Dallas is $5 million behind on sales tax revenue, adding pressure as the city debates whether to repair or relocate its nearly 50-year-old City Hall.
Revenue is growing – it’s up about 2% over the last year – but not fast enough to meet the city’s budget expectations as of January, Chief Financial Officer Jack Ireland wrote in a March 13 memo to the City Council.
The stakes are high: Dallas faces rising costs, a state-mandated 3.5% property tax revenue cap and a fierce debate over City Hall’s future like whether to spend more than $1 billion over 20 years to fully modernize the building.
The city is also weighing whether to close pools and libraries to save money while facing pressure to increase annual police-related spending through a 2024 voter-approved charter mandate.
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“The recent decline in sales tax revenue is another reminder that we need to be cautious with major financial decisions,” council member Kathy Stewart, vice chair of the council’s finance committee, told The Dallas Morning News. “It reinforces the importance of taking a disciplined approach on a project as significant as City Hall.”
Sales tax revenue for the current fiscal year has fallen short of budget projections most months, including nearly $3 million less in November and $1.5 million lower in January, the memo said. The city launched the “Spend It in Dallas” campaign in November to encourage local spending.
Ireland told The News that sales tax revenue is directly tied to spending on taxable goods and services in the city. While sales tax receipts are still going up, Ireland said, they “are not increasing at the same rate that we thought they would when we developed the budget last summer.”
Steven Haynes, an assistant professor of finance and managerial economics at the University of Texas at Dallas, sees the $5 million sales tax shortfall as a sign of deeper economic changes affecting Dallas.
He pointed to more than half of Dallas’ general fund money going to police, fire and other public safety functions.
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He suggested that could lead to the city more seriously considering cutting services, delaying maintenance or raising fees to fill the gaps.
“One of the challenges that city officials are going to have to consider is the trade-off between services, jobs and budgets,” Haynes said. “And as that budget needs to get tightened more and more, they have to realize: is this a short term win to a long term problem?”
Dallas officials are hoping the upcoming FIFA World Cup will bring a one-time financial boost, but Haynes said that money will be split with Arlington, where the games will be played.
The bigger issue, he said, is a slowdown in middle-class spending, which has historically been a major driver of local tax revenue. Even in a strong regional economy like D-FW, rising inflation is creating challenges for families and local governments alike.
“The D-FW economy is robust, but jobs aren’t necessarily as strong as they were,” Haynes said. “So this is a compounded effect.”
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