a 20-year financial plan and we meet regularly with cities to discuss our financial plans and our budget. The public improvement funds we have offered to cities are used for complementary transportation projects that help not only improve the system but also our cities,” Molina said.

Blackmon said some of the additional sales tax revenue could be used for a public safety district, salaries and pensions. She said she was aware of DART’s concerns that a loss of funding would force the transit agency to adjust its staffing and services.

This isn’t the first time council members have discussed plans to change DART’s funding design to address the city’s retirement problems. In 2017, former council member Scott Griggs proposed diverting one-eighth of DART’s share of sales tax revenue to the pension fund.

At the time, DART’s board opposed the move, noting that a reduction in funding would hamper the transit agency’s ability to finance its debts and provide its services.

Things have changed since then. Sales tax revenue has doubled in the region and DART’s financial situation has improved, according to sales tax data.

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In 2022, an infusion of COVID-19-related federal dollars allowed the transit agency to refund a portion of excess sales tax to member cities that felt shortchanged by DART’s services.

Blackmon said other member cities in DART’s coverage area may also be willing to pay less to fund DART’s services. “Plano needs money, Irving needs money — we all need that extra part of that penny,” Blackmon said. “If you’re not providing a service where people say ‘give me more, give me more’, then we should evaluate it.

At the April 15 transportation meeting, Lee said she was concerned about conversations that suggested the transit agency didn’t need as much sales tax revenue. DART looks like it does today because that’s what cities pay for, Lee said.

“If you want DART to be better, additional investment will be necessary,” Lee said. “If you take away money, we can’t even maintain what we’re doing today, and that will have a significant impact, especially for cities like Dallas, (which) benefit from a lot of public services. bus in particular.”

Staff writer Everton Bailey Jr. contributed to this report.