Monday, November 21, 2016

Dallas (Yes, THAT Dallas) Is Facing Bankruptcy -- November 21, 2016

From The New York Times:
Dallas’s mayor, Michael S. Rawlings, testified this month to a state oversight board that his city appeared to be “walking into the fan blades” of municipal bankruptcy.
“It is horribly ironic,” he said.
Indeed. Dallas has the fastest economic growth of the nation’s 13 largest cities. Its streets hum with supersize cars and its skyline bristles with cranes. Its mayor is a former chief executive of Pizza Hut. Hundreds of multinational corporations have chosen Dallas for their headquarters, most recently Jacobs Engineering, which is moving to low-tax Texas from pricey Pasadena, California.
Data points:
  • city's pension fund for its police officers and firefighters is near collapse and seeking an immense bailout
  • over "recent" six weeks, panicked Dallas retirees have pulled $220 million out of the fund
  • the run begin in July when there was a recommendation that retirees no long be allowed to take out big blocks of money
  • trustees of the pension fund have asked for a one-time infusion of $1.1 billion, an amount equal to Dallas's entire general fund budget but not even close to what the pension fund needs to be fully funded
  • Moody's: Dallas is struggling with more pension debt, relative to its resources, than any major American city except Chicago
  • options:
    • raising property taxes (property taxes are already capped in Dallas)
    • borrowing money (city's borrowing capacity is limited)
    • delaying long-awaited public works
    • taking money back from retirees (retirees would surely litigate any clawback)
  • it all began in1993: incredible, inappropriate pension benefits were "sweetened beyond the wildest dreams of the typical Dallas resident (see linked article)
  • one of the sweeteners: guaranteed 8.5% interest, regardless of market returns
Much, much more at the link. Behind a pay-wall but easily accessed through Google.

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