Thursday, December 1, 2022 Dec 1, 2022
39° F Dallas, TX

DART Board Gets First Look at Brutal COVID-19 Budget Blow

The sharp decline in sales tax may throw many of the transit agency’s future plans in limbo
By Peter Simek |
Leah Clausen

At the beginning of the year, things at Dallas Area Rapid Transit were looking brighter than they have in a long time. The agency had hired a respected transit consultant to evaluate its bus system and the board appeared motivated to revamp that system to promote improved service and increased ridership.

The agency was also revamping its application for a federal grant to fund the D2 downtown subway extension, completing a 20 percent design and on pace to finish 30 percent design by fall. DART was going back to the feds asking for twice as much as it had before to build the the downtown subway link that would allow the system’s light rail network to finally increase the frequency of its trains.

DART had even met with city of Dallas officials to look at a streetcar master plan, focusing on the central link between the McKinney Ave. Trolley and the Oak Cliff Streetcar, but also sketching out options for expanded streetcar service around Dallas and in other member cities.

Then COVID-19 reached town. The economy shuttered and DART’s principle source of funding—sales tax—dried up. At the DART board Budget and Finance Committee briefing yesterday, it was clear that the sharp decline in the agency’s main source of revenue has thrown all of DART’s pending projects up in the air.

First, let’s look at some of the hard numbers.

DART staff anticipates sales tax revenue to drop by 50 percent for 2020, and is forecasting a similar decline for 2021. That would lead to a total drop in sales tax revenue of around $157 million for 2020 and $182 million for 2021. That’s about 25 percent of the total sales tax revenue DART had anticipated collecting in 2020. To put that number in perspective, the agency budgeted to dedicate $361 million in sales tax to cover operating expenses in 2020. Around 43 percent of that just evaporated. That drop in sales tax is also equivalent to about 77 percent of the sales tax DART budgeted to cover debt service in 2020.

The severe drop in ridership will also suck revenue from the transit system. Over the next two years, DART anticipates a loss of $46 million due to ridership declines, or around 26 percent of the agency’s budgeted operating revenues during that time frame. The COVID-19 response has also come with its own added costs, mostly related to increased cleaning and hazard pay for DART employees. DART anticipates these expenditures to come in at around $8.6 million.

To offset this sharp financial impact, DART staff proposes slashing the budget for consultants, travel, conferences, and training. The agency’s holiday party and annual picnic are on the chopping block, but the biggest proposed strategy for cutting costs is to reduce the transit agency’s employee headcount by 300. This may not mean immediate layoffs—staff believes a hiring freeze and incentives for older employees to retire may go a long way toward hitting that staff reduction goal. This would all save DART around $12 million in 2020.

The big item that will keep DART in the black, however, is a $229 million federal relief grant it expects to receive as part of the CARES stimulus act. That will help DART balance its books for 2020, though DART President and Executive Director Gary Thomas admitted to the board that no one knows how long and deep a recession we are entering. “We don’t have any history to know how it’s going to behave,” he said.

Some board members were concerned about staff’s plan to burn through the $229 million in federal funds all in 2020, rather than stretching out the relief over a few years and coming up with additional cost savings in the near term. But cost cuts will not come easy since they all mean reducing service and/or pushing off future investments in improving service.

DART is already running its system on a modified Saturday schedule, and the board discussed expanding that indefinitely. That means running fewer buses and trains, which means longer travel times and lengthier transfer waits for riders. The service cuts also threaten plans to realize any meaningful improvement to the city’s bus service any time soon. DART didn’t intend to invest new funding in a revamped bus system, so the redesign was to be funded by finding cost savings and redundancies in the current system. Now DART is planning to winnow service down to the bone just to keep the lights on — not to increase frequency and reliability on any of its bus lines.

The bus system redo isn’t the only system improvement plan that will have to wait. DART staff proposed pushing off future streetcar extension planning for five years, and staff floated a proposal to kick D2 anywhere from three to fifteen years down the road. During a planning committee briefing earlier in the day, Steve Salin, DART’s Vice President of Capital Planning, presented board members with a complicated decision matrix intended to help walk the board through the tough decisions they will have to make around the future of D2. Spanning two pages and comprised of arrows and boxes shooting off in every direction, the decision map looked more like a labyrinth designed to disguise the uncomfortable truth: no matter what way you turn, D2 isn’t happening any time soon.

If the DART board decides to push ahead with the downtown subway route, it will force the agency to issue debt to fund the planning and engineering stages of construction. But if the DART board delays the process, it can soften that short-term budget blow, even though the delays increase the overall cost of the project. An option to delay D2 by 15 years rankled some board members, who reminded staff that their support of the Cotton Belt Line—a northern DFW suburban connector that is projected to have minimal ridership—was contingent on the agency’s commitment to moving both the Cotton Belt and D2 forward at the same time. Now, as Cotton Belt construction continues, D2’s future looks more uncertain than ever.

Board Member Patrick Kennedy floated the idea that there could be future federal appetite for funding “shovel-ready” infrastructure projects if Congress passes additional stimulus bills, though Thomas said D2 would not be shovel-ready until early 2021. Other board members were more concerned with simply surviving the next few months. Garland, Rowlett, and Glenn Heights board member Mark Enoch chastised staff for not presenting the board with a clearer picture of their options to adjust DART expenditures in the near term. Depending on how the next few months shake out, the agency may need to make deeper cuts to prepare for a longer recession.

“I want the board to have action items sooner rather than later,” Enoch said. “We have to plan on being a leaner agency.”

Leaner, inevitably, means less service, which means a transit system that is even more useless than the one Dallas had before the COVID-19 pandemic. But that’s the reality of a world in the grip of a pandemic. There is no money for transit, and no one really wants to ride it.

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