Dallas Bankruptcy Threat Attracts National Attention

The New York Times focuses on Dallas's financial problems

The threat of bankruptcy for the city of Dallas over unfunded public safety pension and back pay liabilities made front page news for nationwide readers of The New York Times Monday.

The headline said "Dallas, a Hive of Growth, Flirts With Bankruptcy," and Dallas Mayor Mike Rawlings said it is ironic but true.

Cranes dot the city skyline with new high-rise construction and yet a possible $6 billion total unfunded expense could make the city government go broke.

"This is the best time in Dallas's history, and I think all of America is looking at us. So we've got to work hard not to even flirt with that," Rawlings said. "But having that on the horizon, I think, sobers everybody up. They're taking it seriously."

Dallas bankruptcy attorney Mark Ralston said reorganization for city government could be painful for employees and taxpayers.

"For a municipality, it's the last resort," Ralston said.

Services could be reduced and employee benefits reduced even further than the cuts police and firefighters are being asked to approve now in pension fund changes.

In a city of Detroit bankruptcy case, Ralston said creditors asked that art from the city-owned museum be sold to raise money, but philanthropists later help save the Detroit art.

"It's not something that businesses that are looking for a home, possibly Dallas, would see favorably. So that's, I think, why it's better to address it now," Ralston said.

The Dallas Police and Firefighter Pension fund faces a possible $4 billion in future unfunded benefits after decades of promising too much with risky real estate investments that returned too little.

Several police and firefighter back-pay lawsuits could result in $2 billion in judgments if employees prevail on claims of being cheated for decades on raises mentioned in a voter referendum.

"If those things came together, we could be walking into those fan blades of bankruptcy. And I'm hopeful that that's not going to happen," said Rawlings. "We've got to work together. If we are in adversarial positions, it could be terrible for retirees, it could be terrible for the current police officers, it could be terrible for taxpayers."

In the next session of the Texas Legislature starting in January, lawmakers will be asked to make some changes to help fix the pension fund. A Dallas City Council briefing to focus on the issues is planned next month.

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