Tax vs Income Chart Dallas 1

Our real estate market has never been better. North Texas sales were up 26% in November. Our median home price is now $230,000. Yeah, the trophy home sales are a little soft, but  our region saw some of the biggest property price/value increases in the country in September, just three months ago. We are up a whopping 8% year over year from 2015 (Standard & Poor’s/Case-Shiller Home Price Index) and only Seattle, Portland and Denver have bigger price gains. We are among the top U.S. cities with the greatest annual home price gains. Nationwide, prices were only up 5.5 percent from 2015. Says Standard & Poors:

“Other housing indicators are also giving positive signals: sales of existing and new homes are rising and housing starts at an annual rate of 1.3 million units are at a post-recession peak,” S&P’s David Blitzer said in the report. “We are currently experiencing the best real estate returns since the bottom in July of 2012.”

Dallas-area home prices are up over 30 percent from the pre-recession high in mid-2007, according to Case-Shiller.

But I am still terrified. And confused. All this could be wiped out by the absolute Class A disaster going on down at City Hall: figuring out how to save the Police and Fire Pension plan. Which has been around since the mid 1990’s. Did everyone just ignore the problems up until now? (Including me — wasn’t on my radar.) And where is the tax revenue on all these gains going? I sat at City Hall in late August and heard, with my own ears, Mayor Rawlings say there was “room in the budget”.

Could this be the next perceived nail in the Dallas real estate coffin? “Bad schools, bad taxes, let’s look in the ‘burbs.”

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Screen Shot 2016-12-06 at 11.28.55 AMThis is one of the biggest pickles Dallas, or really any U.S. city, has been in.

As we have mentioned, the police and fire pension is asking the taxpayers of Dallas to make up a $1.1 billion shortfall. At the same time, the police are SUING Dallas for $4 illion in back pay, IF they are victorious in ther lawsuit.

The mayor of Dallas has personally filed a lawsuit against the fund, asking it to put a halt to the DROP program, which he maintains is bleeding it. And the Dallas City Council will be hashing it out all day tomorrow.

A real estate connection: the mayor’s lawyer, by the way, is Mike Gruber, husband of Dave Perry-Miller’s Diane Gruber, father of Dave Perry-Miller’s Becky Gruber.

There are a trifecta of issues to consider, and Jennifer Staubach Gates sent the entire briefing to her email list. That woman is the queen of transparency.

On the one hand, we have the police filing suit against the city of Dallas, the taxpayers, in a lawsuit that goes way back to 1994, more than twenty years ago. The lawsuit is over a pay differential: that is, the police say that every time the city gives one member or group of members (such as new recruits) on he force a raise, everyone on the force gets one. Whole new meaning to “Let the force be with you.” Dallas says no, but a stupid state law from 2005 is fueling that flame.

We have put the briefing up for all to read. Of note: (more…)

floresrawlings

How badly has our real estate market been harmed by this news? Why did he wait until now, or was Rawlings’ timing impeccable?

The news about Dallas’s Police and Fire Pension System goes from bad to worse. And it continues to be negative national news that could potentially hurt our housing market. In particular, the Wall Street Journal ran a backwash of Dallas Morning News reporting blaming everything on the “bad real estate investments.”

Those “bad real estate investments” are not the whole reason why the fund is in trouble and asking taxpayers for $1.1 billion. It’s mismanagement, and an incredibly thoughtless accounting trick that has enabled retirees and mature pensioners to essentially rob from the young.

In that recent New York Times piece that has the world talking about “Dallas’ bankruptcy”, the blame is put on the state legislature in 1993:

To many in Dallas, the hole in the pension fund seems to have blown open overnight. But in fact, the fuse was lit back in 1993, when state lawmakers sweetened police and firefighter pensions beyond the wildest dreams of the typical Dallas resident. They added individual savings accounts, paying 8.5 percent interest per year, when workers reached the normal retirement age, then 50. The goal was to keep seasoned veterans on the force longer.

Guaranteed 8.5 percent interest, on tap indefinitely for thousands of people, would of course cost a fortune. But state lawmakers made it look “cost neutral,” records show, by fixing Dallas’s annual pension contributions at 36 percent of the police and firefighters’ payroll. It would all work as long as the payroll grew by 5 percent every year — which it did not — and if the pension fund earned 9 percent annually on its investments.

Buck Consultants, the plan’s actuarial firm, warned that those assumptions were shaky, and that the changes did not comply with the rules of the state Pension Review Board.

The DROP accounts were like savings accounts with a guaranteed interest rate. But few news reports critiqued it. . The media only blamed the “shaky real estate investments.(more…)

Sold and For Sale Signs

As if the doom and gloom from the almost-over election isn’t bad enough, the city of Dallas has an economic crisis brewing that will most likely mean higher property taxes in the future. How would that affect our local real estate market? I was speaking to a prominent agent last week about the sticker shock our property taxes give most transplants even with the lack of a state income tax.

“These California buyers are starting to look at our property taxes and think twice about our so-called affordable living,” she said.

Last Thursday, Mayor Mike Rawlings was in Austin, sitting before the Texas Pension Review Board. He was pretty doom and gloom over unfunded liabilities in the Dallas Police and Fire Pension Fund that have also send our bond rating down, making it more expensive for us to borrow money. The fund was, he says, ripped off by a “Bernie Madoff scheme” in which fund members guaranteed themselves 8- to 10-percent returns on their investments, then took the money and ran. Of course, the police elected their board members and city councilmen from years past sat on the board.

Now the pension board wants the city to cough up $1.1 Billion (with a “B”) to replenish the police fund.

If we do that, Mayor Rawlings says the city would have no choice but to increase its current property tax rate by 130 percent to cover the difference. (more…)

James A. Perry (via LinkedIn)

James A. Perry (via LinkedIn)

After a few negative headlines, including a potential FBI inquiry and some trepidation about some serious losses, the Dallas Police and Fire Pension System has created a new position to oversee the $3.1 billion portfolio that funds the retirement income of our city’s first responders.

The pension system has brought in Texas Tech University System assistant chancellor James A. Perry as the Chief Investment Officer. Perry has more than 20 years of investment management experience, according to the pension board. He’s overseen public assets in California and in Texas.

Perry is scheduled to start Sept. 1. He’ll report to the pension system’s executive director, Kelly Gottschalk.

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The tweet from the New York Times twitter feed says it all.

The saga over Museum Tower has officially become a national news story. One can only wonder if this is the result of Nasher architect Renzo Piano making good on his threat to “make trouble” for the owners of the high-rise condo development?

No one quite knows what to do. The condo developer and museum officials are at loggerheads. Fingers are being pointed. Mr. Piano is furious. The developer’s architect is aggrieved. The mayor is involved. A former official in the George W. Bush administration has been asked to mediate.

Sounds like things are heating up (pun intended!). Stay tuned …