Dallas – An analysis released today indicates that the DART plan to sell $2.9 billion in 30-year bonds to accelerate construction of light rail is based upon flawed assumptions that could lead to serious financial problems in future years.
On August 12, DART will ask the voters in its service area to approve the issuance of 30-year bonds to accelerate construction of light rail lines, rather than the five-year debt limit it now operates under. The analysis, by Thomas A. Rubin, CPA, CMA, CMC, CIA, CGFM, CFM, indicates that, in comparison to a financial plan limited by five-year debt, the long-term debt plan would require an additional $1.610 billion in resources to be expended, but add only 42.7 million passenger boardings over the twenty-year plan period – a cost per added passenger of $37.70, or over $35,000 per year.
DART has also been aggressive in its fare and sales tax revenue forecasts to project its ability to make payments on long-term bonds through 2044. For instance, DART projects a 33% increase in bus ridership and a 113% increase in bus fare revenue from 2002 to 2020, even though it plans no increase in bus service over this period. DART also assumes a 6.40% average annual growth rate in sales tax revenues over the next ten years. This figure is significantly higher than the actual 5.15% growth in sales tax revenue from 1986 to 1999, after adjusting for one-time expansions of the sales tax base by the State Legislature. Over just the first five years, the difference between DART’s 6.40% assumptions and the historical 5.15% is over $120 million. Over the full twenty years, the difference is over $1.1 billion.
“DART claims it’s bus ridership is going to increase every year even as the fare increases every year, and with no added bus service. DART also bases its plan on uninterrupted economic growth for the next decade with tax revenue growth that exceeds historical highs. It doesn’t add up and it won’t happen, meaning that DART taxpayers will be paying off long-term bonds for 44 years without the revenue DART promised,” Mr. Rubin stated.
According to Mr. Rubin, “DART may be making a terrible mistake in its rosy financial projections. If any of its projections fall short, it will again fail to keep its promises to DART taxpayers. Even worse, DART will likely be forced to curtail bus service to make the payments for the bonds it is selling, impose huge fare increases, or have to attempt to close down expensive construction projects in mid-stream.”
Mr. Rubin, former Controller-Treasurer of the Southern California Rapid Transit District (Los Angeles), points out the uncanny resemblance of DART’s sales tax projections to those of Los Angeles in 1992. Both plans were built on 1% local sales taxes. Both assumed rapid sales tax growth (6.49% annually in Los Angeles, 6.40% in Dallas) to finance large bond issues for construction of rail lines, 18 in Los Angeles, 13 in Dallas. In Los Angeles, sales tax revenues fell far short of expectations, resulting in a $36 billion shortfall in a $100 billion revenue expectation – and the failure to even start thirteen promised rail lines. “When you’re coming off the longest continuous period of sustained economic growth in the history of the U.S., it is not always prudent to assume that the growth will continue without interruption for another twenty years,” said Rubin.
As was previously pointed out, Dallas area taxpayers will be making payments until the year 2044 on the 30 year bonds DART proposes to sell, and will pay an additional $3.1 billion in interest to accelerate light rail construction by five years. Suburban communities that now have the option of dropping out of DART will be unable to do so until the bonds are repaid in 44 years.