Dallas City Council OKs GO bonds, eyes future debt sales

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Dallas officials revealed debt issuance plans for fiscal 2026 that include $1.5 billion of bonds for a convention center project as well as up to $252 million of general obligation bonds, which the city council approved on Wednesday.

The GO bonds, which are scheduled for a competitive sale in November, mark the second issuance to tap into $1.25 billion of debt authorized by Dallas voters in May 2024, according to a presentation on Tuesday to the city council's finance committee. An initial $250 million of GO bonds were sold as part of a $354 million deal last year and future $250 million tranches could be sold in November 2026, 2027, and 2028.

The council Wednesday also approved $35 million of equipment acquisition contractual obligations that will be included in the upcoming sale to finance the purchase of city vehicles and other equipment.

In spring 2026, Dallas plans to sell about $1.5 billion of senior and subordinate lien revenue bonds to finance a replacement for the Kay Bailey Hutchison Convention Center and $72 million of bonds for improvements to Fair Park, the site of the Texas State Fair and Cotton Bowl Stadium, according to the presentation. The deal led by JP Morgan Securities would also refund an outstanding interim loan.

The bonds are backed by incremental growth in Texas hotel tax revenue collected within a project financing zone and the city's hotel occupancy tax revenue that includes a two percentage point rate increase city voters approved in November 2022 for the projects.

The presentation showed the nation's ninth-largest city had $1.93 billion of outstanding GO bonds as of Sept. 30 and "strong" ratings, although Moody's Ratings revised its outlook on the city's A1 GO rating to negative from stable last year in the wake of a voter-approved proposition mandating increased spending for the police force and for public safety pensions.

The head of Dallas HERO, which backed Proposition U, contended last month that Dallas' $5.2 billion budget for the fiscal year that began Oct. 1 failed to comply with the charter amendment.

Steve Johnson, a director at HilltopSecurities, Dallas' co-financial advisor, told the finance committee Moody's is "overly penalizing the city." 

"We don't agree with their negative outlook, which is one of the reasons why the city doesn't use Moody's on its new issuances," he said. 

The upcoming GO bonds were rated AA-minus by S&P Global Ratings and AA by Fitch Ratings with stable outlooks last week. 

On Wednesday, the city council also approved a $34 million waterworks and sewer system revenue bond borrowing through the Texas Water Development Board's State Water Implementation Revenue Fund for Texas. 

Other potential debt issuance outlined by Dallas officials included a nearly $298 million refunding in the spring of waterworks and sewer system revenue bonds sold in 2012, 2013, and 2015, and nearly $49 million of stormwater drainage utility system bonds for sometime in 2026.

General airport revenue refunding bonds could be issued next summer for  Southwest Airlines' hub Love Field, which has a master plan to expand capacity, according to the presentation.

On Tuesday, the finance committee was also briefed about options for addressing deferred maintenance at Dallas' 47-year-old city hall, which was designed by renowned architect I.M. Pei.  

City staff outlined three options — making only emergency repairs, funding deferred maintenance estimated to cost between $152 million to $345 million, depending on the scope of repairs or replacements, or exploring alternatives like leasing office space or building a new city hall.