Dallas’ embattled bus bureaucracy is scrambling for cash in the wake of last week’s credit downgrade, more scandal, and another hearing in the Texas Legislature on a bill to abolish the agency. The bureaucracy is drowning in debt, despite being subsidized by taxpayers – many of whom who don’t even use its services.
Dallas County Schools’ Budget/Finance Committee met Wednesday to approve over $50 million in new taxpayer-backed bond debt. Some of that borrowed money will be used to refinance current debt, pushing back bond payments coming due over the next three years.
The move will give DCS a cash flow boost of about $12 million – cash the agency desperately needs just to pay its basic operating expenses.
But the debt restructuring will cost taxpayers millions more in interest payments – and millions more than it should. DCS is reportedly borrowing at a high interest rate of five percent, likely as a result of Moody’s latest downgrade of DCS’s credit rating to junk bond status.
Taxpayers and state lawmakers alike are questioning how DCS finds itself $130 million in debt and strapped for cash – even though they’re subsidized by Dallas County property tax payers to the tune of about $20 million a year and receive an additional $21 million annual transportation allotment from the state.
That’s on top of the fees they collect from school districts for bus service, which their largest customer says have doubled in the past few years from $800 to $1,600 per student.
DCS’s financial woes may not be solely due to mismanagement.
A new scandal involving DCS board member Larry Duncan came to light Monday, with DFW’s NBC 5 Investigates reporting on a questionable DCS “sale-leaseback” land deal that’s costing Dallas County taxpayers millions. The report revealed ties between the land deal and Force Multiplier Solutions, the bus stop-arm camera company that partnered with DCS in its controversial stop-arm ticketing program. That scheme also cost taxpayers millions.
Duncan has received about $245,000 in campaign contributions from people tied to Force Multiplier Solutions and the land deal, though he denies the donations influenced decisions on the stop-arm camera or sale-leaseback deals.
At Wednesday’s DCS board meeting, Duncan stepped aside as board president and said he won’t run for reelection. His term expires in 2021.
A day after the land deal story broke, Texas lawmakers pointed to both DCS’s ongoing financial and operational struggles, and its latest ethics scandal, as reasons why the bureaucracy should be shut down.
The House Public Education Committee heard testimony Tuesday night on Senate Bill 1122 by Sen. Don Huffines (R-Dallas) that proposes winding down the agency, paying off its debts, and distributing its assets to school districts that use DCS’s bus services.
In response to pressure from Sen. Royce West (D-Dallas), Huffines amended his bill to let Dallas County voters decide whether to shut down DCS. The Senate passed that compromise version and sent it to the House for consideration.
Specifically, the bill now calls for dissolution of DCS beginning November 2017 unless a majority of Dallas County voters approve keeping the bureaucracy – and its countywide taxing authority – in a November election.
DCS Interim Superintendent Leatha Mullins was in Austin for the House hearing to again plead her employer’s case and oppose SB 1122, claiming that without DCS, “the buses won’t run but the debt will still be there.”
But is that true?
In fact, under the wind-down process called for in the bill, DCS buses will continue to run – managed by a dissolution committee – through the end of the 2017-2018 school year. After that, each Dallas County school district will choose a bus transportation alternative that best suits the needs of its students and taxpayers.
A big reason why private companies have a hard time competing with DCS to provide districts with better alternatives is the small but significant countywide tax the bureaucracy collects to subsidize its operations. The one-cent tax rate on the county’s estimated $225 billion tax base – what Moody’s called DCS’s “strongest credit attribute” – adds up to a big advantage over competitors who can’t dip into taxpayers’ wallets.
“Could the private sector be doing this if DCS didn’t have the penny tax rate subsidizing it?” one lawmaker asked. The answer, from a DCS representative: yes.
What about the millions in debt DCS has racked up? If the agency isn’t shut down, the debt will still be there – and possibly grow – and the tax will continue indefinitely. Under SB 1122, the penny tax will continue just until DCS’s debt is paid off.
House lawmakers asked Mullins about the questionable sale-leaseback land deal exposed earlier in the week. She responded that “no one involved in those decisions is still with DCS.” Yet Duncan, a key player in the story, is still on the DCS board.
Mullins, who took over in March after former Superintendent Rick Sorrells was forced to retire, also suggested that she is bringing a fresh perspective as DCS’s new Interim Superintendent and represents a break from the agency’s troubled past. But she was the agency’s Assistant Superintendent for the past 20 years, which one lawmaker pointed out means she’s not really “new” management.
Dallas Independent School District representatives were at the hearing as well, testifying again in favor of SB 1122.
DISD superintendent Michael Hinojosa told the House panel that “things have changed significantly” between the district and DCS over the last two years, and that “the problem has become so big, we’re willing to pay anything” to sever ties with the troubled agency.
“If you put this off,” he warned, “you’ll be dealing with this in two years.”
As Huffines noted on the Senate floor last week, the financial collapse of DCS seems inevitable, and the legislature has both the authority and the obligation to shut down the ailing bureaucracy before its collapse creates chaos for school districts and costs taxpayers even more money.
If the legislature won’t take responsibility for protecting Dallas County students, school districts, and taxpayers from Dallas County Schools’ bad business practices, voters should.
