DALLAS — Dallas's economic outlook was downgraded from stable to negative after voters approved proposition U, rating agency Moody's Investors Service said.
Proposition U forces the city to hire 900 additional police officers and devote at least half of new tax dollars collected to the police and fire pension fund, WFAA previously reported. About 51% of voters supported the proposition.
The rating agency affirmed Dallas' A1 rating for its general obligation budget, but the new 'negative' outlook could cause the city's credit rating to go down over the next two years, according to a memo addressed to the Dallas Mayor and city council. A downgraded credit rating could make it harder and more costly for the city to issue public bonds.
"According to Moody’s... 'the negative outlook reflects the expected credit impact of Proposition U... going forward, the city will face budget challenges given required increases to its pension plans, growing public safety expenses, and reduced financial flexibility following voter approval of Proposition U,'” the memo states.
"This is going to have an enormous impact on the city," said former Dallas Mayor Tom Leppert. "It’s going to increase borrowing costs, which will increase cost to the city, which will increase cost to the taxpayers."
Leppert, who helped lead the opposition to the so-called HERO amendments, said the Moody's outlook was a "really, really bad sign."
"The cost the city of Dallas will have to pay for all of its bonds will go up and the cost of that gets passed along to taxpayers," he said.
Pete Marocco, the executive director of the HERO initiative, which worked to get the measures onto the city's ballot, said "It’s silly and meaningless to put any weight on a politically motivated rating-for-hire when the City Council can simply prioritize and stop sifting money to their friends."
He said the Moody's rating reflects a lack of confidence in the city's leadership -- not the implications of the amendment.
"Dallas has a bright future to look forward to, but of course a reckless council that violates the law can ruin this," Marocco said.
In September, the city voted to commit $11 billion over 30 years to shore up the city's pension fund for first responders after the plan reportedly nearly ran out of money in 2016, WFAA previously reported. The multi-billion commitment does not include a cost-of-living increase for retirees – who have not received one since 2017.
Proposition U would require the city to calculate the city's year-over-year growth in revenue and appropriate at least 50% of the excess revenue to the Dallas Police and Fire Pension System. Any remaining money will appropriated to other public safety objectives, the memo states.
Proposition U and all other charter amendments won't take effect until the city council declares the resolutions have been adopted, the memo states. Dallas City Council is expected to meet Tuesday, Nov. 19 to approve the resolution.
"The city’s plan to incorporate the mandates from Proposition U will be a key focus in future reviews," according to Moody's report.
