Moody’s gives Dallas ‘negative’ debt outlook

DALLAS – The Dallas Morning News reports a top credit rating firm dimmed its outlook on Dallas’ financial future after voters approved changing the charter to require at least half of annual city revenue increases to boost police pensions, staffing, starting pay and benefits. Moody’s Ratings downgraded the city’s debt outlook from “stable” to “negative” Thursday, citing the expected impact on Dallas’ credit due to the passage of Proposition U, a charter amendment backed by nonprofit group Dallas Hero. The credit ratings agency said the move will limit how the city spends its money amid growing operating expenses. The Dallas Police and Fire Pension System has a funding gap north of $3 billion, and the credit agency said the new mandates to hire 900 more officers, maintain a police force of at least 4,000 and increase starting salaries will increase the pension’s shortfall and require the city to put in more money than planned.

“Although the additional revenue going to DPFP is positive, the reduced financial flexibility and the expected negative impact to the pension liability is likely to weigh on the credit profile,” Moody’s opinion said. “The city’s plan to incorporate the mandates from Proposition U will be a key focus in future reviews.” The update comes two months after the City Council approved a 9% increase of the police department budget to $719 million and greenlit a plan for Dallas to contribute $11 billion over 30 years to the police and fire pension, with increased annual contributions, to address the funding gap. Voters on Nov. 5 approved more than a dozen propositions, including one to decriminalize small amounts of marijuana and another requiring Dallas to remove legal barriers to allow residents and businesses to sue the city if it takes any action that violates the charter, local ordinances or state law. The 16 voter-approved charter propositions won’t go into effect until the City Council certifies the election results on Tuesday.