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Cotton Belt Debt Issuance Fails to Pass DART Board

As Dallas support shifts away from sprawling light rail system, the future of the $1 billion project is in doubt.
By Peter Simek |

After a long, grueling, frank, and often contentious meeting of the Dallas Area Rapid Transit board this morning, a resolution that would have seen the agency take out $1 billion in low-interest, federally backed loans to pay for the Cotton Belt light rail extension failed to receive the two-thirds majority support necessary for approval.

The vote leaves in doubt the future of the long-awaited light rail line, which would extend east from Plano, through the northern suburbs and parts of Dallas, toward DFW Airport. Cities such as Addison have been pushing for the rail line to be built for decades, but critics argue it would not produce ridership sufficient to justify its costs and would direct resources away from fixing DART’s inefficient transit system.

Today’s meeting was specially called to reconsider the motion that failed to pass at the last DART board meeting. The meeting also came a day before the Dallas City Council is set to vote to replace upwards of seven of its representatives on the DART board, potentially remaking the character of the body that governs the region’s public transportation system.

Suburban DART members openly expressed their fears at today’s meeting that new Dallas representation would no longer be committed to pursuing their priority projects, like the Cotton Belt. In a Dallas City Council transportation committee meeting held two weeks ago to interview new DART board representatives, only three of 14 nominees received the full support of the committee, and of those who did, most spoke of a desire to refocus DART’s efforts on bus service and overall system ridership and reliability, rather than continuing to build expensive light rail extensions that have not been able to reverse a downtrend in ridership.

Today’s meeting’s final moments were the most dramatic of a lively session overall, and they well-illustrated the stakes of the decision.

Speaking in support of the Cotton Belt line, Dallas DART board representative Pamela Gates read from a prepared statement, citing her fears that a vote against issuing the Cotton Belt debt would result in some of the suburban member cities holding referendums to pull out of the regional transit agency. The loss of sales tax revenue, Gates argued, would most burden those low-income residents, particularly those living in the southern sector who rely on DART to get to jobs, school, and medical appointments.

“I will vote for these taxpaying citizens,” Gates said. “I vote for an intact DART and voting against the risk of a crippled DART.”

But the nightmare scenario Gates described — a crippled public transit system in which residents have to endure the burden of impossibly long commutes and little access to employment or opportunity — sounded very much like DART as it exists today. In its 30-year blitz to build out the nation’s longest light rail network, DART has created a public transit system that is inefficient and unreliable, a system that has contributed to Dallas’ enduring struggles with upward mobility, high rate of neighborhood income inequality, and a burdensome cost of living when transportation costs are taken into consideration.

Also, to vote for the Cotton Belt out of fears that not supporting the project would result in the loss of DART member cities, and the sales tax revenue they represented, laid bare the kind of horse trading by which decisions about public transit are made by the DART board, pursuing ever more light rail extensions often at the cost of building a system that could increase ridership and improve mobility throughout the region.

This was on full display this morning. Representatives of Dallas and the suburban cities expressed their distrust in each other’s commitment to either the Cotton Belt line or the eagerly sought second downtown subway alignment, called D2. Suburban cities feared that a delay in the vote of the Cotton Belt debt issuance was just a backhanded way of stifling the project. Some Dallas board members feared that committing the agency to a billion dollars of debt could result in over-stretching DART’s borrowing capacity and hamper its ability to deliver on D2.

Specifically, Dallas rep Sue Bauman wanted to know from DART staff how the agency would fund D2 if the federal grant program DART is seeking to fund half of the cost of the proposed downtown subway is eliminated by the Trump administration. She also wanted assurance from her fellow board members that they would continue to support a downtown subway in return for support for the Cotton Belt.

Even though the agenda only called for a discussion of the Cotton Belt debt issuance, Garland, Rowlett, and Glenn Height’s board representative Mark Enoch invited DART CFO David Leininger to address the board and answer questions about how DART might fund D2 if the federal grant opportunities were eliminated. Leininger had a presentation prepared for the occasion.

The challenge, Leininger explained, is that if DART issued $2 billion in debt to build both the Cotton Belt and D2, the transit agency could begin to run out of cash in the mid-2020s. To solve this potential insolvency, Leininger proposed to pay for D2 by issuing $650 million in Capital Appreciation Bonds, which would push out DART’s requirement to pay debt service on the loan until the 2030s.

“Is it legal? Yes,” Leininger said of the CABs. “Are they dangerous? They can be.”

Not only would CAB funding increase the amount of interest paid on the loan for D2 and push the debt obligation out into the far-off uncertain future, funding both the Cotton Belt and D2 with debt would limit DART’s capacity to pursue other transit improvements, including an improved bus network.

To the suburban representatives, Leininger’s presentation answered what, in their minds, was the question that was causing the Dallas DART board members to drag their feet on the Cotton Belt vote. Could DART afford to build both the Cotton Belt and D2? Technically yes, Leininger explained. But that was not enough to sway the five Dallas DART board representatives needed to commit to locking DART into a $1 billion loan to build a new light rail line whose projected return on fare revenue would only be a small fraction of that amount.

In the end, board members Sue Bauman, Patrick Kennedy, Michele Wong Krause, and Amanda Moreno voted against the resolution, joined by Dallas and Cockrell Hill representative William Velasco.

Where today’s vote leaves the Cotton Belt project — as well as D2, and the entire future of the public transit system — is yet to be seen. Changes in representation, ongoing feuding between suburban and urban board representatives, and a desire to shift the focus of the transit agency from building light rail lines to providing reliable and usable public transit create the potential for stalemate on the board.

For now, DART says it will continue to look into funding sources and options for D2 and the Cotton Belt. In other words, as always, DART staff plugs on.

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