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Credit agency warns of bankruptcy risk for Dallas County Schools

One of the major U.S. credit agencies said Friday that Dallas County Schools is in danger of bankruptcy even if the embattled bus service provider survives a November election where voters could abolish it.

Moody’s issued a report on the bus agency which says it is continuing to struggle financially because of its limited ability to raise funds, making it difficult to cover annual payments on existing debt. The report noted that after defaulting on June debt payments, the agency had to borrow money using tax anticipation notes rather than cash on hand to cover costs.

“The shortfall will require additional transfers from the DCS general fund and heightens the potential the district may yet file for bankruptcy,” the report says.

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The report came the same day the bus agency’s trustees proposed a tax increase to help with its finances and officially called for a November election that the Legislature required the agency to hold after several area lawmakers questioned its business dealings.

Trustees want to increase the agency’s tax rate to a full penny per $100 of assessed property value. That’s up from the current rate of 0.009271. Officials said for the homeowner of an average priced home in the county — about $234,000 — would see a bump in their tax bill of about $3.43. The agency must have a public hearing on the rate before its finalized.

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Board President Gloria Levario said the slight increase in the rate would not be noticeable by most taxpayers but could go a long way toward maintaining operations at the bus agency and keeping costs down for area school districts that rely on them for transportation.

Responding to the Moody’s report, Levario said the agency has worked daily to improve its finances. Recent actions have included a thorough outside audit now underway and inviting a law enforcement agency to review documents.

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“We’re working steadily and continually on our financial state,” she said. “I know that we’re doing everything that we can.”

The November election ballot will also include the city of Dallas’ $1.05 billion bond package and possibly a tax rate increase put forward by the Dallas school district. DISD trustees are expected to decide that later this month.

Levario said the additional ballot measures could be a good thing for the bus agency as the measures will draw more voters. She added that officials will be doing all they can to educate voters about how the agency says it is finding stable ground and moving forward.

But that could be a difficult sale to voters after nearly a year of being under fire for its business practices.

Sen. Don Huffines, R-Dallas, began pushing for the abolishment of DCS last August, questioning the need for such a countywide agency and criticizing its business dealings across Texas involving controversial stop-arm cameras that allow cities to fine drivers who drive around stopped school buses.

KXAS-TV (Channel 5) reported on a series of questionable business deals, drivers running red lights, management problems, financial challenges and political donations with vendor connections to then-board president Larry Duncan.

Friday, a former bus driver, Albert Walker, called for Duncan to immediately resign from the seat he still holds on the board, saying the trustee has benefited personally at the expense of DCS.

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"He brought this department down to its knees," said Walker, who now is a teacher. He said he was speaking out because many current employees of the bus agency are fearful to do so because of their jobs.

Duncan issued a statement late Friday saying political contributions he received were legal and followed every rule.

“I understand that there is frustration among our employees,” Duncan said in a statement. “I am hopeful that energy can be applied in a positive way during the campaign season.”

Noel Candelaria, president of the Texas State Teachers Association, said the group was ready to support DCS and its employees, nearly 500 of whom are TSTA members. He said the agency has shown it’s taken steps to be more transparent in its operations.

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Meanwhile, the agency remains without a permanent leader after longtime superintendent Rick Sorrell suddenly retired in March amid the mounting questions about DCS finances. Interim leader Leatha Mullins has been overseeing operations.

Levario said no finalists have yet been named for the post.

DCS is about 200 drivers short of what it needs to fill routes in the districts it serves, with a majority of those routes in Dallas ISD. However, the agency noted that nearly a hundred drivers are in the process of getting final approval to work.

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And this week, DISD officials said Superintendent Michael Hinojosa is reversing a recent practice that barred teachers from also being bus drivers.

DISD officials said Friday that about 60 employees — mostly coaches and paraprofessionals — had previous bus driving experience and expressed interest in picking up routes so long as the work doesn’t conflict with their teaching duties.