D Magazine’s March cover story is titled “Why We Should DFW Airport.” It got Sam Merten thinking. He’s the former Dallas Observer reporter and former manager of public affairs for Mayor Mike Rawlings. Sam couldn’t help but comb through the city’s budget and start wondering how we might use the proceeds from the sale. Then he wrote the following, which I pass along as food for thought on this Friday afternoon.
How To Spend $5.3 Billion
By Sam Merten
After remarkable transformations of the Dallas Zoo and Dallas Farmers Market in the years since their operations were transferred to private organizations, the city this year has placed two more significant assets—Fair Park and the Kay Bailey Hutchison Convention Center—in the private sector’s hands. The Meyerson Symphony Center is likely in the coming months to join the growing group of privately operated city facilities, which also includes the Dallas Arboretum and The Bridge. This penchant for privatization raises the important question of whether DFW International Airport should be next.
Privatization of the airport is not a new idea, but it has entered the realm of public debate unlike before, thanks to D Magazine’s cover story. The author, Joseph Guinto, makes a compelling case for the airport’s board to at least initiate a privatization study by utilizing $750,000 in federal funds.
Guinto estimates that a privatization agreement could include a cash payment to the city of Dallas around $5.3 billion, which would provide benefits and impact far exceeding what has been received by the city through other privatization efforts.
To properly determine whether striking a deal to privatize DFW Airport is best for Dallas, we must understand the amazing possibilities such a massive financial windfall represents. There are countless ways to smartly distribute the proceeds. Let’s imagine one way we could do it.
$2.1 billion to pay off debt
We’re writing a big check to start things off, but there’s nothing else that can provide this much bang for the buck. Paying off the city’s general fund debt would save the city roughly $800 million in interest payments scheduled over the next 20 years, but that’s not even the best part.
Taxpayers are on the hook this year for $250 million in debt payments, $99 million of which is interest. If the debt didn’t exist, those funds could be used elsewhere in future budgets. We could cut the tax rate by 10 percent (to $.699 per $100), add 10 percent to the police and fire departments’ budget, and put $75 million annually into a capital projects fund. (Yes, all three could be accomplished.)
It’s important to note that financial penalties may accompany an early payoff of the bonds.
$1.2 billion to fund unsold bonds
In addition to its general fund debt, the city also has future debt obligations tied to unsold bonds from the 2006, 2012 and 2017 programs. Using cash to pay for these projects instead of borrowing money will save hundreds of millions of dollars in interest payments. More important, it will keep the city’s credit card bill at zero, which ensures the aforementioned tax cut and budget enhancements are sustainable long term.
$500 million for streets
Voters approved more than $500 million for streets in the 2017 bond program, which essentially represented the least amount of funds required to merely keep our streets from getting worse. If we want them to actually improve, another $500 million would be a great start.
$300 million for affordable housing
This much dough for affordable housing may be shocking if you don’t follow civics closely, but it’s necessary to start making a noticeable impact. Dallas put a measly $20 million toward housing in our 2017 bond program, while Austin last year approved a proposition for $250 million.
Affordable housing is one of the most significant challenges we face. Our middle class is diminishing and citizens experiencing homelessness can’t recover without housing availability. The city estimates we are short more than 20,000 affordable units. It’s long past time for Dallas to throw some real money at this issue with clear objectives attached to the funds.
$200 million each for five general areas ($1 billion total)
The city has identified nearly 14,000 infrastructure projects with a total price tag of more than $10 billion that it classifies as needs. It’s unlikely all of those projects are truly needs, but there’s no question the city is desperate for a makeover.
Let’s set aside $200 million for matching grants that are focused on improving our neighborhoods and another $200 million to renovate existing parks and recreation centers. And we can address some of our most desperate needs by giving $200 million each to city facilities (repairs to police and fire stations, libraries and cultural buildings), updated traffic signals and flood control.
$50 million each for four focused areas ($200 million total)
The number of citizens experiencing homelessness in Dallas and Collin Counties increased again this year by nine percent after a nine percent increase in 2018. The majority of Dallas residents when surveyed last year by the city named homelessness as our most significant problem, yet the amount of general funds dedicated to the issue is less than the city’s annual subsidy to the zoo.
In addition to putting $50 million toward homelessness, let’s do the same for bike lanes and pedestrian-friendly projects; job training and workforce development; and southern Dallas infrastructure. There’s a lot to unpack in each area, but in the interest of brevity, these funds would help move innovative projects and partnerships forward.
Earning interest instead of paying it
The only cash spent immediately would be the $2.1 billion to pay off the general fund debt. That leaves a hefty $3.2 billion in the bank. Let’s hope the city could do better than a three percent return on those funds, but we’ll be conservative and say that would yield around $96 million annually. Of course, the return would decline as the funds are used, but it will take a long time to spend it all.
We could split the earned interest into two buckets: the affordable housing trust fund, which will need continued funding even after an infusion of $300 million, and the capital projects fund, which will help us save and pay for future infrastructure projects instead of borrowing money.
If privatizing DFW Airport could accomplish everything we just dreamed or even half of it, a formal study is a no-brainer. Let’s find out how much cash an agreement would actually yield and then have a serious conversation about how the proceeds could be used to address our city’s biggest challenges.
Sam Merten has served on various city boards and commissions, including the 2017 Citizens Bond Task Force, and is a former city employee.