By Allen R. Gray
With the May 4, 2024, election, municipal bonds were the main ticket items. Texas municipalities from Anna to Westworth Village passed bond proposals to fund projects that would make for better, beautiful, and safer cities. It is all about infrastructure, the meat and bones of a city. Bond advocates would have you know that a city cannot and does not exist without infrastructure. It makes for the difference in being a vibrant city and desolate prairie. Municipal bonds are the source of financing for the projects that improve and grow a city.
The projects that receive funding are deciding upon even before the bond passes at the polls. The projects are targeted to specific areas. So, municipal bonds benefit the residents of that target area quite frequently to the detriment of some other area. Yet, the bonds are paid for by everyone in that city whether they voted for the bond or not. The projects are determined based on urgency, equity and other undisclosed factors.
Municipal bonds are becoming so common and frequent that it’s like the city is asking for a second serving of a meal even before the first serving has been consumed.
The May 4th win meant that the City of Dallas was its voters to make a big commitment once again. It was just in 2017 that the city’s voters approved a $1.05 billion bond that the city is still trying to finish spending. In this most recent election, Dallas voters approved ten bond propositions totaling $1.25 billion. Bonds consist of a package of propositions that are voted for or against separately.
The 10 May 2024 propositions (A-J) and their allocations are:
• Proposition A: Streets and Transportation – $521,200,000
• Proposition B: Park and Recreation – $345,270,000
• Proposition C: Flood Control and Storm Drainage – $52,100,000
• Proposition D: Library Facilities – $43,530,000
• Proposition E: Cultural and Performing Arts Facilities – $75,200,000
• Proposition F: Public Safety Facilities – $90,000,000
• Proposition G: Economic Development – $72,300,000
• Proposition H: Housing & Neighborhood Infrastructure – $26,400,000
• Proposition I: Homeless Assistance Facilities – $19,000,000
• Proposition J: Information Technology – $5,000,000
The cost to pay back this enormous $1.25 billion loan will set Dallas taxpayers back approximately $1.8 billion over the life of the bond.
That payback amount could have been more had Dallas not received a high rating from Stand and Poors (S&P) Global Rating. If not for that rating, which is something akin to a credit score, that $1.8 billion payback amount could have been well over $2 billion to taxpayers.
The S&P bond rating for a city is measured on a scale. A city with an Investment Grade of AA, AA, A, BBB is considered as best quality to good quality but somewhat vulnerable to changing economic conditions. A “Non-Investment Grade” (also referred to as Junk) is in the grade range BB, B, CCC, CC, which means a city’s credit is speculative from the least degree of speculation to the highest. A rating of D means a city is in payment default.
On February 16, 2024, Dallas Chief Financial Officer, Jack Ireland sent a memorandum to the Honorable Mayor and Members of the City Council regarding the city’s S&P bond rating.
Ireland informed them that, “On February 12, 2024, S&P Global Ratings (S&P) assigned its ‘AA-’ credit rating and stable outlook to the anticipated General Obligation Refunding Bonds, Series 2024A, affirming the credit rating on the City’s long-term general obligation debt. The rating by S&P continues to reflect the City’s ‘“strong economy with an anchoring broad, diverse Metropolitan Statistical Area [MSA]…’”
Ireland also included that S&P said that Dallas has “very strong management with strong practices, policies focused on long-term planning, reserve maintenance,” and a “strong institutional framework.”
But S&P also assessed that Dallas had credit weaknesses with deficiencies in its pension-plan-contribution.
(To review Dallas Chief Financial Officer’s memorandum concerning its bond rate see: Stand and Poors Ratings Revised Outlook (dallas.gov))
Now comes the rub.
It has been suggested that the simplest and fairest way to go about it would be this: if a street or accoutrement was repaired or improved in a particular area of town, that area would be exclusively responsible for those costs. For example, if a street repair were done on Skillman Avenue in North Dallas the people in and around Skillman Avenue, who directly benefit from the improvement would be responsible for repair costs. Likewise with Overton Road in South Oak Cliff. But that is not how it works.
As it stands, when a repair or improvement is made on Skillman Avenue, everyone residing in the city pays for repair by way of taxation—whether repairs are done on Overton Road or not.
The “everyone pays for it whether your repairs are done or not” scenario has repeatedly happened in the past and is a sure bet to happen in the present.
The expenditures and projects from the 2017 $1.05 billion Dallas bond package are about 97% complete and/or in progress.
What about the missing 3%?
The 2017 bond allocated $2,213,532 to the South Dallas and Bonton areas for “Economic Development.” South Dallas and Bonton have not seen one red cent of that bond money, because leaders in charge of the bond changed their minds.
That is how the purveyors of bonds operate. They might list an item, or an amount attached thereto, to cause the bond to be appealing to voters come election time—but post-election those bond items are subjected to change at the purveyor’s discretion. And it is all considered fair game because it is all a part of the way things operate.
That is how a city operates.
That is how America operates.
That is how systemic racism operates.
The Cambridge Dictionary defines “Systemic Racism” thusly: policies and practices that exist throughout a whole society or organization, and that result in and support a continued unfair advantage to some people and unfair or harmful treatment of others based on race.
Denton, Texas born author and internet yeller Ijeoma Oluo, who penned “So You Want to Talk About Race,” had this to say. “Systemic racism is a machine that runs whether we pull the levers or not, and by just letting it be, we are responsible for what it produces. We have to actually dismantle the machine if we want to make change.”
Stanford University professor Dr. Destin Jenkins is a historian of capitalism, democracy, and inequality in post-Reconstruction America. Dr. Jenkins has explored inequities practiced by a variety of American financial markets; as well as the causes that consistently make African Americans come out on the losing end of the finance game.
Dr. Jenkins’ prizewinning book, “The Bonds of Inequality: Debt and the Making of the American City” (2021), has produced startling revelations about the trillion-dollar municipal bond market. The book uncovers some things investors and lenders may not want everyone to know.
The North Dallas Gazette will explore those revelations in the upcoming article: “Systemic Racism by Way of Municipal Bond, Who Profits, Who Loses”
