The Dallas City Council is considering whether to divert a portion of its funding for the Dallas Area Rapid Transit to tackle the city’s pension crisis — a move that transit officials warned would have a negative impact on DART.
Council members have been exploring ways they can fill the city’s pension gap faster. One approach would involve sending DART 25% less in sales tax revenue, according to council members Tennell Atkins and Paula Blackmon, both of whom sit on the city’s committee on pensions.
DART collects a penny sales tax — a 1% tax on every dollar spent — in all 13 of its member cities. The transit agency collected over $400 million in Dallas annually for the last two years, sales tax data shows.
Atkins, who chairs the pensions committee, told The Dallas Morning News that city officials are examining whether the transit agency is collecting more money than it needs to provide its services. “It’s just a discussion right now,” he said.
Dallas must come up with a 30-year funding plan to resolve its pension predicament. The city faces a $3 billion shortfall in its police and fire fund, which administers the pension program for over 10,000 current and retired officers. The pension fund for civilian employees also suffers a $1 billion shortfall, according to city officials.
The city has until November to come up with a plan it can submit to the Texas Pension Review Board.
The funds were on the brink of collapse nearly eight years ago before the Texas Legislature passed a law to overhaul the system in 2017 and kept the funds afloat. Most of the pension issues emanated from board-approved decisions that supported unsustainable benefits and poor investments, like owning a 3,100-acre California resort bought for close to $111 million in 2006, the director of the Dallas Police and Fire Pension System, Kelly Gottschalk, told 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, have said they are open to evaluating different revenue streams, including the one related to DART, to make continual payments to offset some of the burden.
Blackmon, who has already brought up DART funding in an April meeting, said that funding could come up again in the next few weeks.
In the past, city officials have considered liquidating more of its real estate portfolio to put more cash into the fund. They have also recommended seeking voter approval to change contribution rates for the employees’ retirement fund.
Impact on vulnerable populations
In a May 6 memo to council members on the transportation committee, DART CEO Nadine Lee warned any reduction in the sales tax would “detrimentally impact the transit agency’s services.”
Lee said the net impact of collecting 0.75% sales tax instead of the current 1% is $6 billion less revenue over the life of its current 20-year financial plan.
“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 light rail system, replacing our aging light rail and bus vehicles, replacing hundreds of bus shelters and benches, and investing in bus corridors to enhance speed and reliability,” Lee said in the memo.
In the memo, Lee warned that fixed-route bus and light rail services could see 30-minute gaps in frequency, and most customers may have to wait an hour for local buses.
The North Park Shuttle, or DART 402, which services three bus stops from Park Lane station to NorthPark Center’s entrance, would be discontinued. GoLink coverage, which shuttles customers to DART stations, would decline by 30%, according to the memo,
DART also anticipates that pruning its services, especially in areas where routes intersect, could impact areas in South Dallas, West Dallas, Inland Port and Legacy West zones, among others.
“I cannot emphasize enough the detrimental effects these types of service reductions would have on the most vulnerable populations that rely on DART to access jobs, health care, education, and more,” Lee said in the memo.
Lee also cautioned that the disproportionate and disparate impacts on low-income and communities of color could violate federal guidelines of Title VI of the Civil Rights Act. Meanwhile, the state law that created DART binds member cities to DART’s debt obligations and that is unlikely to go away despite a reduction in sales tax, according to the memo.
In an April 11 pension committee meeting, Blackmon asked whether DART still needed the full penny to finance its projects. She said DART’s built-out system today is different from the 1980s, when the system was first created.
Blackmon told The News it wasn’t clear how the transit agency was using its money.
“You have money, you can’t tell me where you’re spending it, you’re giving money back,” Blackmon said about the transit agency. “Are you really creating opportunities to broaden mass transit or are you just spending money?”
Jeamy Molina, DART’s chief communications officer, said DART’s budget and financial plan are approved by the DART board in open meetings and has financial audits that have passed auditors’ scrutiny for the past 20 years.
“We have a 20-year financial plan, and we regularly meet with the cities to discuss our financial plans and budget. The public improvement funds that we have offered to the cities are being used for complementary transportation projects that not only help improve the system but our cities,” Molina said.
Blackmon said some of the extra sales tax revenue could be used for a public safety district, salaries and the pension. She said she is aware of DART’s concerns that a loss in funding would force the transit agency to adjust its staff and services.
It isn’t the first time council members have brought up plans to alter DART’s funding design to address the city’s pension woes. In 2017, former council member Scott Griggs proposed diverting one-eighth of DART’s share of the sales tax revenue to the pension fund.
Back then, DART’s board opposed the move, emphasizing that a pullback in funding would hamper the transit agency’s ability to fund its debt obligations and provide its services.
Things have changed since then. Sales tax revenue collections have doubled across the region and DART’s financial position has improved, according to sales tax data.
In 2022, an infusion of COVID-19 federal dollars left the transit agency in a position to refund some of the excess sales tax to member cities that have felt shortchanged by DART’s services.
Blackmon said other member cities in DART’s coverage area may also be amenable to paying less to fund DART’s services. “Plano needs the money, Irving needs the money — we all need that extra part of that penny,” Blackmon said. “If you’re not providing a service where people are saying ‘give me more, give me more,’ then we should evaluate it.”
In the April 15 transportation meeting, Lee said she was concerned about conversations that implied that the transit agency did not need as much of the sales tax revenue. DART looks the way it does today because that’s what cities are paying for, Lee said.
“If you want it [DART] to be better, there’s going to be additional investments required,” Lee said. “If you take money away, we will not be able to even keep up what we’re doing today, and that is a significant impact, particularly to cities like Dallas, [which] see a lot of bus service in particular.”
Staff writer Everton Bailey Jr. contributed to this report.
