By Lewis F. McLain Jr., CityBaseLab & AI

Dallas is trying to decide whether to repair its City Hall or leave it. That sounds like a real estate question. It is not. It is a question about fifty years of budget choices, about rules the City wrote for itself, about charter amendments the voters wrote for the City, and about an accounting system that is very good at recording what a city buys and very poor at telling anyone what a city is quietly using up. City Hall is simply the place where all of that finally surfaced at once.

This essay begins with why Dallas hired I.M. Pei and what his building was meant to say, and what a conventional glass tower on the same site would likely look like today. It then tells the story of the current dispute, describes the box Dallas has built around itself, and goes underneath the waterline. Using the City’s own audited financial statements for the fiscal year ended September 30, 2025, and thirteen years of prior audits, it shows that City Hall is one visible building sitting on top of a much larger portfolio of aging public assets. It closes with lessons for every government and with a suggestion: this case deserves to be taught, and it may deserve a dissertation.

The Building

Planning for the Dallas Municipal Center began in 1964, when the City Council appointed a Citizen’s City Hall Site Committee. The I.M. Pei building at 1500 Marilla Street opened in 1978 as Dallas’s fifth City Hall. It is a cast-in-place concrete structure of roughly one million square feet, housing about 2,000 of the City’s more than 13,000 employees, along with the 911 call center and emergency operations center in the basement. Its predecessor, the 1914 Municipal Building on Harwood Street, still stands today and serves as the UNT Dallas College of Law. Preservationists point to that building often, and the point is fair: a well-built public building can last more than a century if someone takes care of it.

Why Pei? The Statement Dallas Paid For

To understand what Dallas would be giving up, you have to understand why it hired one of the most prominent architects in the world in the first place. Cities do not commission I.M. Pei to get office space. They commission him to say something.

The wound came first. After President Kennedy was assassinated in November 1963, Dallas was branded the “City of Hate.” Mayor J. Erik Jonsson, a founder of Texas Instruments, made repairing the city’s image the work of his administration. His “Goals for Dallas” program set out what the city wanted to become, and one of its goals, on city design, called for “a city of beauty and functional fitness that embraces the quality of life for all its people.” In 1964 the Council appointed a Citizen’s City Hall Site Committee, and a committee of prominent citizens chose Pei. City Hall became the most visible answer Dallas gave to the question the world was asking about it.

Pei understood the assignment. “When you do a city hall, it has to convey an image of the people,” he said, “and this had to represent the people of Dallas.” Of the residents he met, he said: “They felt that Dallas was the greatest city there was, and I could not disappoint them.”

So what was the statement? Read the building and it tells you.

• Government is open to the people. Pei persuaded the City to buy about six additional acres so the building would face a civic plaza two blocks long, with a 180-foot reflecting pool, fountains, native trees, and Henry Moore’s sculpture “The Dallas Piece.” Inside, the Great Court runs 250 feet with a vaulted ceiling about 100 feet high. When it opened, staff sat at 1,400 workstations behind low partitions so most could see a window. The building was arranged around public space, not around offices.
• Government is not a corporation. While banks and oil companies were building glass towers, Pei laid City Hall down long and low, seven floors above grade. It deliberately refuses to compete with the skyline. The message is that the city’s house is different from the companies in it.
• Government shelters the people. The facade leans out at 34 degrees, each floor 9½ feet wider than the one below, so the roof is 200 feet wide over a ground floor of 126 feet. The overhang shades the building and the people beneath it from the Texas sun. The shape came from function: the public floors needed less space than the office floors above.
• Government endures. Pei used buff-colored concrete as both structure and finish, chosen to echo the earth tones of the region. It is a building meant to look as though it grew out of the ground and will stay there. Even its critics call it a fortress. City staff told KERA in 2025 that “the city hall building itself is virtually indestructible.” That is the point. The bones were built for a century.
• Dallas looks forward. The leaning form was daring enough that it unnerved Mayor Jonsson himself; Pei added three cylindrical columns, which carry no structural load, mainly to reassure people that it would not tip over. The designers even left an unused tunnel and station three levels down for a rail line the city did not yet have. That is a building planned for a long future.

The statement was not cheap. The original estimate was $42.2 million. The final cost for the building, plaza and 1,325-car garage exceeded $70 million, and the overruns and the avant-garde design were controversial at the time. Notably, income from the garage under the plaza was part of how the project was paid for, an early example of the City making the asset help carry its own cost.

Put plainly, Dallas paid a premium in 1978 for a building that would say: we are open, we are stable, we are permanent, and we are not who you think we are. The irony of 2026 is that the building still says all of that. What failed was not the statement. It was the maintenance budget that was supposed to keep the statement standing.

The Road Not Taken: What if Dallas Had Built a Tall, Shiny Tower?

It is worth imagining the alternative, because it is exactly what the relocation path would now buy. Suppose that in the late 1960s Dallas had chosen the conventional route: a sleek glass-and-steel office tower on the Marilla Street site, like the private towers rising downtown at the time, with the rest of the land sold or developed.

Here is what that building would most likely look like today, based on what has happened to its peers.

• It would be one of downtown’s struggling towers. D CEO reported in May 2026, using Downtown Dallas Inc. and appraisal district data, that overall downtown office vacancy is near 30% and that the ten largest towers have a 48.80% vacancy rate, with 6.26 million square feet empty. Those ten towers were built between 1972 and 1985, the same era as City Hall. Bryan Tower, built in 1972, was 4.50% leased. Renaissance Tower, built in 1974, was 53.00% leased. One developer called most downtown towers “basically zombie buildings.”
• It would need the same reinvestment, on a less forgiving skin. A tower of that vintage would have reached the end of life of its curtain wall, elevators, mechanical systems and electrical gear on roughly the same schedule as Pei’s building. The difference is that a glass curtain wall is a system that must eventually be replaced in full, while Pei’s concrete is the structure itself. City Hall’s problem is its systems and waterproofing, not its bones.
• It would face the same conversion math as its neighbors. Downtown Dallas Inc.’s modeling shows funding gaps of about $293 million for Comerica Bank Tower and $126 million for Harwood Center before historic tax credits. Old towers are not cheap to fix either; they are simply less noticeable when they decline.
• It would have said nothing. A city hall that looks like a bank tower tells the world nothing about the city. There would be no plaza, no Great Court, no shelter at the base, and no symbol to rally around. It is hard to imagine a “Save Dallas City Hall Coalition” forming to protect an ordinary 1970s office tower.
• It might already be gone. A conventional tower with no architectural standing could have been sold and replaced long ago without much protest. In that sense the tower path would have been easier to abandon, which is exactly what makes it the wrong benchmark for a building meant to represent the public.

This counterfactual is reasoned, not proven; no one can know exactly how a different building would have been maintained. But it makes one thing clear. The relocation options now under study are in downtown’s existing office stock, the very buildings in this comparison. Moving out of Pei’s building and into a 1970s or 1980s tower does not escape the aging problem. It trades a building with sound bones and a civic purpose for a building with its own aging systems and no civic purpose at all, and it starts a new reinvestment clock on someone else’s schedule.

That is why the question was never really “old building or new building.” It is whether Dallas will maintain what it owns. A city that could not keep up a concrete landmark designed to last a century has no reason to believe it will do better with a glass tower whose skin and systems were never designed to last that long.

The Warnings Were Given, in Writing, for a Decade

The most important fact in this story is that nobody can claim surprise. The City’s own staff documented the problem repeatedly.

• In an April 2016 briefing to the Budget, Finance and Audit Committee, staff reported that City Hall’s critical power system had reached “end of life” in 2012 and that parts were increasingly hard to find. The same briefing included a photograph labeled “City Hall water infiltration.”
• That 2016 briefing also stated the industry guideline plainly: an adequate annual maintenance and repair budget is 2% to 4% of facility portfolio value, which for Dallas’s non-enterprise facilities meant $34,000,000 to $68,000,000 a year. The spending chart in the same briefing showed annual maintenance and major-repair spending running in the single-digit to low-double-digit millions.
• The City paid AECOM $1,942,861 for a facility condition assessment. The resulting assessment identified roughly $37,000,000 to $39,000,000 of City Hall needs. A May 2023 staff presentation later noted that the 2017 assessment covered only 220 of the more than 500 facilities the Building Services Department maintains, and that the City lacked the $5,000,000 needed to do a new one.
• That same May 2023 presentation listed specific City Hall priority items: replacing six outdated generators for $6,000,000; repairing a water leak “causing potential foundation issues” and the plaza for $36,000,000; replacing 210 outdated Federal Pacific electrical panels for $5,318,186; an “overdue” roof replacement for $1,800,000; and air conditioning retrofits for $5,000,000. Those five items total $54,118,186.
• The bond record tells the rest. The 2012 bond program set aside $400 million for facilities that would have included City Hall, but other priorities won. The 2017 program provided $7 million for City Hall. In 2024, $61 million was initially requested for City Hall, $28 million was advanced, and that money was later reallocated to other priorities.

Compare the 2023 list with the October 2025 “State of City Hall” briefing. Emergency generators went from $6,000,000 to $17 million. Water infiltration, which was a $36,000,000 item in 2023, became a $72 million to $100 million item, and garage structural repairs were added at $25 million to $145 million. The scopes may not match line for line, but the direction is unmistakable. This is what the cost of waiting looks like when it is written down.

How the Question Got Asked

In the summer of 2025, Mayor Eric Johnson charged the new Finance Committee with finding the most fiscally responsible course for City Hall. At the same time, the Dallas Mavericks were looking for a new arena ahead of their 2031 lease expiration at the American Airlines Center, and the City Hall site was openly discussed as a candidate. The October 2025 briefing put deferred maintenance at $152 million to more than $345 million. In November the Council voted 12 to 3 to explore alternatives and to commission an outside review.

That review, led by the Dallas Economic Development Corporation with AECOM, arrived in February 2026. It priced corrective repair of every failing system at $329 million, and full modernization over twenty years at $906 million to $1.14 billion. The larger number included $299 million to $360 million of interest on twenty-year financing, roughly $133 million to relocate staff during construction, and $165 million to make the building move-in ready. Asbestos throughout the building meant it would have to be emptied during a five-year renovation.

The number was contested immediately. Ten former presidents of AIA Dallas argued there was no evidence for $400 million or more of true deferred maintenance. The executive director of AIA Dallas, a former City facilities official, proposed a targeted ten-year plan at $70 million to $100 million that would keep the building occupied. In June, two more consultants priced four phased repair scenarios at $531.6 million to $610.8 million, of which about $329 million was repairs and the rest was swing space and financing. City staff then framed the twenty-year total cost of staying, including modernization, interest, swing space and $229 million of operating expense, at about $1.49 billion to $1.6 billion.

Here is the problem in one sentence: the cost of staying was presented on a fully loaded twenty-year basis, and the cost of leaving never was. No public side-by-side showed twenty years of lease or purchase cost, tenant improvements, parking, moving, a separate 911 facility, operating costs of the new space, demolition of a concrete-and-rebar structure, and net sale proceeds after prior claims on them. The Chief Financial Officer told the Council in June that the savings from relocating were “in the $100s of millions, but we don’t know the exact amount.” A decision of this size should never rest on a number that has not been built.

The Arena Thread

Mavericks CEO Rick Welts later said that the City Manager had approached the team more than a year earlier and said she had to move out of City Hall, before the Council had commissioned any assessment. A Dallas Morning News review of internal emails found no coordinated financial plan connecting the two, but the perception damaged trust. By early June 2026, the Mavericks had announced a purchase of 104 acres at the former Valley View Center in North Dallas, and the Stars had signed a letter of intent to build at Willow Bend in Plano. The arena rationale for the site disappeared. The relocation effort continued.

June 2026: Repair Rejected, Courts Intervene

A special Council meeting was called for June 10. Three Council members sued, and on June 9 Judge Eric Moyé issued a temporary restraining order finding the relocation and redevelopment agenda items too vague under the Texas Open Meetings Act. Only the repair item went forward, and the Council voted 9 to 6 against the phased repair program. On June 17 the Council voted 9 to 5 to spend up to $3 million on due diligence for up to four downtown sites, $2 million for City Hall functions and $1 million for 911 and emergency operations. That $2 million was transferred from an American Rescue Plan Act line for City Hall generator and electrical repairs.

The Self-Imposed Box

Almost every constraint Dallas now faces is one it built or one its voters built for it.

1. Neglect. Repeated bond cycles bypassed the building and the 2024 advance was reallocated. A problem in the tens of millions became a problem in the hundreds of millions.
2. A moving cost story. The estimate rose more than tenfold from the 2018 assessment to the 2026 phased plans while its definition changed underneath it. Every later vote inherited the suspicion that the numbers had been built to reach a conclusion.
3. The arena conversation came first. When both teams chose other sites, the City was left defending a relocation whose most visible reason was gone.
4. The City’s own landmark process. The Landmark Commission unanimously initiated historic designation on March 3, 2025. Under City code, that triggered a predesignation moratorium requiring the building be preserved against deterioration and kept free from structural defects. The moratorium runs to March 3, 2027. The City now has a legal duty to maintain a building it voted not to repair.
5. The Council’s own supermajority rule. In 2021 the Council amended Financial Management Performance Criteria No. 20 to require a supermajority to authorize a new or replacement facility, specifically to avoid unplanned operating costs. The relocation bloc has nine votes. Staff then proposed lowering the threshold to a simple majority in the middle of the decision, which the Finance Committee chair himself opposed.
6. Procedural shortcuts. A rushed special meeting with vague agenda language was halted by a judge at the request of the City’s own Council members.
7. Proposition S. In November 2024, voters gave any resident standing to sue the City to comply with its charter, ordinances and state law, and waived governmental immunity for those suits. Combined with the landmark moratorium, letting City Hall deteriorate is now a litigable violation rather than a policy choice. The Save Dallas City Hall Coalition used exactly that combination when it sued for “demolition by neglect” on August 12, 2026.
8. Proposition U. Passed with about 50.5% of the vote, it requires at least half of each year’s growth in unrestricted revenue to go to police and fire pension and public safety. Moody’s moved Dallas to a negative outlook citing lost flexibility. Whether the City borrows to repair or signs a long-term lease to leave, it must find the money inside a tighter box.
9. Redirected repair money. The coalition’s suit identifies about $22.7 million of City Hall-related ARPA capacity sitting unused, while $2 million was moved out of a repair line to fund the exit study.
10. A shrinking downtown. AT&T has announced its headquarters will relocate in 2028, the Mavericks are going north, and the Stars are going to Plano.
11. The voters may take the decision away. On October 2, 2026, the coalition launched a sixty-day drive for about 20,000 signatures to place a charter amendment on the May 2027 ballot requiring City Hall operations to remain at 1500 Marilla Street.

Put together: Dallas has rejected the repair path, lacks the votes under its own rule to authorize a replacement, is legally bound by its own landmark process and charter to keep the building from deteriorating, has limited fiscal room to pay for either option, and may soon have the decision made for it at the ballot box, all while the building continues to age.

Below the Waterline: What the Audited Financial Statements Show

To see whether City Hall is an isolated failure or a symptom, I went to the City’s Annual Comprehensive Financial Report for the fiscal year ended September 30, 2025 (Note 8, Capital Assets), and to the same note in every ACFR back to fiscal 2013.

First, a point that matters to anyone reading these numbers. The General Fund itself does not record depreciation. Governmental funds, including the General Fund, are reported on the modified accrual basis: when the General Fund buys or builds something, the full cost is shown as an expenditure that year, and nothing is depreciated afterward. Depreciation of the buildings, streets, equipment and parks that General Fund departments use is reported in the government-wide statements under “governmental activities.” That is the right place to look, and it is what the schedules below show. In the General Fund itself, fiscal 2025 capital outlay was $23,251,000 out of $1,787,216,000 in total expenditures, or 1.30%.

Dallas reports approximately $14.5 billion of capital assets, net of depreciation, across governmental and business-type activities. In fiscal 2025 the City recorded $235,645,000 of depreciation and amortization in governmental activities and $241,143,000 in business-type activities, a combined $476,788,000. Below are the complete schedules, converted from the ACFR’s thousands to whole dollars.

Table 1. Governmental activities capital assets, fiscal year 2025

Asset class	Balance Sept. 30, 2024	Additions	Deletions	Balance Sept. 30, 2025
Not depreciated
Land	$602,660,000	$39,940,000	($359,000)	$642,241,000
Artwork	$51,265,000	$317,000	$0	$51,582,000
Construction in progress	$540,947,000	$355,591,000	($282,277,000)	$614,261,000
Total not depreciated	$1,194,872,000	$395,848,000	($282,636,000)	$1,308,084,000
Depreciated / amortized (cost)
Buildings	$1,675,365,000	$17,538,000	$0	$1,692,903,000
Improvements other than buildings	$875,148,000	$151,963,000	$0	$1,027,111,000
Equipment	$1,119,385,000	$108,022,000	($40,712,000)	$1,186,695,000
Infrastructure	$3,440,227,000	$98,696,000	$0	$3,538,923,000
Land (leased)	$4,246,000	$0	$0	$4,246,000
Buildings (leased)	$31,501,000	$0	($250,000)	$31,251,000
Equipment (leased)	$125,224,000	$0	$0	$125,224,000
Subscription IT (SBITAs)	$57,058,000	$99,887,000	($3,146,000)	$153,799,000
Total depreciable cost	$7,328,154,000	$476,106,000	($44,108,000)	$7,760,152,000
Accumulated depreciation / amortization
Buildings	($757,915,000)	($34,012,000)	$0	($791,927,000)
Improvements other than buildings	($347,178,000)	($21,042,000)	$0	($368,220,000)
Equipment	($709,628,000)	($64,945,000)	$40,707,000	($733,866,000)
Infrastructure	($1,347,807,000)	($63,998,000)	$0	($1,411,805,000)
Land (leased)	($2,428,000)	($218,000)	$0	($2,646,000)
Buildings (leased)	($8,264,000)	($2,285,000)	$245,000	($10,304,000)
Equipment (leased)	($25,635,000)	($13,195,000)	$0	($38,830,000)
SBITAs	($23,327,000)	($35,950,000)	$1,828,000	($57,449,000)
Total accumulated depreciation / amortization	($3,222,182,000)	($235,645,000)	$42,780,000	($3,415,047,000)
Depreciable assets, net	$4,105,972,000	$240,461,000	($1,328,000)	$4,345,105,000
Governmental activities capital assets, net	$5,300,844,000	$636,309,000	($283,964,000)	$5,653,189,000

Source: City of Dallas FY2025 ACFR, Note 8. Buildings include buildings held for sale with a historical cost of $2,200,000 and accumulated depreciation of $35,000.

Table 2. Depreciation and amortization charged to governmental functions, fiscal year 2025

Function / fund	Depreciation	Amortization	Total
General government	$23,675,000	$49,920,000	$73,595,000
Public safety	$21,789,000	$0	$21,789,000
Code enforcement	$1,294,000	$0	$1,294,000
Environment and health services	$142,000	$0	$142,000
Streets, public works, and transportation	$79,229,000	$570,000	$79,799,000
Equipment and building services	$26,514,000	$0	$26,514,000
Culture and recreation	$30,657,000	$0	$30,657,000
Housing	$697,000	$1,158,000	$1,855,000
Total governmental activities*	$183,997,000	$51,648,000	$235,645,000

*Includes $18,040,000 of depreciation and amortization for Internal Service Funds.

Table 3. Business-type activities capital assets, fiscal year 2025

Asset class	Balance Sept. 30, 2024	Additions	Deletions	Balance Sept. 30, 2025
Not depreciated
Land	$279,657,000	$47,436,000	$0	$327,093,000
Artwork	$6,171,000	$0	$0	$6,171,000
Construction in progress	$1,880,172,000	$645,276,000	($330,746,000)	$2,194,702,000
Total not depreciated	$2,166,000,000	$692,712,000	($330,746,000)	$2,527,966,000
Depreciated / amortized (cost)
Water rights	$353,910,000	$0	$0	$353,910,000
Buildings	$2,088,261,000	$14,592,000	($306,000)	$2,102,547,000
Improvements other than buildings	$673,591,000	$49,502,000	($153,000)	$722,940,000
Equipment	$1,012,753,000	$39,657,000	($10,875,000)	$1,041,535,000
Infrastructure	$772,384,000	$11,373,000	$0	$783,757,000
Utility property	$5,385,283,000	$273,066,000	($1,868,000)	$5,656,481,000
Land (leased)	$62,464,000	$0	$0	$62,464,000
Buildings (leased)	$18,119,000	$0	($413,000)	$17,706,000
SBITAs	$5,385,000	$9,793,000	($547,000)	$14,631,000
Total depreciable cost	$10,372,150,000	$397,983,000	($14,162,000)	$10,755,971,000
Accumulated depreciation / amortization
Water rights	($145,229,000)	($3,537,000)	$0	($148,766,000)
Buildings	($958,653,000)	($45,307,000)	$232,000	($1,003,728,000)
Improvements other than buildings	($304,447,000)	($23,175,000)	$152,000	($327,470,000)
Equipment	($717,844,000)	($39,883,000)	$10,536,000	($747,191,000)
Infrastructure	($336,768,000)	($13,791,000)	$0	($350,559,000)
Utility property	($1,781,617,000)	($110,787,000)	$1,413,000	($1,890,991,000)
Land (leased)	($549,000)	($183,000)	$0	($732,000)
Buildings (leased)	($5,002,000)	($1,484,000)	$281,000	($6,205,000)
SBITAs	($2,822,000)	($2,996,000)	$142,000	($5,676,000)
Total accumulated depreciation / amortization	($4,252,931,000)	($241,143,000)	$12,756,000	($4,481,318,000)
Depreciable assets, net	$6,119,219,000	$156,840,000	($1,406,000)	$6,274,653,000
Business-type activities capital assets, net	$8,285,219,000	$849,552,000	($332,152,000)	$8,802,619,000

Buildings include buildings held for sale with a historical cost of $20,200,000 and accumulated depreciation of $681,000.

Table 4. Depreciation and amortization charged to business-type activities, fiscal year 2025

Function / fund	Depreciation	Amortization	Total
Dallas Water Utilities	$159,358,000	$1,576,000	$160,934,000
Convention Center	$17,851,000	$0	$17,851,000
Airport Revenues	$42,423,000	$983,000	$43,406,000
Sanitation	$13,170,000	$380,000	$13,550,000
Storm Water	$3,195,000	$0	$3,195,000
Nonmajor enterprise funds	$483,000	$1,724,000	$2,207,000
Total business-type activities	$236,480,000	$4,663,000	$241,143,000

The City depreciates on a straight-line basis. Governmental buildings, infrastructure and improvements are given lives of 10 to 50 years and equipment 3 to 20 years. Business-type infrastructure runs 50 to 100 years, water rights 100 years, and utility property 33 to 75 years.

What These Numbers Say, and What They Cannot Say

Read honestly, the schedules do not show a city that has stopped building. Over thirteen years, additions to governmental buildings, improvements, equipment and infrastructure totaled $3,621,961,000 against $1,792,626,000 of depreciation on those classes, about 2.02 times. Additions to governmental buildings alone totaled $515,297,000 against $378,384,000 of building depreciation, about 1.36 times. Dallas has added new libraries, fire stations, parks and the like.

But additions are not the same thing as reinvestment in what you already own. A new fire station does not fix a leaking City Hall. The more telling measure is how much of the existing building stock has been used up, and that number has climbed steadily.

Table 5. Governmental buildings: additions, depreciation, and share of cost already depreciated, FY2013 to FY2025

Fiscal year	Building additions	Building depreciation	Additions ÷ depreciation	Building cost, year-end	Share of cost already depreciated
FY2013	$18,484,000	$24,171,000	0.76x	$1,222,996,000	36.82%
FY2014	$30,118,000	$24,566,000	1.23x	$1,253,114,000	37.90%
FY2015	$47,710,000	$25,139,000	1.90x	$1,300,824,000	38.44%
FY2016	$14,251,000	$26,073,000	0.55x	$1,309,879,000	39.93%
FY2017	$31,674,000	$27,314,000	1.16x	$1,341,553,000	41.03%
FY2018	$69,039,000	$28,133,000	2.45x	$1,410,592,000	41.01%
FY2019	$49,184,000	$29,494,000	1.67x	$1,459,776,000	41.65%
FY2020	$6,445,000	$30,062,000	0.21x	$1,466,130,000	43.51%
FY2021	$84,919,000	$30,933,000	2.75x	$1,551,049,000	43.13%
FY2022	$34,094,000	$31,853,000	1.07x	$1,575,629,000	43.90%
FY2023	$75,233,000	$32,789,000	2.29x	$1,650,862,000	43.88%
FY2024	$36,608,000	$33,845,000	1.08x	$1,675,365,000	45.24%
FY2025	$17,538,000	$34,012,000	0.52x	$1,692,903,000	46.78%

Source: Note on capital assets in each year’s Dallas ACFR. Some beginning balances were restated in later reports; year-end figures are shown as originally reported.

The share of governmental building cost already depreciated rose from 36.82% in fiscal 2013 to 46.78% in fiscal 2025, an increase of 9.96 percentage points. In fiscal 2025, building additions of $17,538,000 covered only 0.52 times the year’s $34,012,000 of building depreciation. Across all governmental depreciable assets, accumulated depreciation now equals 44.01% of cost; for business-type activities it is 41.66%. Equipment is the one class that improved, from 79.82% used up in 2013 to 61.84% in 2025, reflecting large recent equipment purchases.

Now the part the financial statements cannot tell you, which is the heart of the iceberg.

• Maintenance never shows up as an asset. Under the City’s own policy, normal maintenance and repairs that do not add value or materially extend a life are expensed, not capitalized. A roof patched every year for a decade leaves no trace on the balance sheet.
• Depreciation is based on what the building cost decades ago, not what it would cost to replace. A building placed in service in 1978 on a 50-year life is nearly fully depreciated. Its annual depreciation charge is close to nothing, while its replacement cost is enormous. The older and more neglected an asset becomes, the less the financial statements say about it.
• There is no required line for deferred maintenance. Dallas, like most cities, depreciates its infrastructure rather than using the GASB 34 “modified approach,” which would have required it to disclose assessed condition and the gap between planned and actual maintenance spending. A $345 million City Hall problem and a citywide backlog in the billions can coexist with a clean audit opinion.
• The citywide backlog is far larger than City Hall. The May 2023 staff presentation listed $133,145,374 of priority major maintenance across all general-purpose facilities. Its broader needs inventory, which includes rehabilitation, new construction and land, lists category amounts that add to $4,044,199,365, although the printed total on the page is $1,091,604,345; the page does not foot, largely because of a $2,834,979,024 park and recreation figure. Either way, City Hall is one building in a portfolio of hundreds that was assessed incompletely and maintained on a “fix it when it fails” basis.
• The balance sheet is already under pressure from elsewhere. Governmental activities report an unrestricted net position deficit of $4,854,204,000, driven largely by pension obligations. Total governmental net position is only $23,857,000. Any repair bond or long-term lease for a new City Hall competes for room on a balance sheet that pension costs have already filled.

That is the iceberg. The financial statements show a city that keeps buying and building. They do not show, and are not designed to show, the slow consumption of the things it already owns. City Hall is simply the first building where the consumption became too large, too visible, and too political to ignore.

What the Public Conversation Has Missed

• The ten-year warning trail. The 2012 end-of-life power system, the 2016 briefing, and the 2023 priority list are public documents. They answer the question of whether this was foreseeable.
• The measurable cost of delay. The same categories of work roughly doubled or more between the 2023 list and the 2025 briefing.
• The leave-side number. No public model yet shows twenty years of lease or purchase, finish-out, parking, moving, a separate emergency center, operations, demolition and asbestos abatement, and net sale proceeds on the same basis as the stay-side number. City finance staff have said the goal is to own, not lease, a new City Hall; the capital cost of buying and fitting out a tower has not been shown.
• The redevelopment value claim. Assertions that redeveloping 11.8 to 15 acres will revitalize downtown have not been rebuilt from components: absorption, land value, taxable value added, tax increment already committed, substitution from other downtown sites, and timing. Headline economic benefits deserve the same scrutiny as headline repair costs.
• The emergency operations risk. The 911 center and emergency operations center sit in the basement of a building with documented water infiltration and failing generators. That is a public safety exposure regardless of what happens to the rest of the building.
• Where sale proceeds go. A 1977 ordinance directs proceeds from the sale of capital assets to a capital improvements depository, and the City has discussed asset monetization as a source for the Police and Fire Pension. Sale proceeds are not free money.
• The space question. How much office space does a city of 13,000 employees need after remote and hybrid work? A building sized in the 1970s for 1,400 workstations may or may not be the right size today, and that question should be answered before either path is funded.
• Environmental and embodied cost. Demolishing roughly one million square feet of concrete, abating asbestos, and building or fitting out replacement space all carry costs that have not been priced.

Why This Belongs in a Graduate Classroom, and Perhaps a Dissertation

I have spent more than fifty years in local government finance, starting as Budget Director for the City of Garland in 1972. I have rarely seen a single case that touches so many disciplines at once. Dallas City Hall would make an outstanding graduate case study in public administration, public finance, urban planning, or law, and it has the depth for a doctoral dissertation.

Consider the research questions it raises:

• Political economy: Why do elected bodies consistently underfund maintenance of assets they own, even when staff document the problem, and what institutional designs change that behavior?
• Public financial reporting: Should governmental accounting standards require disclosure of deferred maintenance, condition indexes, or replacement-cost consumption, so that neglect becomes visible before it becomes a crisis?
• Decision analysis: How should a government compare a fully known repair cost against an uncertain relocation and redevelopment alternative, and how does the framing of those numbers shape votes?
• Direct democracy: How do petition-driven charter amendments, such as revenue earmarks, immunity waivers and facility mandates, interact and accumulate to constrain a council’s capital decisions?
• Governance and agency: What happens to trust when staff discussions with private parties precede a council’s own needs assessment?
• Preservation law: How do predesignation moratoria and “demolition by neglect” provisions bind the government itself, and should they?
• Urban economics: When a city’s largest employers and franchises leave downtown, is the government’s own building an anchor to keep or a parcel to monetize?

A dissertation could be organized around five chapters: the history of the building and its maintenance funding from 1978 to 2026; the evolution of the cost estimates and their framing; the legal and procedural constraints, including Propositions S and U and the City’s own financial rules; a quantitative chapter on asset consumption across Texas’s largest cities using a decade of ACFR capital asset notes; and a policy chapter proposing reporting and budgeting reforms. The data is public, the records are dense, and the outcome is still unfolding, which is exactly what makes a good case.

Lessons for Every Government

1. Make maintenance a fixed obligation, not what is left over. Adopt a written policy funding facilities at a target share of replacement value each year, and protect it from reallocation. Dallas’s own staff cited the 2% to 4% guideline in 2016.
2. Keep condition assessments current, complete and public. Assess every facility on a fixed cycle and publish the backlog every year, alongside debt and pension figures.
3. Report what the financial statements do not. Publish an asset consumption ratio (accumulated depreciation divided by cost) by asset class, a reinvestment ratio (spending on existing assets divided by depreciation), and a facility condition index, every year in the budget. These three numbers would have flagged City Hall years ago.
4. Treat deferred maintenance as debt with interest. A $37 million backlog that becomes $329 million of corrective repair is the most expensive borrowing a city can do, and it never appears in a rating presentation until it explodes.
5. Never compare a fully loaded number to a partial one. Put staying and leaving in the same frame, with the same horizon and assumptions, every component exposed and open to challenge, including the lease liabilities that must be recorded on the balance sheet.
6. Decide what you need before you talk to anyone who wants your land.
7. Do not change the rules in the middle of the decision. Supermajority requirements exist for exactly this kind of choice.
8. Know your own tripwires. Inventory every landmark process, charter provision, financial policy, deed restriction and parkland question before you start.
9. Stabilize while you decide. Fund roofs, waterproofing, generators and life-safety work no matter what the final decision is, and do not raid those lines to pay for the exit study.
10. Get the open-meetings basics right. Specific agenda language and full materials, posted early, for any decision that is hard to reverse.
11. Value civic identity openly, even if it cannot be priced. If an analysis treats a city hall as nothing more than office space, the public will reject the analysis rather than the conclusion.
12. Agree on the facts before you vote on the decision. An independent reviewer selected jointly by both sides of a divided council would likely have saved Dallas a year and several lawsuits.

Closing

Dallas City Hall is not falling down. It is something more instructive: a structurally sound public building that was allowed to wear out in plain sight, documented by staff and passed over by budgets, until the cost of fixing it became large enough to make leaving look cheap. The financial statements recorded every dollar Dallas spent and almost nothing about what it was consuming. Every city in Texas has buildings like this one. The only question is whether they find out the way Dallas did.

Sources

• Wikipedia, Dallas City Hall (history, design and cost)
• Docomomo US, Dallas City Hall register entry
• D Magazine, I.M. Pei’s legacy will forever loom over Dallas
• D CEO, Empty office towers in downtown Dallas, May 2026
• City of Dallas, Annual Comprehensive Financial Report, FY ended September 30, 2025 (Note 8, Capital Assets; MD&A Table 3; governmental funds statements)
• City of Dallas, audited financial reports FY2013 to FY2024
• City of Dallas, City Facility Condition Assessment briefing, April 4, 2016
• City of Dallas, Critical Facilities Subcommittee, Major Maintenance Presentation, May 25, 2023
• City of Dallas, State of Dallas City Hall briefing, October 2025
• KERA, New report to give updated estimate (bond history)
• Dallas Observer, Council skeptical of billion-dollar price tag
• CandysDirt, Repairs pegged at $1B, but is that the real cost?
• CandysDirt, AIA Dallas director pitches $70M to $100M plan
• CandysDirt, City Manager raised relocation to Mavs CEO over a year ago
• KERA, Phased repair scenarios, June 3, 2026
• Dallas Express, Long-term price nears $1.6B
• Dallas Express, Judge rules agenda too vague
• FOX 4, Renovation plans paused
• Dallas Express, $2M greenlit for due diligence
• KERA, Dallas could lower voting majority
• KERA, Coalition sues over demolition by neglect
• Dallas Express, Coalition invokes Proposition S
• Dallas Express, Closed-door lawsuit briefing and ARPA transfer
• KERA, Petition drive for May 2027 charter amendment
• The Bond Buyer, Moody’s negative outlook
• City of Dallas, Monetization of City Assets briefing, August 22, 2024

A collaboration between Lewis McLain & AI

The Fall the Cameras Went Dark

In about eight weeks, the license plate reader went from an invisible line item in the police budget to a campaign issue. In the last week of August, Governor Abbott ordered state agencies to stop funding Flock Safety cameras. Within days, Plano’s program ended, Princeton parked six cameras it had just received, and Wylie voted unanimously to end its contract.

Dallas turned off 321 state-funded cameras but kept roughly 300 city-funded ones; only three council members voted to cut the remaining $1.5 million. Pflugerville terminated after learning that 459 outside agencies had searched its data when the city had authorized 83. Bastrop ordered its cameras covered. League City and Conroe are talking about letting voters decide at the ballot box.

Nationally the story is the same, only louder. One advocacy group counts more than 200 cities and counties that have ended Flock contracts; a more conservative newspaper count found 82 terminations in 28 states through May. The Senate Judiciary crime subcommittee held a hearing in September titled “Always Watching.” Connecticut and Washington passed new limits. Flock cut its default data retention from 30 days to seven, made audits mandatory, laid off about 18% of its staff, and raised its federal lobbying spending to $360,000 for the quarter.

Much of the anger is earned, and I will get to why. But a city council that votes to unplug ought first to remember what it bought, and why. The original reason for these cameras was narrow, practical and good. That reason has not gone away just because the network built around it got out of hand.

The Original Reason: A Car Was Used in a Crime

Flock began in 2017 in an Atlanta subdivision, not a police headquarters. Garrett Langley, an electrical engineer, watched a string of break-ins and a stolen gun go unsolved in his own neighborhood. When he asked police chiefs and homeowner association boards why, the answer was the same: the bottleneck was evidence, and the most useful piece of evidence was a license plate.

The first customers were HOAs. One 37-home Minnesota development split a $2,000 annual subscription, about $54 per household, after a resident found a stranger in his kitchen. The cameras were solar powered, so nobody had to trench power or fiber to a neighborhood entrance. The pitch was modest: if a car comes in to commit a crime, we will have its tag.

Texas adopted the cameras for an equally specific reason. In 2023, with catalytic converter thefts spiking, the Legislature unanimously added $1 to every auto insurance policy to fight that crime. The bill was named for Harris County Deputy Darren Almendarez, killed after he interrupted converter thieves in a grocery store parking lot. When the Motor Vehicle Crime Prevention Authority offered grants, local agencies chose plate readers over investigator overtime and training by a wide margin.

The logic was sound. A converter theft is a quick, mobile crime with few witnesses, and the getaway vehicle is often the only lead. North Texas cities described the same narrow purpose when they signed up. Frisco told residents the cameras would alert officers to stolen vehicles, wanted suspects, and AMBER or Silver Alert vehicles, would not be used for traffic enforcement, and would not capture faces.

That is the baseline worth remembering. The camera was built to answer one question: was this car, tied to this crime, on this road?

What the Cameras Actually Do Well

Strip away the marketing and the panic, and the benefits fall into four plain categories.

First, they turn no-witness crimes into solvable ones. Car theft, converter theft, porch-pirate runs and smash-and-grabs rarely leave a witness who caught a tag. A camera at the neighborhood entrance or a major intersection supplies the one fact a detective needs to start. Texas’s vehicle crime authority reported that plate reader data was searched about 62,000 times in 2025 and led to roughly 1,660 cleared converter theft cases.

Second, they find people fast when minutes matter. Recent examples are not hard to find:

• Moody, Alabama: a 13-year-old taken from a convenience store was located on an interstate, unharmed, before an AMBER Alert could even be issued.
• Lucas County, Ohio: a deputy found a missing girl in under 30 minutes by running the suspect’s plate and seeing where it kept appearing.
• Toledo, Ohio: in October, a camera hit led police to one missing teen and then to a pregnant 16-year-old who had been missing since March.
• Greenville County, South Carolina: a woman and her son held by an armed boyfriend were tracked across North Carolina to Bristol, Tennessee, where he was arrested.
• Flagstaff, Arizona: cameras helped locate a missing toddler from California, months before that city canceled its contract.

Third, they multiply small departments. Prosper’s chief called his roughly 50 cameras a force multiplier. Even in Ingleside, where the council voted 6-0 to cancel, the discussion included praise for the system as a great tool. A town with a dozen officers cannot stake out every entrance; a camera can.

Fourth, they are cheap relative to the alternative. Frisco approved $434,150 for 81 cameras, about $5,360 per camera under that agreement. At that price, a dozen cameras come to about $64,300. The honest test is to set that figure beside the fully loaded cost of one patrol position (salary, benefits, vehicle, equipment) in your own city’s budget. The cameras also work nights and weekends.

The Numbers, Rebuilt Honestly

The defenders of these cameras do themselves no favors with headline claims. A fair case rests on the evidence that survives scrutiny, and that evidence points to a real but moderate benefit concentrated in vehicle crime and locating people.

Claim	Who says it	What it actually shows	Weight
Crime reductions of up to 70%	Frisco PD release, repeating Flock marketing	A best-case ceiling with no stated base or comparison group	Weak
Involved in clearing over a million crimes last year	Flock’s CEO, on a podcast	“Involved” is undefined; no denominator	Weak
9.1% higher clearance rate per camera per sworn officer	Flock-funded study with TCU and UT Tyler researchers, 123 agencies, 2023	A regression association, paid for by the vendor	Weak to moderate
11% fewer car thefts, 16% higher car-theft clearance	University of South Carolina working paper, 216 agencies	The first independent look at fixed networks; other property crime did not fall the same way	Moderate
Same study, caveat	The authors and the Institute for Justice	Thefts and clearances were already improving before the cameras went up, so not all of the gain belongs to them	Discount applied
Fewer shootings, car thefts and property crimes; no drop in violent crime	Atlantic City evaluation, Shjarback and Sarkos	A peer-reviewed single-city result	Moderate
62,000 searches, about 1,660 cleared converter cases in 2025	Texas Motor Vehicle Crime Prevention Authority	About 1 clearance per 37 searches; “led to” may overstate the camera’s role	Moderate
13,000 searches a week on about 2,100 unique plates	Dallas Police, to council	About 6.2 searches per plate: targeted, repeat lookups on specific vehicles, not idle browsing	Useful context

Read the table from the bottom up and a sensible picture emerges. The cameras do not cut crime 70%. They appear to cut car theft by something on the order of a tenth, lift vehicle-crime clearances, and give investigators a fast lead in abductions and pursuits. For many cities, at a few thousand dollars a camera, that is a good buy. It is not a miracle, and councils should stop being sold one.

Plano’s chief made the more defensible version of the argument this fall: the program was useful and crime fell over the three years it ran. That is correlation, not proof, and it is exactly why cities should collect their own outcome data rather than lean on the vendor’s.

What Went Wrong Was Drift, Not the Camera

Nearly every scandal driving the backlash traces to how the system was governed, not to the idea of reading a plate on a public street. Four kinds of drift stand out.

Sharing drift. A city buys cameras to watch its own entrances and quietly joins a national lookup network. Pflugerville authorized 83 agencies and found 459 had searched its data. A Shaker Heights, Ohio police chief admitted his department could only take the vendor at its word about who else was looking.

Purpose drift. Records obtained by 404 Media showed more than 4,000 searches between June 2024 and May 2025 listing ICE or immigration as the reason, run by local and state police on federal agents’ behalf, including in Illinois, where state law forbids it. Other logs showed more than 1,200 searches for suspected loitering. In Texas, police searched roughly 83,000 cameras, some in other states, for a woman suspected of a self-managed abortion. None of that is what a city council voted for when it approved cameras to catch converter thieves.

People drift. The Washington Post counted at least 50 officers charged with or accused of misusing plate readers, many to track wives, ex-girlfriends or women they wanted to meet. In Texas, a Lufkin officer faces 100 counts for allegedly tracking 11 people for more than a year. An Indianapolis officer allegedly searched his ex-wife’s plate more than 1,000 times, and that department had no routine audit of searches until recently.

Money drift. The Texas Tribune found the $1 converter-theft fee helped pay for at least 3,200 Flock cameras, many on highways and toll roads, and lawmakers said they never discussed that use when they passed the bill. When the governor stopped the money, cities like Plano and Dallas learned the program had never been fully priced into their own budgets.

Add accuracy problems, such as Roseville, California logging more than 1,000 false positives over two years, and the pattern is clear. A camera designed to answer whether this car was on this road became a searchable, 30-day memory of everyone’s car, open to thousands of users, for loosely stated reasons, with almost nobody checking. That is a governance failure. Governance failures have governance fixes.

Keeping the Benefit: A Ten-Point Council Ordinance

A council does not have to choose between a dragnet and darkness. It can adopt rules that keep the cameras tied to their original reason. Most of these already exist somewhere: in Connecticut’s and Washington’s new laws, in Michigan’s pending bill, and in the guardrails Flock itself announced in August.

1. Purpose limit. List the allowed uses in the ordinance: stolen vehicles, felonies, missing or endangered persons, AMBER and Silver Alerts. Everything else is prohibited, including traffic enforcement and loitering.
2. Short memory. Delete routine data after 7 days, Flock’s own new default, and never later than 21 days, the Connecticut and Washington standard. Keep longer only records tied to an open case.
3. Sharing by name. No national lookup. The council approves, by name and once a year, each outside agency allowed to search, and requires the stated limits in writing, as Connecticut now does.
4. Case number on every search. No case or incident number, no query. Flock now requires this; the city should require it too.
5. Audit with teeth. A supervisor reviews searches monthly, an outside auditor reviews them yearly, and misuse is a firing offense. Langley has urged states to make illegal use of plate data a crime; Texas legislators should take him up on it.
6. Warrant for tracking a person over time. A real-time hit on a stolen car needs no warrant. Reconstructing someone’s movements over days should, with exceptions for active emergencies and missing children, as Michigan’s bill proposes. Congressman Keith Self of McKinney has proposed a warrant rule for federal access.
7. An annual public report. Cameras, searches, unique plates, outside agencies with access, hits, arrests and clearances by offense, false hits, and misuse cases. If the program works, the numbers will show it.
8. Signs. Tell drivers when they enter a camera zone.
9. Budget honesty. Carry the full cost as its own general fund line, voted in the open, so the program does not disappear the day a grant does. Add a sunset: the program expires every two years unless reauthorized with the report in hand.
10. A clean contract. The city owns the data, the vendor gets no secondary use, and termination comes with a certified deletion.

A program run this way is very close to what residents thought they were getting in the first place.

Questions This Debate Has Not Answered

Several questions came up in the reporting that nobody has yet answered with data. A council weighing its vote, in either direction, should ask for each of them.

1. What does unplugging cost? No city that canceled has published before-and-after numbers on vehicle theft, clearances or missing-person recoveries. Until someone does, both sides are arguing from anecdotes.
2. Does canceling a city contract actually remove the network? Often not. The Department of Public Safety installed nearly 1,200 cameras of its own under a $15.9 million contract, and Austin police reportedly kept using that state network after the city halted its program. In Princeton, most of the Flock cameras are privately owned by neighborhoods, and Fort Worth lets residents register private cameras for police use.
3. What happens to the data after a city cancels? South Lyon, Michigan ordered its police to stop accessing and sharing the data. Few cities have said publicly whether the vendor certified that the data was deleted.
4. Does switching vendors solve anything? Sierra Vista, Arizona canceled Flock and is shopping for another plate reader vendor with the same grant. Witnesses at the Senate hearing urged that any rules apply to Axon and Motorola as well. Princeton already runs Motorola Vigilant cameras. The governance problem follows the data, not the brand.
5. Who pays now? The governor’s office said most local camera money is federal. The Texas Tribune documented at least $45.9 million in state money, counting the vehicle authority grants and the DPS contract. Nobody has published the federal share, and cities that keep their cameras now carry the full cost locally.
6. Is seven days a rule or a suggestion? Coverage of Flock’s August changes conflicts. Some reports call seven days the new default; others say Flock is recommending it while agencies keep the authority to set their own. A council should write its own number into ordinance rather than rely on a vendor setting.
7. How accurate are the hits? Roseville’s false positives surfaced only through an internal review. Almost no city reports its false-hit rate, even though a bad hit can mean a felony stop on an innocent driver.
8. What will Texas law say? City-by-city rules are a patchwork, and the debate has become a statewide campaign issue. The Legislature returns in January 2027, and the converter-fee statute that paid for so many of these cameras is a natural place to start.

What the Critics Would Say Back

A fair essay owes the other side its strongest arguments, and they are serious.

The constitutional objection. The Institute for Justice, the ACLU and EPIC argue that a searchable record of every driver’s movements, queried without a judge’s approval, is a warrantless dragnet. On that view, shorter retention and audits make the dragnet smaller but do not make it lawful. Several pending lawsuits, including one in San Diego, rest on this argument.

The trust objection. Local rules only work if the vendor and the network honor them. Misuse has mostly been uncovered by reporters, public records requests and citizen tools, not by internal audits. A Pinal County, Arizona sheriff told the Senate the company first said its cameras used no AI and later contradicted that. Connecticut found it had to change state law and the vendor’s software to stop out-of-state access.

The evidence objection. The best independent study is one working paper with a pre-trend problem, and most of the rest is vendor-funded or anecdotal. Critics say councils are being asked to accept a permanent surveillance cost for a benefit that has not been proven.

The consent objection. Polling cited by The Texan found nearly 64% of Texas likely voters oppose plate cameras at public intersections, and a national poll found unfavorable views of about 40% among Democrats and Republicans alike. San Diego Councilmember Stephen Whitburn put it this way, in substance: a safety tool that makes residents feel less safe has stopped doing its job.

Those arguments explain why so many councils have chosen to unplug rather than reform. The question for every council is whether rules like the ten above can earn back that trust, or whether the trust is already gone.

Sources

• Texas Tribune via KXAN: Abbott blocks state agencies from spending on Flock cameras
• Texas Tribune via ABC13: $1 insurance fee paid for thousands of Flock cameras
• Straight Arrow News: state fund totals, including the DPS contract
• San Antonio Current: converter-fee grants and 2025 clearance figures
• Community Impact: Plano’s Flock contract ends
• FOX 4: Princeton won’t use Flock cameras; Wylie ends contract
• Princeton Herald: most current Flock cameras in Princeton are private
• FOX 4: Dallas council rejects ending Flock funding
• The Texan: Texas cities and counties break with Flock
• CBS Austin: Bastrop covers its cameras
• Newsweek: League City and Conroe weigh a public vote
• KRLD: Flock cameras across DFW and Fort Worth’s community camera program
• Community Impact: Frisco’s 81-camera agreement
• City of Frisco: Flock camera announcement
• Killeen Daily Herald: Ingleside cancels Flock contract
• CBS Minnesota: HOA adopts Flock; founder’s story
• Flock Safety media kit: founding story
• ABC 33/40: Moody police find abducted 13-year-old
• WTVG via Cleveland 19: Toledo recovers three missing children
• WTVG via WAGM: Lucas County deputy finds missing girl
• Post and Courier: Greenville case and USC study
• City Journal: USC authors on their study
• Institute for Justice: critique of the USC study
• Shjarback and Sarkos: Atlantic City ALPR evaluation
• Police1 via STIRM: Flock-funded clearance study
• Washington Post via Anchorage Daily News: officers misusing plate readers
• Tech Brew: abortion search and other cases
• Reason via Yahoo: 404 Media immigration search records
• Cybernews: loitering searches
• Cleveland Scene: Shaker Heights and network sharing
• Michigan Advance: South Lyon covers cameras and ends contract
• KGUN 9: Sierra Vista ends contract, seeks another vendor
• Northeastern University: 200+ terminations, retention cut to 7 days
• GovTech: 82 terminations in 28 states
• FOX 6: Flock’s mandatory audits and new retention
• Straight Arrow News: Flock’s new guardrails and agency authority over retention
• Live 5 News: Senate subcommittee hearing
• Fox Carolina: hearing testimony on Axon and other vendors
• Bloomberg Government: Flock lobbying spending
• ValueAdd VC: Flock layoffs
• TechCrunch: Langley calls for compromise
• WFSB: Connecticut’s new plate reader rules
• Washington State Standard: Washington’s new law
• WNEM via WNDU: Michigan warrant bill
• Times of San Diego: council resolution and ACLU suit
• Roll Call: hearing preview and polling
• TechSpot: Roseville false positives
• Slashdot / Washington Post: Indianapolis officers charged

A Collaboration between Lewis McLain & AI

On Tuesday, November 3, Americans vote in the midterm elections. Every news channel will be covering it. The results will drive the conversation for weeks.

On Wednesday, November 4, the U.S. Treasury Department will put out a press release almost nobody reads. It is called the Quarterly Refunding Statement. It is dry, technical, and full of numbers. It will not lead any broadcast.

There is a reasonable chance that the second document ends up mattering more to your mortgage rate, your city’s next bond sale, and your retirement account than the first one does.

This post explains why, starting from zero. If you have never thought about the bond market in your life, you are the intended reader.

Start with the basic problem

The federal government spends more than it takes in. To cover the gap, it borrows. It borrows by selling IOUs called Treasury securities.

There are short ones and long ones. A Treasury bill matures in a year or less. A Treasury note runs two to ten years. A Treasury bond runs twenty or thirty years. When you buy one, you hand the government money now and it pays you back later with interest.

The total pile of these IOUs is around $40 trillion. The interest alone now runs over $1 trillion a year. That is more than the government spends on national defense.

Here is the part that trips people up. The government does not pay off that pile. It rolls it over. When a bond comes due, Treasury sells a new one to pay off the old one, the way someone might pay one credit card with another. That means the government is constantly back in the market asking investors to lend again. Every week. Forever.

So the interest rate investors demand is not a trivia question. It is the price of keeping the whole thing running.

Who decides that price

Not the government. The market does.

The Federal Reserve sets one very specific interest rate, the overnight rate that banks charge each other. That heavily influences short-term rates. But the rate on a 30-year Treasury bond is set by supply and demand among investors: pension funds, insurance companies, foreign central banks, mutual funds, ordinary people.

If those investors get nervous, they demand a higher rate to lend for thirty years. That extra amount they demand is called the term premium. It is the compensation for taking a long, uncertain risk. Nobody sets it. It emerges.

And here is why you should care even if you never buy a bond. Treasury yields are the benchmark everything else is priced against. Mortgage rates follow the 10-year Treasury closely. Corporate borrowing costs, and city and school district bond rates, follow the longer end. When those yields go up, everything else that borrows long-term gets more expensive, from a family buying a house to a school district building an elementary school.

Enter the Treasury Secretary

Scott Bessent has run the Treasury Department since January 2025. Before that he spent forty years in investment management. He is a currency and bond specialist by training. He worked for George Soros, then started his own fund.

That background matters for understanding what he is doing now. He is not a career bureaucrat who ended up in charge of the government’s finances. He is a trader who ended up in charge of the government’s finances, and he has been acting like one.

Long-term interest rates have been uncomfortably high. So Bessent reached for a tool.

The tool: buybacks

The Treasury Department has a program where it buys back some of its own older bonds from the market. This is a real, boring, established program. It launched in 2024. It normally exists to help trading run smoothly in bonds that have gotten stale and hard to trade.

On August 19, 2026, Bessent announced that starting September 9, Treasury would at least double the size of these buybacks in the longest maturities, from around $2 billion per operation to at least $4 billion.

The mechanics are simple enough. Treasury announces which old bonds it wants to buy. Wall Street’s big bond dealers submit offers. The New York Fed runs the auction on Treasury’s behalf. Treasury takes the best offers, pays cash, and retires the bonds.

Now the question everyone should ask: where does the cash come from?

This is the whole story, so slow down here.

The Treasury Department cannot create money. Only the Federal Reserve can do that. So when Treasury spends $4 billion buying back 30-year bonds, it has to get that $4 billion somewhere. It gets it by borrowing more.

And because Treasury has already locked in how much long-term debt it plans to sell this quarter, the extra borrowing happens in short-term bills.

Read that again. Treasury is buying back 30-year debt and replacing it with 4-week debt.

Total debt does not go down by one dollar. Nothing is paid off. The government has simply swapped a long loan for a short loan.

If you have ever refinanced a house, you know this trade. Moving from a 30-year fixed mortgage to an adjustable-rate loan lowers your payment today. It also means your payment resets whenever rates reset. You have not reduced what you owe. You have changed what you are exposed to.

That is what the U.S. government is doing, at scale.

Why would that lower long-term rates at all?

The theory is about supply.

Imagine the world’s investors can only stomach so much long-term risk. If Treasury takes some 30-year bonds off the market, there is less long-term risk left for investors to hold. Less of something usually means a better price for it. So the rate on the remaining long bonds should fall.

That is the idea. It has a name and a history.

A short history detour: the Twist

In 1961, the Federal Reserve and the Kennedy administration faced a puzzle. They wanted short-term rates high, to keep money from leaving the country for better returns abroad. They also wanted long-term rates low, to encourage businesses to build things.

Those two goals fight each other. So they tried something clever: buy long-term bonds, sell short-term bonds, and bend the shape of the curve rather than moving it up or down as a whole.

Somebody in the financial press noticed that Chubby Checker’s “The Twist” was the biggest song in the country. The nickname stuck. Operation Twist.

It came back in 2011. The Fed had already cut its main interest rate to essentially zero and had no room left to cut. So it bought roughly $667 billion of long-term Treasuries and sold an equal amount of short-term ones. Officially the Maturity Extension Program. Everyone called it Twist 2.

Both times, the Federal Reserve did it.

Here is the thing that makes 2026 different

What Bessent is doing looks like a Twist and gets called a Twist, but it is not the same animal, for two reasons.

First, it is the wrong institution. Both historical Twists were run by the Fed, which can create money and whose job is managing interest rates. This one is being run by the Treasury Department, whose job is selling debt and paying the government’s bills.

Second, it runs the wrong direction on maturity. The Fed’s versions gave the Fed longer-term holdings. Bessent’s version leaves the government’s own debt shorter and therefore more exposed to future rate changes.

Think of it this way. The federal government has two hands. One hand is the Fed, which is supposed to be independent and worry about inflation. The other hand is the Treasury, which worries about paying the bills and answers to the President. For decades the arrangement has been that the Fed manages interest rates and Treasury does not try to.

When Treasury starts trying to steer long-term interest rates, that arrangement blurs. Economists have an unfriendly name for the far end of that road: fiscal dominance. It means the government’s debt problem, rather than the inflation target, has become the thing driving policy. Countries that get there do not enjoy it.

What the market actually did

Not much, and not in the right direction.

When the buyback expansion was announced, the dollar fell and the price of gold rose. That pairing is a tell. A falling dollar plus rising gold is the combination investors produce when they think U.S. risk has gone up, not down. The announcement was meant to project confidence and the market read it as worry.

The scale explains part of the shrug. Treasury expects to borrow about $739 billion this quarter. A $4 billion buyback against that is a rounding error. As one analyst quoted by the Wall Street Journal put it, the move is a band-aid that does not fix the problem.

Others pointed out an irony. Bessent was part of the team that famously bet against the British pound in 1992 and won, forcing the Bank of England to give up defending its currency. A man who made his name proving that governments lose fights with markets is now picking one.

The thing he is actually spending: credibility

There is a concept here that takes a minute to explain but is the most important idea in this entire post.

A Treasury Secretary has almost no direct power over interest rates. He cannot order them lower. What he has instead is credibility, which in this context means something specific: when he says the government’s finances are under control, do professional investors believe him enough to lend at a lower rate?

That belief is worth real money. A tenth of a percentage point across $40 trillion is $40 billion a year. Credibility is not a soft, reputational nicety in this job. It is the asset.

Bessent came into office with an unusually large supply of it. Wall Street knew him. Bond traders described him at the time as a fiscal hawk who would rein in spending and keep Treasury policy honest with markets. He was, by wide agreement, one of the appointments the financial community was most comfortable with.

That has been draining away, and the buyback episode accelerated it. Politico reported in late August that his credibility took a hit that may not recover. Mohamed El-Erian, one of the most widely followed economists in the business and previously a supporter, said he was worried, and that continued intervention in the bond market takes things somewhere different. Mark Dowding, the chief investment officer at BlueBay Fixed Income, put it more bluntly: the market is not granting Bessent the credibility he believes he has.

That last line is worth sitting with, because it describes a specific and dangerous gap. It is not that investors think he is wrong about the economy. It is that he is acting as though his word moves markets, and markets have decided it does not. When someone in that job overestimates his own standing, he tends to reach for bigger and more visible actions to prove the point, which is exactly the escalation dynamic described further down.

There is also a compounding problem. Credibility in debt management is built the boring way, over years, by being predictable. Treasury’s entire brand is “regular and predictable issuance.” Investors pay a premium for U.S. debt partly because they trust the process is not being improvised. Every intervention that looks improvised chips at that premium, and it is much easier to spend down than to rebuild.

Which brings us to November 4

The Quarterly Refunding Statement is where Treasury tells the world how it plans to borrow for the next three months. How much in bills. How much in notes and bonds. How big the buybacks will be. It comes out four times a year, and the professionals read every word.

The current buyback expansion was announced as running through November 4. That is not a coincidence of the calendar; that is the natural expiration date. So on November 4, Treasury has to say what happens next. There are three broad answers:

Quietly stand down. Sizes return to normal, the language goes back to routine plumbing talk, and the whole episode fades. This is the calm outcome.

Double down. Bigger buybacks. That tells markets Treasury is committed to defending a rate level, which invites investors to test whether it can.

Change the plumbing instead. Reduce how many long bonds Treasury sells at auction in the first place. This is actually the more powerful lever and it is completely ordinary debt management. If Bessent wants to move long-term rates without picking a fight, this is how.

Now stack the elections on top. On November 3, voters may change who controls Congress. Control of Congress shapes taxes and spending, which shapes how much the government has to borrow, which shapes the price of borrowing. Investors will spend election night forming a view about the fiscal outlook.

Then, before most people have finished reading the election coverage, Treasury publishes its borrowing plan into that fresh view.

Two big signals, back to back, into a market that is already unsettled. That adjacency is what makes this particular pair of days unusual.

Deliberately looking at the worst case

Most of the time, thinking through disaster scenarios is a waste of energy. Occasionally it is the most useful thing you can do, and the reason is not pessimism. It is that worst cases have a sequence, and if you know the sequence you can spot which step you are on before the rest of the market does.

So here is the bad version, laid out as a chain. Each link has to hold for the next one to happen.

Step one. The bigger buybacks start on September 9. Rates dip a little on the day, then drift right back up within a day or two. After a few rounds, everyone concludes the buying is mechanical, limited, and predictable. Worse, dealers start selling into it, because a buyer who announces in advance exactly what he will buy and when is a buyer you can position against.

Step two. Pressure builds to make the operations bigger. But bigger operations mean more short-term bills to fund them. There is only so much appetite for short-term bills before the government has to pay up to place them, which defeats the purpose.

Step three. This is the ignition point, and it is not the buybacks. It is a regular Treasury auction of 20-year or 30-year bonds where investors demand a noticeably higher rate than expected. In the trade this is called a tail. One bad auction is a story. Two is a pattern.

Step four. The term premium reprices. Long-term rates rise while short-term rates hold, which stretches the gap between them. Alongside it: the dollar weakens and gold rises again. This particular combination is important because it distinguishes between two very different fears. If investors are afraid of a recession, the dollar usually strengthens. If investors are afraid of the government’s finances, the dollar weakens. Watch which one happens.

Step five. Treasury is stuck with two bad options. Escalate into a market that is now actively testing it, or retreat and confirm it had no answer. Neither one is good, and both cost credibility, which is the resource that was already running low.

Step six. Stocks. Contrary to intuition, the level of interest rates matters less to the stock market than the speed of the change. Long-term rates drifting up over two months does very little. The same move compressed into two weeks breaks things, because it snaps the usual relationship where bonds go up when stocks go down. When both fall together, the standard diversified portfolio stops protecting anyone. That is the scenario that shows up in retirement account statements.

Why the worst case probably does not happen

Being honest about the bad chain also means being honest about how many links have to hold.

Severe requires the buybacks to fail, and a long-bond auction to go badly, and the election to produce a fiscal outlook investors dislike, and the Fed to decline to step in. Each of those is plausible on its own. All four together is a much narrower path.

There is also a natural brake that gets forgotten in scary write-ups. Every bond has a price at which somebody wants it. Pension funds have obligations stretching decades into the future and genuinely want long-term bonds. Insurance companies do too. Foreign central banks hold dollars because they need dollars. Push the yield high enough and those buyers show up in size. The market clears. The only real questions are what level it clears at and how quickly it gets there.

What to actually watch, in order

You do not need a Bloomberg terminal for any of this.

Buyback operations starting September 9. Do rates move, and does the move stick past the next morning?

Auction results for 20-year and 30-year bonds in September and October. This is the real early warning system, and it runs about six weeks ahead of anything that shows up in your local news.

The dollar and gold together. Both moving the wrong way at once is the fiscal-worry signature.

November 3, then November 4. Election result, then borrowing plan.

Why a local government finance blog cares

Because none of this stays in Washington.

When Treasury yields rise, city and school district borrowing costs rise with them, usually within days. Consider a district that got voter approval for a bond package back in 2021 or 2022, when rates were far lower, and has not yet sold all of it. The gymnasium still costs what a gymnasium costs. What changed is the interest owed on the money borrowed to build it, and that has gone up, not down. Same project, same par amount, more total dollars repaid over the life of the debt.

Under a failure scenario, this gets worse rather than better. That is the point worth being clear about. The entire purpose of the buyback program is to bring long-term rates down. If it fails, rates do not fall. If it fails badly, rates rise. So the local consequence of a failed intervention is not neutral. It is a higher cost of building schools, streets, and water lines than the voters were shown when they approved the projects.

In Texas, that debt service flows into the interest and sinking portion of the property tax rate. Which means a decision made in a Treasury press release on November 4 can end up on a tax bill in a suburb nobody in Washington has ever heard of.

That is the honest reason to pay attention to a boring document on a Wednesday. Not because the bond market is interesting. Because it is upstream of nearly everything else.

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The elections on November 3 decide who governs. The refunding statement on November 4 reveals the terms under which they will have to. One of those gets wall-to-wall coverage. The other one is a PDF on a government website.

A collaboration between Lewis McLain & AI

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For six years, Texas school districts lived with a ballot rule they considered unfair and worked around at the margins. House Bill 3 in 2019 required every school bond proposition to carry the statement “THIS IS A PROPERTY TAX INCREASE.” Districts complied, but a number of them softened the blow — appending explanatory phrases, adjusting placement, letting the required language sit somewhere down in the body of a long proposition where a voter scanning quickly might not register it.

That era ended on May 24, 2025.

Senate Bill 1025 of the 89th Legislature rewrote Section 52.072(e) of the Election Code. Senate Bill 506 added a facial-neutrality requirement effective September 1, 2025. And on July 30, 2025, the Public Finance Division of the Texas Attorney General’s office issued a letter to all bond counsel that reads less like guidance and more like a door closing.

Put the three together and something structural has changed in how Texas asks voters to approve debt and tax rates. Districts have almost no discretion left over the wording that matters most — and the enforcement mechanism means the question is not even close.

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What Senate Bill 1025 Actually Did

The amended statute requires that a ballot proposition seeking voter approval of the imposition or increase of a tax must include, at the top of the proposition, in capital typewritten letters of the same font size as the rest of the proposition, the statement “THIS IS A TAX INCREASE.”

Read that clause slowly, because every phrase is doing work.

At the top of the proposition. Not somewhere within it. The warning leads. A voter cannot reach the purpose language without passing the statement first.

In capital typewritten letters. No discretion on case.

Of the same font size as the rest of the proposition. This one is easy to miss and it is the sharpest edge in the bill. Before SB 1025, a district could satisfy the requirement with the statement rendered smaller than the surrounding text. Now it must match the body size.

And SB 1025 went further: the remainder of the proposition must be printed in mixed-case typewritten letters. Lower case except for the first word of a sentence, proper nouns, and the like. The practical effect is that “THIS IS A TAX INCREASE” becomes the only capitalized text in the entire proposition. It is visually isolated by operation of law.

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The Attorney General Extended It to Bonds

Here is where the July 30 letter matters.

Section 52.072(e) speaks to propositions seeking approval of a tax increase. One could argue a bond proposition seeks approval to issue debt, not to raise a tax. The Attorney General rejected that reading.

The letter reasons that by conforming Section 52.072(e)(1)(B) of the Election Code to Section 45.003(b-1) of the Education Code — the 2019 school-bond provision — the Legislature indicated its intent that the rule applies to all ballot propositions seeking voter approval of the imposition or increase of a tax, including when such a proposition seeks approval to issue tax bonds.

The AG then supplies the compliance path: school districts satisfy both statutes together by placing “THIS IS A PROPERTY TAX INCREASE” at the top of the proposition, in capital letters at matched font size, with the remainder in mixed case.

There is a small drafting detail worth knowing. The word “PROPERTY” is required only for school district ad valorem tax bonds under Section 45.003(b-1). Other issuers — cities, counties, junior college districts, water districts — use the shorter “THIS IS A TAX INCREASE.” The AG notes this explicitly, observing that the omission of “PROPERTY” from the Election Code version signals that the rule reaches taxes other than ad valorem.

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And Then It Closed the Workaround

The fourth section of the letter is the one that ends the conversation.

The AG observes that since Section 45.003(b-1) took effect, several school districts have qualified the required statement with phrases such as “REQUIRED STATEMENT FOR ALL SCHOOL DISTRICT BOND PROPOSITIONS PURSUANT TO SECTION 45.003, EDUCATION CODE.”

You can see the appeal. The added phrase tells a voter, in effect, do not read too much into this — the state makes us say it. For a district cutting its debt service rate while asking for new authorization, that framing feels like simple accuracy.

The AG’s response, quoting its own July 3, 2020 guidance: prescribed language is strictly construed; therefore, school districts may not modify, supplement, or qualify this mandatory ballot language.

Then the new hook. Effective September 1, 2025, such language may also violate Section 52.072(g) of the Election Code, added by Senate Bill 506, which requires a proposition to substantially submit the question with such definiteness, certainty, and facial neutrality that the voters are not misled.

That is a meaningful escalation. Under the old regime, qualifying the statement was non-compliance with a formatting rule. Under the new one, it is potentially a facial-neutrality defect going to the validity of the proposition itself.

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Why This Is Checkmate and Not Merely Check

A skeptic could ask: so what? Statutes get ignored. Who enforces this?

The answer is that Texas built the enforcement mechanism a century ago and it has nothing to do with litigation.

Government Code Section 1202.003 provides that before the issuance of a public security, the issuer shall submit the public security and the record of proceedings to the attorney general. Only if the attorney general finds that the security has been authorized to be issued in conformity with law does the AG approve it and deliver the approving opinion to the comptroller.

The phrase “record of proceedings” is defined to include the issuer’s proceedings relating to authorization. Where the enabling law required an election as a condition precedent, the AG requires proof that the condition was satisfied. The election order and the ballot go into the transcript.

So consider what happens to a district that gets creative with proposition wording, wins its election, and then tries to sell bonds.

Nothing happens. That is the point.

There is no lawsuit, no injunction, no contested hearing. The transcript goes to Austin, the Public Finance Division reviews it against the very guidance it published, and approval is withheld. What the district holds is authorized-but-unissued paper that cannot be monetized. The voters said yes and the bonds still do not exist.

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The Provenance Detail That Forecloses the Ignorance Defense

The July 30 letter states that it is provided pursuant to authority under Section 402.044 of the Government Code, which requires the AG to advise the proper legal authorities regarding the issuance of bonds that by law require the Attorney General’s approval.

Sit with that for a moment.

This is not a think-tank white paper or a trade association bulletin. It is the office that holds the approval pen, publishing its construction of the statute in advance, addressed specifically to the bond counsel who draft election orders.

A district that deviates cannot claim surprise. Neither can its counsel.

Which points to the real gate. In practice, the Attorney General is the backstop, not the checkpoint. Bond counsel would decline to render the approving opinion long before any transcript reached Austin. No firm in the Texas public finance bar is going to stake its name on a proposition format the AG has already said it will reject.

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What Is Actually at Risk

The final piece explains why no district would attempt this even if it thought it could win.

Once a public security is approved by the Attorney General, registered by the Comptroller, and delivered against payment, it becomes valid and incontestable for all purposes — challengeable only on narrow grounds such as an alleged constitutional defect. The AG’s certificate is admissible as conclusive evidence of validity.

That incontestability is not a legal nicety. It is a pricing input.

It is a substantial part of why Texas school district paper trades where it does, and it stacks on top of the Permanent School Fund guarantee. To take one current example, McKinney ISD’s Series 2026 refunding bonds priced at Aaa and AAA on the strength of the PSF guarantee, with underlying ratings of Aa1 and AA+.

A district that jeopardizes AG approval is not risking a delay. It is risking the legal status that makes the debt sellable at all. Nobody trades hundreds of millions of dollars of issuance capacity for softer ballot wording. The math is not close.

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Where Discretion Actually Survives

To be fair to the districts, the ballot is not entirely locked. The AG’s letter is careful to preserve Section 52.072(f), which provides that the political subdivision shall prescribe the wording of the proposition in accordance with Subchapter B of Chapter 1251 of the Government Code. Section 52.072(e), the letter says, applies in addition to that requirement.

So three levers remain.

Descriptive purpose language. The district still writes what follows the warning. Whether a proposition reads “school renovations, safety and security upgrades, and career and technical education facilities” or something drier is a drafting choice. This is the largest legitimate lever and it is entirely conventional.

Number of propositions. Education Code Section 45.003(g) forces separation only for specific facility types — stadiums, performing arts facilities, natatoriums — plus technology. Everything else may be consolidated. Because each proposition carries its own mandatory warning, four propositions produce four warnings and eight would produce eight. McKinney ISD once bundled a very high-dollar football stadium with replacing HVAC systems and school building roofs. Cities and counties can’t do that. And now, ISDs are blocked from the tactic to vote up or down on controversial big-ticket items and basic building care.

That creates a genuine tension worth naming. A district that consolidates minimizes the number of tax-increase statements on the ballot and simultaneously reduces the granularity voters get. Fewer warnings and finer voter choice are opposing objectives. No district can optimize both, and how a board resolves that tension is a legitimate subject for public discussion.

Everything off the ballot. The Voter Information Document required by Section 1251.052(b), the district website, the FAQ, the sample-ballot posting — all of it can explain a declining tax rate in full, which is exactly what the ballot forbids.

But that lever comes with its own boundary. Election Code Section 255.003 prohibits the use of public funds for political advertising, and the line between informational and advocacy is where districts get into trouble. In November 2025, Judson ISD drew an Attorney General electioneering complaint during early voting. Canyon ISD was criticized for promoting its tax rate election on a tax-funded website. Both measures failed. Advocacy belongs with a political action committee spending private money, and the distinction is not a technicality.

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The One Proposition the Gate Does Not Cover

There is an asymmetry here that deserves attention, because it cuts against the tidy conclusion.

The Attorney General approval gate applies to bonds. It does not apply to a voter-approval tax rate election. A VATRE ratifies a tax rate, not a security. Nothing goes to Austin. The only check is an election contest under the Election Code — slower, privately financed, and considerably weaker.

And yet the VATRE ballot is arguably the most locked-down proposition in Texas law.

Section 26.08(b) of the Tax Code prescribes the sentence verbatim: “Ratifying the ad valorem tax rate of ___ in (name of school district) for the current year, a rate that will result in an increase of ___ percent in maintenance and operations tax revenue for the district for the current year as compared to the preceding year, which is an additional $___.”

Three blanks, all computed, none of them framing. The percentage and dollar figures come out of the Form 50-859 worksheet. There is technical judgment in a maintenance-and-operations revenue calculation, but it is audited arithmetic, not messaging.

So the Legislature locked down the unpoliced proposition by drafting it word for word, and locked down the policed ones by putting the Attorney General at the door. Different mechanisms, same destination.

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The Structural Problem Nobody Has Solved

Here is what makes this more than a compliance story.

The mandatory warning is accurate in some cases and misleading in others, and the statute cannot tell the difference.

Consider a district that adopts a voter-approval tax rate election raising its maintenance-and-operations rate by roughly a penny while simultaneously cutting its interest-and-sinking rate by five cents. The total rate falls. Every homeowner whose appraised value holds steady pays less. And every proposition on that ballot — the tax rate election and each bond question — opens with a capitalized statement that this is a tax increase.

On the tax rate election, the statement is defensible. The maintenance-and-operations rate genuinely rises and maintenance-and-operations revenue genuinely increases. Truth-in-taxation law has always treated revenue growth as an increase regardless of what happens to individual bills, and there is a coherent argument for that convention.

On the bond propositions, where the debt service rate is coming down, the statement is harder to defend as informative. New authorization does create a new obligation, and reasonable people can argue that voters should be told so in the strongest terms. But a voter reading “THIS IS A PROPERTY TAX INCREASE” above a proposition financed by a falling rate is not receiving a precise signal.

And the ballot offers no reference point. It states the proposed rate. It does not state last year’s rate. A voter sees a number, sees a warning, and has no way to compare the two without outside information.

That is a design choice, and it was made deliberately. Whether it produces better-informed voters or merely more suspicious ones is an empirical question the Legislature has not tested.

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What the Record Suggests

The empirical picture is mixed enough to resist easy conclusions.

An Austin American-Statesman analysis of 55 school districts holding tax rate elections found that 58% failed and roughly 42% passed. In November 2025, five San Antonio-area districts held voter-approval tax rate elections and only Boerne passed, narrowly. Schertz-Cibolo-Universal City failed by an even smaller margin. Canyon ISD’s measure failed with 59% voting against.

In November 2024, Frisco ISD voters rejected all four propositions on their ballot — a tax rate election and three bond propositions totaling more than $1 billion — despite substantial district promotion and organized local opposition.

But the same November 2025 cycle saw dozens of districts pass more than $10 billion in bond authorizations statewide. Grapevine-Colleyville passed its tax rate election with 58% approval. Austin ISD passed one in 2024 that added $41 million annually. The warning is a headwind, not a wall.

Turnout may matter more than typography. District officials in several failed elections observed that placing a local measure on a high-turnout general election ballot brings out voters unfamiliar with district finance. The November 2025 constitutional amendment election drew roughly 14% turnout statewide. A general election in an even year with a U.S. Senate race on the ballot can run several times that, and the marginal voter reads the ballot cold.

There is a counterweight worth noting: property under the over-65 and disabled tax ceilings is insulated from rate increases entirely. In many districts that is a meaningful share of taxable value and a highly reliable voting bloc. The ballot does not tell those voters they are insulated either.

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What This Means Going Forward

Four things follow.

First, the ballot is settled. Districts should stop treating proposition wording as a communications problem. Six elements are locked — the statement, its placement, its case, its font size, the prohibition on qualifying it, and the computed blanks in a tax rate election. Energy spent there is wasted, and worse, it is risky.

Second, the timeline moved up. If the ballot cannot explain a falling tax rate, voters must arrive already knowing. That is a spring-and-summer information effort, not an October campaign. By the time the sample ballot posts — not less than 21 days before election day — the argument is either made or it is not.

Third, volume is not the answer. Frisco promoted aggressively in 2024 and lost everything. Judson and Canyon drew complaints for how they promoted and lost too. The lesson is not to spend more from the public purse; it is to be scrupulous about the line between information and advocacy, and to let a political action committee carry the rest.

Fourth, proposition architecture is now a substantive decision. Because each proposition carries its own warning, the choice of how many to put on the ballot is simultaneously a choice about voter granularity and about how many times a voter reads the word “increase.” Boards should make that trade-off consciously and explain their reasoning. It will be noticed either way.

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A Closing Observation

I have watched Texas municipal finance since 1972, starting as budget director for the City of Garland. Ballot language fights are not new. What is new is the combination.

A prescriptive formatting statute. A facial-neutrality standard with teeth. Pre-published guidance from the office holding the approval authority. And an approval gate that converts non-compliance into unissuable debt rather than into litigation a district might survive.

Any one of those is manageable. Together they are not a rule that districts navigate. They are a rule that districts obey.

Whether that produces better public decisions is a separate question, and an open one. The Legislature has decided that a voter facing a bond proposition should be told, in capital letters, before anything else, that a tax increase is at stake. Districts that believe their particular facts are more complicated than that now have exactly one place to make the case, and it is not the ballot.

Checkmate.

Well, unless school districts put on a full blown campaign today to prepare the voter of the truth about the state’s corner ISD boards are painted into. It is unfair by almost every reasonable yardstick.

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Now, time for a pop test:

Here’s the closing block. Reconstructed format, SB 1025 compliant — statement at top, capitals only there, everything else mixed case.

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Try It Yourself

Enough theory. Here is what a McKinney ISD voter will see on November 3, reconstructed from the statutes and the district’s adopted propositions. The formatting is not stylistic license — it is what SB 1025 requires.

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McKINNEY INDEPENDENT SCHOOL DISTRICT PROPOSITION A

THIS IS A TAX INCREASE

Ratifying the ad valorem tax rate of $1.0664 per $100 valuation in the McKinney Independent School District for the current year, a rate that will result in an increase of ____ percent in maintenance and operations tax revenue for the district for the current year as compared to the preceding year, which is an additional $__________.

☐ FOR ☐ AGAINST

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McKINNEY INDEPENDENT SCHOOL DISTRICT PROPOSITION B

THIS IS A PROPERTY TAX INCREASE

The issuance of $430,950,000 of bonds by the McKinney Independent School District for the construction, acquisition, renovation and equipment of school buildings in the district, including two new elementary schools and a career and technical education facility, the purchase of school buses, and the levying of a tax sufficient to pay the principal of and interest on the bonds and the costs of any credit agreements executed in connection with the bonds.

☐ FOR ☐ AGAINST

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McKINNEY INDEPENDENT SCHOOL DISTRICT PROPOSITION C

THIS IS A PROPERTY TAX INCREASE

The issuance of $62,000,000 of bonds by the McKinney Independent School District for the purchase of new technology equipment, other than equipment used for school security purposes, and the levying of a tax sufficient to pay the principal of and interest on the bonds and the costs of any credit agreements executed in connection with the bonds.

☐ FOR ☐ AGAINST

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McKINNEY INDEPENDENT SCHOOL DISTRICT PROPOSITION D

THIS IS A PROPERTY TAX INCREASE

The issuance of $4,500,000 of bonds by the McKinney Independent School District for the renovation and equipment of a natatorium, and the levying of a tax sufficient to pay the principal of and interest on the bonds and the costs of any credit agreements executed in connection with the bonds.

☐ FOR ☐ AGAINST

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McKINNEY INDEPENDENT SCHOOL DISTRICT PROPOSITION E

THIS IS A PROPERTY TAX INCREASE

The issuance of $2,550,000 of bonds by the McKinney Independent School District for the renovation and equipment of stadiums, including turf and track replacement, and the levying of a tax sufficient to pay the principal of and interest on the bonds and the costs of any credit agreements executed in connection with the bonds.

☐ FOR ☐ AGAINST

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Five propositions. Five capitalized warnings. Nothing anywhere on that ballot tells you the district’s adopted rate last year was $1.1043, or that the total rate under all five propositions would be $1.0664 — three and a half cents lower.

Nothing tells you the interest and sinking rate is proposed to fall five cents while the maintenance and operations rate rises about a penny.

Nothing tells you that the district’s average annual debt service requirement through 2044 is $27,466,110, an obligation covered by a rate of $0.0919, while the district currently levies $0.3700 for debt.

Insult to Injury

And there is one more thing the ballot will not tell you, though the statute guarantees a number will appear. Proposition A must state the percentage increase in maintenance and operations tax revenue and the additional dollars raised. McKinney ISD is an excess local revenue district under Chapter 49 of the Education Code, satisfying recapture (“Robin Hood”) through the purchase of attendance credits — an arrangement its voters made permanent at the May 1, 2021 election.

The district reports the tax rate election would generate approximately $9,100,000 in additional maintenance and operations revenue, of which roughly $4,100,000 stays in McKinney. The remaining $5,000,000 goes to the State of Texas. That is 54.95 percent of the money, sent to Austin off the top, and the district keeps about forty-five cents of every dollar its own taxpayers approve. Here is where the drafting turns cruel: Section 26.08(b) measures maintenance and operations tax revenue, not revenue net of recapture.

The figure printed on the ballot, directly beneath the words THIS IS A TAX INCREASE, will be the gross amount — the larger number, the one the district never receives. A voter is warned in capital letters about revenue the district does not get to keep, and nothing in the prescribed language permits anyone to say so.

All of that is true. None of it is permitted on the ballot. And under the Attorney General’s July 30, 2025 letter, a district that tried to add it would risk the propositions themselves.

So here is the question I would put to any Texas voter, and particularly to the one who came to the polls for the Senate race and the state propositions and found five school district questions waiting at the bottom of the ballot:

What is your reaction to this ballot? If you walked in to vote mostly on state and federal issues, would you have voted for any of these five propositions — and would anything you just read have changed your answer?

I am not asking how you would vote on the merits of McKinney ISD’s building program. That is a separate argument, and a legitimate one on both sides. I am asking a narrower question: did this ballot give you what you needed to decide?

Because whatever your answer, that ballot is now the law in Texas, and it is not going to change before you get there.

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One caution to include if you’re publishing before mid-October: the purpose clauses are my reconstruction from statutory categories. MISD’s exact wording is in the August 10 election orders, and the sample ballot posts roughly October 13. I’d add a one-line note so a reader who compares them later doesn’t find a discrepancy you didn’t flag.

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Sources: Senate Bill 1025 and Senate Bill 506, 89th Texas Legislature; Texas Election Code Sections 52.072(e), 52.072(f), 52.072(g), 255.003; Texas Education Code Sections 45.003(b-1) and 45.003(g); Texas Tax Code Section 26.08(b); Texas Government Code Sections 402.044, 1202.003, 1202.006, 1251.052; Office of the Attorney General, Public Finance Division, All Bond Counsel letter dated July 30, 2025 (Leslie Brock, Assistant Attorney General, Chief, Public Finance Division); Office of the Attorney General, All Bond Counsel letter dated July 3, 2020; Austin American-Statesman analysis of tax rate election results; Texas Public Radio and Texas Scorecard reporting on November 2024 and November 2025 election results.

Note: the Attorney General’s July 30, 2025 letter states that it does not dictate how a court may rule in a legal proceeding. It reflects the Attorney General’s construction of the statutes, which is controlling in practice because the Attorney General approves the bonds, but it is not a judicial holding.

This blog is the writer’s understanding of the current requirements. He is not an attorney, and the reader is advised to seek advice from a local governments City Attorney or Bond Counsel.

How three words in a June memorandum became an economic siege, and why six months of deadlines have produced a very loud dog with a very small bite

A collaboration between Lewis McLain & AI

How three words in a June memorandum became an economic siege, and why six months of deadlines have produced a very loud dog with a very small bite

On Monday morning, Treasury Secretary Scott Bessent stood up and compared what he was about to do to the Normandy landings.

He announced Operation Economic Outcast, called it the single greatest financial offensive ever marshaled against an adversary, and said the objective was to sever every economic lifeline sustaining Tehran until Iran stands alone. Roughly sixty people, entities and vessels were designated. The categories eligible for secondary sanctions were widened to cover digital assets, gold, aviation, technology and shipping. Every country and every entity, he said, should expect to be held accountable. China was pointedly not exempted.

Brent crude fell about two and a half percent.

That gap — between the rhetoric of a continental invasion and a market that shrugged and took profits — is the whole story. The answer is not that the sanctions are trivial. It is that after six months of ultimatums, extensions, signings and un-signings, the people who move money for a living have stopped grading this administration on what it announces and started grading it on what it finishes.

The timeline, because the timeline is the argument

February 28 — Major combat operations begin. Joint U.S. and Israeli strikes hit military, government and infrastructure targets. Israel kills Supreme Leader Ali Khamenei with American intelligence support. Iran closes the Strait of Hormuz, through which roughly twenty million barrels a day had been moving.

March 23 — Trump gives Iran 48 hours to reopen the strait or face strikes on its power plants. Hours before the deadline he extends it five days, citing very good and productive talks. Tehran denies that any talks exist and calls the announcement an attempt to move markets. Oil drops ten percent, then climbs right back.

April 6 — Iran rejects a 45-day ceasefire proposal outright.

April 7–8 — A ceasefire is reached anyway. The strait briefly reopens. The ceasefire is extended indefinitely in late April.

April 11–12 — Talks in Islamabad collapse. The United States imposes a naval blockade of Iranian ports.

June 12–17 — Pakistan brokers a fourteen-point memorandum of understanding. It is digitally signed June 14 and formally signed June 17, with Trump signing at Versailles after the G7 dinner and Pezeshkian signing in Tehran. The blockade comes off. The new supreme leader endorses the memorandum while stating his misgivings.

Late June — Roughly a week after the signing, Iran drone-strikes a vessel in the strait.

July 6–8 — Iran attacks three commercial ships that transited outside its designated lanes. The United States strikes Iranian territory. Trump declares the truce over on July 7. On July 8 he says the exchange will not lead to long-term military action. Within days the conflict escalates considerably. The blockade returns.

August 5–8 — Iran and Oman agree on route coordinates, inbound through Iranian territorial waters and outbound to the south. Tehran then attaches conditions to reopening: compensation from the United States, unfrozen assets, Israel’s conduct in Lebanon. Deputy Foreign Minister Gharibabadi says flatly that the American claim that negotiations are underway is false.

August 18 — Trump says no talks are underway. Parliament speaker Ghalibaf issues a list of demands. A regional source says indirect contact continues through Pakistan anyway.

August 20 — Bessent promises the toughest sanctions in history and says they will collapse the regime. In the same week he concedes that large-scale combat is unlikely to restart.

August 23 — Bessent publishes an op-ed announcing that an economic D-Day is coming. Iran’s Mohsen Rezaei threatens to halt all oil movement through the strait if neighboring states cooperate with Washington.

August 24 — Operation Economic Outcast. Sixty designations. The rial falls past two million to the dollar. Brent falls two and a half percent to about $92.

Read that list in one sitting and the pattern is unmistakable. Deadline, extension, denial, signature, violation, declaration, reversal, escalation, announcement.

Six months of maximum verbs and the strait is still closed.

The three words that broke the deal

The June memorandum committed Iran to use its best efforts for the safe passage of commercial vessels, with no charge, for sixty days only. The future administration of the strait was left to be determined later.

Read that again the way you would read a bond covenant. Sixty days only is not a concession. It is the assertion of a right, temporarily waived. If passage is free for sixty days, somebody has standing to charge on day sixty-one, and the document does not say who.

Iran read it as an acknowledgment that Hormuz is theirs to administer. Washington read it as a pause while the grown-ups worked out a permanent arrangement. Both readings survive the text, which is what happens when negotiators paper over the one issue they cannot resolve in order to get a signing ceremony on the calendar.

The Iranian parliament is now advancing legislation to establish transit service fees. That is not opportunism. That is Tehran executing the clause exactly as written, and it is going to be a great deal harder to unwind a fee schedule than a blockade.

Barking, and the question of teeth

I want to be careful here, because I am not a reflexive critic of this administration. Given the same choices, I would certainly vote for him again. But I have watched enough negotiations from the finance side of the table to know the difference between leverage and noise, and this has been drifting toward noise for a while.

Consider what actually enforces a secondary sanction. It is not the designation. It is the willingness to penalize a large foreign bank, a Chinese refiner, a Gulf trading house or an allied shipping registry that keeps doing business anyway. That step is expensive, it hits our own markets, and this administration has not yet taken it against anyone whose loss would sting.

Until it does, Operation Economic Outcast is a list. Iran has been on lists since 1979.

And the audience is not lining up. China is buying. Tehran denies that negotiations exist even as Washington describes them in the present tense. The Revolutionary Guard has instructed the United States not to interfere in the Oman channel. The Saudi crown prince spent last week in Paris signing deals with Macron and discussing the strait with someone other than us. Iran’s parliament speaker publicly called the whole exercise theater diplomacy.

When the people you are pressuring, the people you are recruiting, and the people you are protecting all respond by going around you, the pressure is not working the way the press release says it is.

The moving target

The deeper problem is that the tactics change faster than any counterparty can respond to them.

A 48-hour ultimatum becomes a five-day extension becomes a claim of productive talks that the other side denies the same afternoon. A truce is declared over on Monday and downgraded to a non-event on Tuesday. Negotiations are happening, then they are not, then a regional source says they quietly are. And on the very day Treasury launched its economic D-Day against Iran, the President was also announcing 50% tariffs on Canadian automobiles, auto parts and steel and declaring that Canada would no longer be treated like a state.

You cannot run a maximum-pressure campaign that requires sustained multilateral cooperation while simultaneously opening a second front against your largest trading partner and closest neighbor. Pressure campaigns are compounding instruments.
They require patience, sequencing and allies who believe the terms will still be the terms in ninety days.

Improvisation is the one input they cannot survive, and improvisation has been the house style.

Bessent is the messenger

I have less and less use for the podium performances. The D-Day comparison was not analysis, it was staging, and I suspect the Treasury Secretary knows better than the script he was handed.

The tell is that the language shifts week to week. On Thursday the sanctions will collapse the regime. On the same Thursday, large-scale combat is unlikely to resume. On Sunday it is an economic D-Day. On Monday it is a sixty-name designation list and a two percent decline in crude.

Those are not the statements of a policy architect working a plan. They are the statements of a man narrating decisions made elsewhere, in real time, by someone whose mind changes on an hourly basis.

The market has already graded it

Brent has spent the past month swinging roughly between $72 and $102 on alternating rumors of breakthrough and breakdown. It sat near $92 after Monday’s announcement. One analyst put it plainly: Brent at $93 rather than $120 to $150 tells you enough oil is getting through.

The turning point would be Iran actually closing the strait with rockets and drones, and that has not happened.

Sanctions do not remove barrels that are already off the water. The rial collapsing past two million to the dollar is real and it is painful for ordinary Iranians, but a falling rial has never once reopened a shipping lane.

Adaptation is the enemy of resolution

The most consequential development of the past several months is also the least dramatic. The U.S. military reports escorting more than 660 million barrels through Hormuz since early May. Vessels run with transponders off and under false flags. Cargoes reroute. Gulf producers have adjusted their logistics.

A crisis that was acute in March has become chronic in August, and chronic is comfortable. Once shippers, refiners and finance ministries have absorbed the cost of working around a problem, the urgency that produces settlements drains out of the room.

Nobody has to fix what everybody has learned to live with.

What would actually signal movement

Four things. None of them happened Monday.

The Oman routing arrangement being implemented rather than announced. The coordinates are reportedly agreed. That framework is the only mechanism on the table that lets both governments claim victory without either conceding sovereignty. Watch transit counts, not communiqués.

China’s response to the expanded secondary sanctions. This is the only real test of whether Operation Economic Outcast has teeth. If Chinese refiners and their banks keep lifting Iranian barrels without consequence, the operation is a press release.
The Hormuz fee legislation in the Iranian parliament. If it passes and Tehran starts invoicing, a wartime position becomes a permanent revenue institution.

The fracture inside Tehran. Pezeshkian has defended the June memorandum publicly and said his country cannot continue at war forever. The supreme leader signed with reservations. The Revolutionary Guard treats the strait as national power rather than commerce. That argument gets settled one way or the other, and how it settles matters more than any designation Treasury issues.

The clock that is actually running

Gasoline averaged $4.09 a gallon on Sunday, roughly 37.5% above the pre-war level. Longer-dated Treasury yields have climbed through the summer on inflation and debt concerns, taking mortgage rates with them.

For those of us on the municipal side, that is the part of this story that arrives in the mail. Fuel lines in fleet and public safety budgets are running well past the assumptions baked into fiscal 2026 adoptions. Asphalt, chemicals and every petroleum derivative have followed.

And a sustained energy contribution to headline inflation keeps pressure on the long end of the curve, which is the number that sets what a November bond package costs a city or a district for the next twenty-five years. A fight over a shipping lane eight thousand miles away arrives here as basis points in a competitive sale.

Where this leaves me

I have supported this President and I am not walking that back over one press conference. There is a serious argument that patient economic strangulation is the least bad option available, that the alternative was a ground war nobody wanted, and that regimes under this kind of financial pressure eventually do break.

That argument deserves a hearing, and it may yet be proven right.

But it requires steadiness, and steadiness has not been on offer. Six months in, the strait is closed, gasoline is up better than a third, our neighbors are being tariffed, our partners are negotiating around us, and the adversary has learned that every deadline is negotiable and every declaration is subject to revision by morning.

The likeliest outcome from here is not victory or settlement. It is the quiet normalization of a frozen conflict, punctuated by periodic strikes and periodic announcements that move crude two percent in whichever direction the traders were already leaning.

Tehran can wait. That has always been the asymmetry. Monday’s announcement, for all its D-Day framing, did nothing to change it.

A collaboration between Lewis McLain & AI

Part Two of “Forty Trillion Is the Small Number” — posted one day later, because one day was all it took.

Yesterday I posted a long piece arguing that the United States government had passed forty trillion dollars in debt, and that the forty trillion was the small number.

I stand by every word of it. But I left something out, and I did not have to wait long to find out what. By the evening came around the bond market and three separate wire services had explained it to me.

Here is what I missed.

I wrote that piece as though the federal government were the only large borrower that mattered — as though Washington set the price of money and everybody else stood in line behind it and paid whatever was left. That is how it has worked for most of my career. That is how I was taught it works.

It is not how it worked this summer.

This summer, somebody else got to the window first.

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ONE: WHAT HAPPENED WHILE WE WERE WATCHING WASHINGTON

Four companies — Alphabet, Amazon, Meta, and Oracle — have sold about $223 billion in bonds so far this year. Last year, all four of them together sold about $108 billion.

They more than doubled it. In eight months.

And that is only four companies. Add Microsoft and the forecasts get bigger still. JPMorgan raised its estimate for technology borrowing this year to $540 billion. Goldman Sachs expects the big five to borrow about $250 billion this year and $400 billion next year. UBS thinks these companies will spend approaching $770 billion on buildings and chips and power this year alone.

For most of my life, these were the companies that did not borrow much. They generated so much cash they did not know what to do with it. Apple and Microsoft and Google sat on cash piles that embarrassed small countries.

That era ended. The artificial intelligence buildout costs more than even those companies earn, and so they have come to the bond market — the same bond market where the Treasury sells its paper, at the same long maturities, to the same buyers.

And here is the part that ought to get your attention. Bank of America’s economists wrote that this borrowing is potentially crowding out demand for long-term Treasury bonds, and that it has played a major part in pushing yields up.

Think about what that sentence means. For forty years, the complaint ran one direction: the government borrows so much that it squeezes out everybody else. Now the accusation runs backwards. Now there is at least a serious argument that private companies are squeezing out the government.

One analyst went further and raised the possibility that all this corporate supply could eventually force the Treasury to sell fewer long-term bonds to keep from paying too much.

Sit with that a minute, because if you read my last piece you already know why it matters. The single most dangerous thing about America’s debt is not the size of it. That’s a squeaky close second. It is how short it has gotten — a third of it coming due inside a year, which is what makes a rate shock hit the budget in three years instead of ten.

And now the government may be pushed even shorter, not by its own choice, but because Amazon and Oracle got to the long end of the market ahead of it.

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TWO: WHAT CROWDING OUT ACTUALLY MEANS

Let me get this out of the jargon, because it is a simple idea wearing a suit.

Picture a small-town bank on a Monday morning. There is one loan officer and there is a certain amount of money to lend that week. That is it. That is what he has got.

If the county comes in at nine o’clock and takes most of it for a new jail, then the farmer who walks in at two o’clock is going to hear a higher rate, or hear no.

That is crowding out. One big borrower ahead of you in line changes the price for everybody behind him or her.

For decades the county was always first through the door. Government borrowing was so much larger than anything a company could do that nobody else really moved the needle.

What changed this year is that a handful of companies got big enough to matter in that line. Two hundred twenty-three billion dollars is not a rounding error. It is real money competing for the same lender’s attention, at the same long maturities, in the same week.

As one strategist put it plainly: whoever is issuing — a government, a tech company, anybody — is now competing with more borrowers. And so yields have to be higher.

The evidence that this is duration and not the Fed

https://yield-curves-lfm.netlify.app

Bookmark the link above. If you are unable to interpret what it means, that is perfectly okay. My audience is wide, so I know only a few would even read this particular blog. Just know that a basis point in 1/100th of one percent. When the rates go up only 1 basis point, sounds tiny, the Federal government will eventually pay $4 billion every year just on that level of current outstanding debt! What if the rates go up 10 basis points? I know for sure that the person sitting in honking traffic isn’t focused on this condition. But hear me out.

Split this year in half at June 30 and look at what the Treasury’s own yield curve did.

	Short-Term (2-Year)	Long-Term (30-Year)
January through June	rose sharply	barely moved
July through August	barely moved	rose sharply

In the first half of the year, the short end did all the moving and the long end sat still. That is a market arguing about the Federal Reserve — about whether rates get cut this fall or next spring. When they quibble over the increments or decrements, the are usually talking about 25 basis points, sometimes 50. Quick quiz now that you are informed. What does 50 basis points do to the Fed’s $40 trillion, not to mention all other governments? Even you.

In the second half, it flipped completely. The short end went quiet and the long end took off.

That is not an argument about the Fed anymore. When the thirty-year moves and the two-year does not, the market has stopped asking what the Fed will do next quarter and started asking a different question entirely: what does a person deserve to be paid for parting with their money until 2056?

And that question — what long money is worth — is precisely the question a flood of thirty-year corporate bonds forces the market to answer.

The thirty-year Treasury closed at five dollars and thirty-one cents per hundred on August 17, and touched about five dollars and thirty-four cents the next morning. That is the highest since 2007. Do you recall what happened back then?

One correction to yesterday’s piece. I wrote that the government sold thirty-year bonds on August 13 at five dollars and twenty-two cents. That was accurate as far as it went — it is the price at that particular auction. But the market kept right on going in the days after, and by the time I hit publish it had moved. Then on the 19th, the Treasury doubled the size of its bond buyback operation to steady things, and yields came down some.

I would not read too much into that last part. As one strategist noted, the buyback operation changes very little about the fundamentals — which remain the need to finance an enormous wave of technology borrowing on top of very large government deficits. You can rearrange the furniture. The house is still the same size.

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THREE: THE HONEST OTHER SIDE

Now I have to slow down, because I do not want to sell you something the evidence will not carry.

There is a real argument on the other side, and it deserves a fair hearing.

Corporate bonds and Treasury bonds are not the same thing. They do not draw from a single fixed pot of money. Different investors buy them for different reasons, and a pension fund that buys an Amazon bond was not necessarily going to buy a Treasury bond instead.

These are not shaky borrowers. The hyperscalers are among the strongest credits in the entire investment-grade market. They carry far less debt against their earnings than a typical big company. Treating a company with that balance sheet as a source of stress in the government bond market may confuse a lot of supply with a lot of risk, which are not the same problem.

And there are other suspects. Japanese long-term rates have been climbing for reasons that have nothing whatever to do with data centers, and world bond markets move together. An inflation shock from the war has repriced everything. Foreign central bank buying has been soft. The federal deficit itself is running near two trillion dollars annually. Any one of those, by itself, could have pushed the thirty-year up this summer.

So here is what I actually believe, stated as carefully as I know how:

The AI borrowing is not the cause of higher long-term rates. It is a genuine, measurable, and rapidly growing contributor to a move that has several fathers. Anyone who tells you it explains the whole thing is selling something. Anyone who tells you it explains nothing has not looked at $223 billion.

And the direction of travel is not in dispute. Whatever share you assign it today, that share is getting bigger, because the buildout is not slowing down.

One thing to watch that I find genuinely sobering

Demand for these bonds is cooling even as the supply climbs.

Apollo tracked how many orders came in relative to how many bonds were offered. In February, hyperscaler deals were drawing nearly five dollars of orders for every dollar offered. By July, that had fallen to under two.

And a Reuters review found that of ninety-one hyperscaler bonds issued this year with comparable data, seventy-eight were trading at worse prices than where they were sold. Buyers who took them at issue are underwater. That means they are holding investments that have lost their value.

Supply climbing while appetite falls is how markets get repriced. Not all at once. But steadily, and in one direction.

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FOUR: AND NOW LET US TALK ABOUT TEXAS

Everything above is a national story. Any newspaper can write it.

Here is the part that belongs to us, and I have not seen anybody put it together, and it is the reason I sat down with Claude to write this at all.

Texas is paying for this twice.

Once at the bond window, in higher interest on every road and school and water line we finance.

And once at the tax office, because we are subsidizing the very buildout that is raising our cost of money.

The numbers

Texas exempts qualifying data centers from sales tax on their equipment. Two sections of the Tax Code do the work — 151.359 for regular data centers, 151.3595 for the very large projects. To qualify, a facility generally needs at least a hundred thousand square feet, a commitment of two hundred million dollars over five years, and twenty qualifying jobs.

When the Comptroller’s office scored that exemption back in 2020, it estimated the cost to the state at about $29 million for fiscal 2025.

The actual figure for fiscal 2025 came in at over $1 billion.

Read those two numbers again. Twenty-nine million estimated. A billion delivered. That is not a forecast that missed. That is a forecast that was off by a factor of more than thirty.

And it is still climbing. The Comptroller now projects the annual value approaching $1.8 billion by 2030, and the state expects to forgo about $3.2 billion over the next two years.

Texas has more than three hundred operating data centers, with a hundred forty-two more under construction — the most of any state in the country. Fifty-nine new certifications were approved this year alone, and the Comptroller’s office expects roughly ten new ones every month going forward.

Now here is the part that lands directly on city hall

Section 151.359 exempts the state sales tax. But section 151.3595 — the one for large projects — exempts the state and local sales tax both.

That is your city’s money. That is your two percent. That is the revenue line your finance director builds a General Fund budget on.

Layer on top of it the property tax side — Chapter 312 abatements, the JETI program — and a city can find itself hosting an enormous capital investment while collecting a fraction of what a facility that size would ordinarily generate.

And nobody is checking

This is the part that would end a municipal finance career if it happened at a city.

Of the one hundred thirty-eight data centers certified for the exemption, the Comptroller’s office has audited twenty.

Of those twenty, six were found in breach of the terms. Four failed to create the jobs they promised. One did not build to the required square footage. One reported that its required power agreement had fallen through.

Six out of twenty. Nearly a third of everything they looked at.

And a hundred eighteen certified facilities have not been looked at yet, while ten more get added every month.

I want to be careful here, because a thirty percent failure rate among the first twenty audited does not necessarily mean thirty percent of all hundred thirty-eight are out of compliance — auditors often start where the questions are. But that is exactly the point. We do not know. The Comptroller’s own testimony was that the office has little information about whether these facilities are meeting their promises. Facilities found in breach do have to pay the money back, which is the system working. But it only works on the ones somebody looks at.

Accounting for results with such a few number of data centers involved (few for those of you who manage hundreds of big projects), is simply not that hard. Were project tracing and results reporting not part of the agreement in the first place?

The Legislature noticed. The Senate Finance Committee held an interim hearing on this in July, and both the Governor and the Lieutenant Governor have raised questions about the exemption’s cost. One senator put it about as plainly as it can be put: no tax exemption should operate on autopilot.

The fair case for the other side

I am not going to pretend there is no argument for these incentives, because there is one and it is not foolish.

A data center brings enormous capital investment into a county. Even abated, the improvements eventually hit the tax roll. Construction employment is real while it lasts. Utility load can improve a municipal system’s cost recovery. And Texas won this industry over Virginia and Arizona partly because of these incentives — if we repeal them, some of that development goes elsewhere, and we get the higher interest rates anyway with none of the buildings.

That last point is the strongest one against me, and I want it stated in its best form: you cannot stop the national borrowing wave by taxing Texas data centers. The bond market does not care what Collin County does. Repeal the exemption tomorrow and the thirty-year Treasury does not move a basis point.

Fine. Granted. But that is an argument for getting the exemption right, not for leaving it on autopilot at thirty times its estimated cost with eighty-five percent of the participants unexamined.

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FIVE: WHAT A CITY COUNCIL SHOULD ACTUALLY DO ABOUT IT

Enough diagnosis. Here is the practical part.

Reprice your capital plan, and do it now. If your five-year plan assumes anything close to what money cost in 2021, it is fiction. Long rates are at twenty-five-year highs and there is a very large private borrower standing in line ahead of you who was not there before. Run your debt service at today’s rates plus a cushion, and find out what falls off the list before the bond market finds out for you.

Read your economic development agreements again — specifically the sales tax section. If you have a large data center project under 151.3595, find out exactly what local sales tax you are forgoing and for how long. Put that number in your long-range forecast as a line item, not a footnote. If you have a Chapter 380 or 381 agreement layered on top, add it up.

Ask for the compliance file. If a facility in your city is certified for the exemption, somebody should be able to tell you whether it has been audited and whether it met its job and investment commitments. If the answer is that nobody knows, that is your answer, and it belongs in front of your council.

Watch the Legislature. The 2027 session is going to take up this exemption. Cities with certified projects should know what a repeal, a cap, or a retroactive modification would do to their revenue — in both directions. This could be a revenue gain for a host city or a lawsuit, depending on how it is written.

And watch your own investment portfolio, gratefully. The same rates that are punishing your bond issues are paying your operating funds better than they have since 2007. Book the income. Do not build a payroll on it.

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CLOSING

Yesterday’s arithmetic has not changed, and I would not take back a line of it. Forty trillion borrowed. Something near eighty-eight trillion promised and never written down. The trust funds empty, with dates already on them — 2032 and 2033.

What one day added is that Washington is no longer the only one standing at the window.

For my entire career, the government has been the largest borrower in the world by so wide a margin that everyone else was a rounding error. That is ending. Not because the government got smaller — it has never been bigger — but because a handful of companies decided to build something enormous, and discovered they could not pay for it out of pocket either.

So now there are two great borrowers in that line. Both of them want long money. Both of them want it this morning. And neither one of them is going to stop.

The lender is the same lender he always was. There is only so much in the drawer on Monday morning.

And the man who walks in at two o’clock — the school district refinancing a bond, the city building a fire station, the young couple buying a first house in Princeton or Anna — that man does not get told about any of this. He just gets told the rate.

Here in Texas, we have done something that would be funny if it were not our money. We have written a tax exemption we scored at twenty-nine million dollars, delivered a billion, and put it on autopilot heading toward one point eight billion a year — to subsidize the construction of the very thing that is raising the interest rate on our own bonds.

I do not say that to argue the exemption should be repealed. Reasonable people are lined up on both sides of that, and it will get settled in Austin in 2027, not by me.

I say it because a city that does not know it is paying twice will only budget for it once.

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SOURCES

Hyperscaler issuance volumes: LSEG data as reported by CNBC and Reuters, August 2026. Forecasts: JPMorgan, Goldman Sachs, UBS, and Barclays analyst notes, 2026. Crowding-out analysis: Bank of America economics notes and Bloomberg reporting, August 17, 2026; Federal Reserve Bank of Dallas, “How AI debt financing impacts duration supply and interest rates,” February 10, 2026. Order-book cover ratios: Apollo Global Management. Secondary market performance: Reuters analysis of LSEG data, July 28, 2026. Yield curve movements and auction data: U.S. Treasury daily yield curve and TreasuryDirect. Treasury buyback operation: August 19, 2026.

Texas data center exemption figures: Texas Comptroller of Public Accounts testimony before the Senate Committee on Finance interim hearing, July 27, 2026, as reported by The Texas Tribune and others; Texas Tax Code sections 151.359 and 151.3595; 34 Texas Administrative Code section 3.335. Data center counts: Comptroller testimony and industry analysis.

The interpretation, the Texas argument, and any errors in either are my own.

A collaboration between Lewis McLain & AI

On the eighteenth day of August, 2026, the debt of the United States government passed forty trillion dollars.

The exact figure was $40,047,425,768,420.22. Treasury publishes it every day, to the penny, the way a bank publishes a balance. It is not a guess. It is not a projection. It is a number somebody has to pay.

Now I want you to hold that number in your mind for a minute, because I am going to tell you something about it that most of the news coverage left out.

Forty trillion is the small number.

That is the part we have already borrowed. That is the part with a signature on it. There is another number, and it is more than twice as large, and the government’s own auditors will tell you it does not appear on the balance sheet liability at all.

We will get there. But let us start where we ought to start, which is at the beginning.

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ONE: HOW WE GOT HERE

I started in this business in 1972, as Budget Director for the City of Garland. That year the whole federal debt was under $450 billion. The government now borrows that much about every ten weeks.

Something changed around 1980. Before then, the debt grew about like inflation grew. After then, it did not.

Here is every president since, and what happened on his watch. These are Treasury’s own year-end figures.

President	Years	Started	Ended	Added
Reagan	1981–1988	$0.91T	$2.60T	$1.69T
G.H.W. Bush	1989–1992	$2.60T	$4.06T	$1.46T
Clinton	1993–2000	$4.06T	$5.67T	$1.61T
G.W. Bush	2001–2008	$5.67T	$10.02T	$4.35T
Obama	2009–2016	$10.02T	$19.57T	$9.55T
Trump I	2017–2020	$19.57T	$26.95T	$7.37T
Biden	2021–2024	$26.95T	$35.46T	$8.52T
Trump II	2025–today	$35.46T	$40.05T	$4.58T

Now those numbers cover different lengths of time, so they do not compare cleanly. Divide each one by the years served and you get the honest picture — how much debt got added in an average year:

President	Added Per Year
Reagan	$212B
G.H.W. Bush	$366B
Clinton	$201B
G.W. Bush	$544B
Obama	$1.19T
Trump I	$1.84T
Biden	$2.13T
Trump II	~$2.41T

Read that column from top to bottom. Go slow.

Every man in that list borrowed faster than the man before him — every single one — except Clinton. One president in forty-six years slowed the car down. One.

I want to be fair here, because fairness matters more than a good line. The federal budget year starts October first, so a new president spends his first nine months operating on his predecessor’s budget. Congress writes the checks, not the president. Wars and recessions and pandemics are not chosen. And Reagan’s $212 billion in 1985 money would be near $650 billion today.

So do not read that table as a scorecard on eight men. Read it as a scorecard on us. On all of us. Both parties. Every Congress. Every election in which somebody promised more and charged less, and we voted for him, and then we did it again.

The trend does not belong to a party. The trend belongs to the country.

And it is speeding up

Look at how long each trillion took:

• The first trillion took until October 1981.
• Getting to $10 trillion took until 2008.
• Getting to $20 trillion took until 2017.
• Getting to $30 trillion took until February 2022.
• Getting to $40 trillion took until this week.

Ten trillion dollars in four and a half years. The last two trillion took ten months.

Right now the government is borrowing about $200 billion a month. That is $6.6 billion a day. Every day. Saturdays. Sundays. Christmas.

I live in Collin County. Every house, every store, every warehouse, every acre on the tax roll of this entire county would not cover two months of it.

One more thing while we are on the subject

Last summer Congress raised the debt ceiling to $41.104 trillion. We are at $40.047 trillion.

That leaves about $1.06 trillion of room. At $200 billion a month, that is a little over five months.

I am not predicting a crisis. Treasury has tricks — extraordinary measures, they call them — that buy some time, and the timing shifts around. But if you are wondering when this becomes a front-page fight again, look at your calendar for early next year.

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TWO: THE COFFEE CAN IS EMPTY

Now. Let me tell you about the trust funds, because this is where the plain truth has been buried under sixty years of comfortable language.

That $40 trillion splits into two pieces:

• About $32.2 trillion we borrowed from the public — from investors, from banks, from foreign countries.
• About $7.7 trillion the government owes to itself. Social Security. Medicare. Federal retirement.

Everybody calls that second piece “the trust funds,” and the word trust does a lot of work it has not earned.

Here is what actually happened.

For about thirty-five years after 1983, Social Security collected more in payroll taxes than it paid out in benefits. Real money. Your money, out of your check, every two weeks, with your name on it.

That money did not go into a vault. It did not go into a savings account. It did not get invested in anything.

By law, it was handed over to the general fund of the Treasury and spent. On the Navy. On highways. On farm programs. On everything the government does. And in return, the trust fund got a piece of paper — a special Treasury bond that cannot be sold to anybody, ever, that says the government owes the government some money.

Now every city finance director in Texas knows exactly what that is, because we do it too, and we have a name for it. It is an interfund loan.

Suppose a city borrows ten million dollars out of its water fund to patch a hole in the general fund. The city writes an IOU. Now the water fund’s books show a ten-million-dollar asset. Looks fine. Auditor signs off.

But the city is not one dollar richer than it was that morning. And when the water plant needs a new clarifier, somebody has got to raise the water rate, cut a budget, or sell bonds. The IOU did not create one dime. All it did was write down whose problem it is.

Or put it the way my grandmother would have. She kept the grocery money in a coffee can on top of the icebox. If my grandfather took forty dollars out of the coffee can and left a note in there saying “IOU $40,” there is not forty dollars in that can. There is a note. When Momma reaches in on Friday to buy groceries, that note does not feed anybody. Somebody has to come up with forty real dollars.

There is no money in the Social Security trust fund. There never was. There is a stack of notes describing money that was already spent, and a promise that somebody in the future will find it.

And the future has a date on it now

For four decades, those trust funds were among the biggest buyers of government bonds in the world. That is finished. They have flipped from putting money in to taking money out.

The Trustees put dates on it this June:

Fund	Runs Dry	What Happens Then, Under Current Law
Social Security retirement (OASI)	Late 2032	Automatic 22% cut to every benefit check
Medicare Part A (hospital)	Mid-2033	Hospital payments cut about 11%, growing to 16% by 2040
Social Security combined	2034	83% of promised benefits payable

Read that middle column again. Not “Congress might consider reductions.”  Automatic. Under current law, on that date, every retiree in America — the ones already drawing, not just the young ones — gets a 22% cut. And it grows to 38% by the end of the century.

Social Security’s retirement fund moved a whole quarter closer just since last year’s report. These dates keep walking toward us, not away.

Here is the part that nobody explains

When those trust funds start cashing in their special bonds, the Treasury has to come up with real cash money. It gets it exactly three ways. Raise taxes. Cut something else. Or borrow from the public.

It will borrow from the public.

So the redemption does not reduce anything. It just moves the debt out of the pocket where nobody is watching and into the pocket where the whole bond market is watching. Dollar for dollar. That is a big part of why what we owe to actual outside investors — which is the part that has to be sold at auction to real buyers — goes from roughly the size of the entire American economy today to about a fifth larger than the economy by 2036.

The trust fund is not a cushion. It is a bill with the due date already printed on it.

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THREE: THE BILL NOBODY PUTS ON THE BOOKS

Now we come to it. This is the part I most want you to understand, and it is the part that requires a little patience, because it involves an idea most people have never had explained to them plainly.

The idea is called present value. Let me get it out of the way in one story.

Say your granddaughter is eight years old and you have decided you are going to pay for her wedding, and you figure that is going to run $50,000, and she is not getting married for fifteen years.

How much do you need in the bank this morning?

Not $50,000. Less than that — because whatever you put in there is going to sit and earn interest for fifteen years while she grows up. Depending on the rate, maybe $25,000 does it.

That smaller number is the present value. It is what a future promise costs you today. It is the honest price of the promise, right now, in this morning’s money.

Every insurance company on earth runs on this. Every pension fund. Every actuary. If a company promises you a check thirty years from now, the law requires it to put the present value of that promise on its balance sheet as a debt, today, in ink, where the auditors can see it.

The federal government does not do that.

The numbers

The government does calculate it. It is required to. It just does not have to count it.

Here is what its own accountants and actuaries reported this year:

What Is Being Measured	The Hole, In Today’s Money
Social Security, next 75 years	$30.3 trillion
Medicare, next 75 years	$65.3 trillion
— Part A, the hospital half	$4.2 trillion
— Parts B and D, doctors and drugs	$60.9 trillion
Treasury’s own audited figure for both	$88.4 trillion
Treasury’s broadest measure of the gap	$79.6 trillion

Different offices count it different ways and land somewhere between seventy-nine and ninety-six trillion. I am not going to pretend to referee that argument. Here is the part that does not depend on who wins it.

For every single dollar this country has borrowed in its entire history — every war, every depression, every program, every bailout, the whole forty trillion — we have promised away about two more dollars that nobody ever wrote down.

That is the sentence. You do not need any arithmetic to check it. The borrowed part is forty. The promised part is around eighty-eight trillion. Two dollars promised for every dollar borrowed.

And I want to be precise about what those numbers mean, because it is easy to hear them wrong. That $88.4 trillion is not what we are going to spend on Social Security and Medicare. It is the amount by which the spending exceeds everything those programs will collect — after every payroll tax, every premium, every dollar of dedicated revenue. It is the hole. And it is not the future dollar amount of the hole either. It is what you would need in the bank this morning to fill it.

The Treasury’s own report says the shortfall grew by $6.9 trillion in a single year.

Six point nine trillion dollars. In one year. And it did not show up in the deficit, it did not show up in the debt, and it did not make the news.

Now here is the sentence I want you to sit with

From the Financial Report of the United States Government, published by the Treasury Department, audited by the Government Accountability Office. This is not a think tank. This is not a politician. This is the government’s own audited annual report:

“Under federal accounting rules, social insurance amounts as reported in both the SLTFP and in the SOSI are not considered liabilities of the government.”

Not considered liabilities.

An eighty-eight-trillion-dollar gap between what has been promised and what will be collected, and under the accounting rules the government wrote for itself, it is not a debt.

Let me tell you what would happen to a Texas city that tried that. If a city promised its police officers a pension and then declined to book the liability because it had decided the promise was not really a promise, the auditors would qualify the opinion, the rating agencies would downgrade the bonds, the Attorney General would have something to say, and somebody would very likely go to jail.

The federal government does it every year, on purpose, and calls it accounting.

And one more thing, which I did not know until I went looking

The Government Accountability Office — the government’s own auditor — gave the Medicare portion of these statements a disclaimer of opinion.

In plain English, a disclaimer of opinion means the auditor could not gather enough reliable evidence to say whether the numbers are right or wrong. Not “we found problems.” Not “we disagree.” We cannot tell you.

That is roughly $60 trillion of the total — sixty-eight percent of it — that the nation’s auditor will not sign his name to.

If your bookkeeper handed you a set of books and said “I can’t form an opinion on two-thirds of this,” you would not shrug and file it. You would sit down at that table and not get up until you understood it.

Why Medicare is the bigger problem, and why nobody says so

Everybody argues about Social Security. Almost nobody argues about Medicare. But look at the table again — Medicare’s hole is more than twice the size of Social Security’s.

And here is why: Social Security’s cost is basically demographics and a cost-of-living adjustment. It grows, but it grows in ways you can count.

Medicare grows with the price of health care, and health care has been outrunning the economy for fifty years. Part B — that is your doctor visits — is projected to grow better than eight cents on the dollar every year. Part D, your prescriptions, better than nine. The economy grows about four.

Anything growing at 9% inside something growing at 4% will eventually be the whole thing. That is not an opinion. That is a bank statement in slow motion.

Your Part B premium went from $174.70 to $202.90 this year. That is a 16% jump in one year, and it still does not cover the cost, because it never has. About three-quarters of Part B and Part D comes out of general income taxes.

Here is that number, and it is the one I would put on a billboard:

Last year, about eighteen cents out of every dollar of income tax collected in this country — personal and corporate, all of it — went to pay for Medicare Parts B and D. By 2040 the Trustees expect that to be nearly twenty-nine cents. By the end of the century, thirty-eight.

Not for Medicare altogether. Just for the doctor-and-drug half of it. Nearly forty cents out of every income tax dollar in America.

Putting it all together

So set the ledger out plain:

• We have borrowed $40 trillion. That is on the books.
• We have promised, beyond what we will collect, somewhere around $88 trillion more. That is not on the books.
• The not-on-the-books part grew $6.9 trillion last year alone.
• The auditor could not form an opinion on the biggest piece of it.

Forty trillion is the small number.

It is the small number, and we cannot pay it, and everybody is arguing about it, and it is not even the main thing.

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FOUR: WHEN THE INTEREST EATS THE PAYCHECK

Let me put this in terms of a household, because that is where it lives.

The federal government this year will take in about $5.6 trillion and spend about $7.4 trillion. The gap is about $1.9 trillion, and it borrows every dime of it.

Out of that $5.6 trillion coming in, interest on the debt already takes about $1.4 trillion. That is a quarter of the paycheck, gone before the first bill gets paid.

Interest is now bigger than the entire national defense budget. It is the biggest thing the government spends money on except Social Security and Medicare.

And it is going to get worse for a reason that has nothing to do with Congress.

The reason: old cheap debt is being replaced by new expensive debt

Let me put interest rates the way a banker would have explained them to my father: as dollars per hundred borrowed.

In early 2022, the government was paying about a dollar and forty-five cents a year on every hundred dollars it owed. Money was nearly free.

Today it pays about three dollars and forty-four cents on every hundred.

But that figure is stale, and here is why. Most of the debt was borrowed back when money was cheap, and a lot of it has not come due yet. When it does come due, it gets borrowed all over again at today’s price.

And today’s price is higher. On August 13, the government sold thirty-year bonds at five dollars and twenty-two cents on every hundred — the steepest price it has paid for thirty-year money since 2001.

Set those two side by side. Old money: three forty-four. New money: five twenty-two. Every dollar that rolls over gets replaced by a dollar that costs about half again as much.

So the average is going to keep climbing on its own. Nobody has to vote for it. Nobody can stop it. It happens quietly, as the old paper matures, the way a balloon note comes due whether you were ready or not.

That is the single most important thing to understand about the next ten years. The interest bill is going up no matter what anybody does.

So when does interest eat everything?

I built a model to answer this. It is straightforward arithmetic: the debt grows by the deficit plus the interest, revenue grows with the economy, and the average interest rate creeps toward today’s rate as old bonds come due. I ran it three ways.

If things go about as the budget office expects — the economy growing four cents on the dollar, new borrowing at four dollars and thirty cents per hundred:

Year	Interest Bill	Revenue	Share of Every Dollar
2026	$1.10T	$5.60T	20 cents
2030	$1.69T	$6.55T	26 cents
2036	$2.50T	$8.29T	30 cents
2040	$3.18T	$9.70T	33 cents

If rates simply stay about where they sit today — the economy growing a little slower, borrowing at five and a half dollars per hundred:

Year	Interest Bill	Revenue	Share of Every Dollar
2026	$1.10T	$5.60T	20 cents
2030	$2.16T	$6.43T	34 cents
2036	$3.52T	$7.90T	45 cents
2040	$4.66T	$9.06T	52 cents
2050	$9.07T	$12.79T	71 cents

By 2040, in that middle case, more than half of every tax dollar this country collects goes to interest. Everything else — Social Security, Medicare, the Army, the veterans, the courts, the border, all of it — comes out of the other half. Plus more borrowing.

And if we get a bad decade — a slow economy and money at seven dollars per hundred — interest swallows every last dollar of federal revenue by 2044. Eighteen years from now.

Now, I want to be honest about those tables. They are arithmetic, not prophecy. Change the assumptions and the dates all move. And nobody actually gets to 100% — something breaks long before, politically or financially. Read the far end of those columns not as a forecast but as pressure. As the reason something has to give.

The dates that will actually matter

Forget 100%. The crossings that will change American politics come much sooner:

• Interest already passed national defense. Done.
• Interest passes everything the government spends on domestic programs — parks, highways, the FAA, medical research, grants to cities — in about three years.
• Interest passes Medicare around 2030.
• Interest passes Social Security, the biggest line in the whole budget, sometime in the mid-2030s.

That last one is the day the conversation in this country changes. When the single largest thing the United States government spends money on is interest on money it already spent — not defense, not retirement, not medicine, just rent on the past — the politics of the budget will not survive it in its current form.

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FIVE: THE POINT WHERE YOU CANNOT TURN THE SHIP

People ask me: is there a number where this becomes unfixable? Is it $50 trillion? A hundred?

No. There is no such number. Japan owes more than we do, measured against the size of its economy, and Japan borrows just fine.

The point of no return is not a debt level. It is a race between two percentages, and it is easy to explain.

The race

Compare two things: the interest rate the government pays, and the rate at which the economy grows.

Think of it as your credit card against your paycheck.

If the card charges 4% and your pay goes up 6% a year, that card gets lighter every single year even if you never pay a dime on it. You grow out of it.

Flip it. Card charges 6%, pay goes up 4%. Now the card gets heavier every year even if you never charge another thing. You cannot grow out of it. You have to actually cut something.

That is the whole thing. That is the entire question, and nothing else about the debt matters half as much.

For forty years, America was in the first case. That is exactly how we handled World War II. In 1946 we owed a little more than the entire country produced in a year. By 1980 we owed about a third of it. And we never paid it off — we simply grew faster than the debt, and we inflated faster than the debt, and after thirty-four years of that it had shrunk to something manageable.

We are now crossing into the second case. The government pays about three dollars and forty-four cents per hundred, and that is climbing on its own as old cheap debt rolls off. The economy grows about four cents on the dollar a year. Those two numbers are neck and neck right this minute — and only one of them is rising.

What it costs to stop it

Once the interest rate passes the growth rate, you cannot grow out of it. You have to cut spending or raise taxes — permanently, every year — just to keep the debt from growing as a share of the economy. Not to pay any of it back. Just to stop the bleeding.

Here is what that costs at different interest rates:

If Money Costs	And the Economy Grows	The Fix, Every Year, Forever	Which Is About
$4.30 per hundred	4 cents	$920 billion a year	one dollar in six of all federal revenue
$5.00 per hundred	3.5 cents	$1.29 trillion a year	one dollar in five
$5.20 per hundred	3.5 cents	$1.45 trillion a year	one dollar in four
$7.00 per hundred	3 cents	$2.07 trillion a year	two dollars in five

That last column is the one to read. A trillion and a half dollars a year means taking one dollar out of every four the federal government collects — either by cutting a quarter of everything it does, or by raising every tax bill in America by a quarter, or some mix of the two. And then holding it there. Not for a term. Not for a decade. Permanently.

If you want it at kitchen-table scale: spread across every household in the country, a fix that size runs somewhere between eight and eleven thousand dollars a year, per household, indefinitely.

Now, nobody actually gets that bill in the mail, and I am not suggesting they do. Households do not pay in equal shares and never have. I use the figure only because “four and a half percent of gross domestic product” is a phrase that slides right off a person, and eleven thousand dollars a year does not.

Has anybody ever done it?

Yes. That is worth knowing, and it is the closest thing to good news in this whole piece.

The third column translates each one into what it would mean if we did the same thing here, at today’s size — in dollars, and in how much of the federal government’s money it amounts to.

Country	When	Same Fix, In American Terms	How They Did It
United States	1993–98	$1.6 trillion a year — a bit over a quarter of federal revenue	Spending caps, pay-as-you-go rules, a tech boom
Ireland	1987–89	$2.2 trillion — two dollars in five	National agreement between labor and government
Canada	1993–97	$2.5 trillion — nearly half	Line-by-line program review, strong growth
Denmark	1982–86	$3.2 trillion — over half	Currency peg forced the issue
Sweden	1993–98	$3.8 trillion — two dollars in three	After a banking crash, with broad agreement
Greece	2010–16	$5.1 trillion — nearly everything it collects	Forced from outside. Economy shrank a quarter.

Look at our own line first. In the nineties this country pulled off a fix worth about a quarter of what the government collects — and we did it with spending caps, a rule that said you had to pay for what you passed, and a technology boom that filled the Treasury. Divided government. Both parties at the table. It was ugly and it worked.

The countries below us on that list are small, homogeneous nations that could get most of their people to agree on something, and most of them had a cheaper currency softening the blow. And Greece did not choose its fix at all. It was handed one from outside, and the economy shrank by a quarter while they swallowed it.

So here is the honest answer:

If money settles back around four dollars per hundred, the fix is roughly one federal dollar in six. Hard. Painful. We have done it before, and the men who did it are still alive.

If money stays where it is today, the fix is one dollar in four — bigger than everything the federal government spends on every domestic program combined. You cannot get there without touching Social Security or Medicare or raising broad taxes. Possible on paper. It requires an agreement this country has not produced in thirty years.

If money goes to seven dollars per hundred, the fix is two dollars out of every five the government collects. No large democracy has ever done that voluntarily. Not one, not ever. The arithmetic still works fine. It is the country that stops working.

That is what unfixable means. Not that the math is impossible. That the math stays possible while the country loses the ability to do it.

Now the part about speed

Magnitude is only half of it. The other half is how fast the trouble arrives, and this is where America has quietly put itself in a bad spot.

Think about the difference between a thirty-year fixed mortgage and a note you have to renew every single year.

Same house. Same debt. But if interest rates jump three points, the man with the fixed mortgage does not feel a thing. The man with the annual note feels all of it, right now, this year.

The United States has been drifting toward the annual note. Right now, about a third of the debt comes due within twelve months. Roughly $10 trillion, coming due inside a year, that has to be borrowed all over again at whatever the rate happens to be that morning.

So watch what a three-point rate increase does to the government’s actual interest bill:

Say rates jump three points and stay there. Here is how much of that damage has actually landed on the federal budget as time passes — us, versus a country that borrowed long and slow:

After	Landed On Us	Landed On the Careful Country
One year	three-tenths of it	one-tenth
Two years	over half	one-fifth
Three years	seven-tenths	one-quarter
Five years	nine-tenths	four-tenths

Inside of three years, seven-tenths of the damage has already arrived.

A country that borrowed for the long term gets a decade to argue about it, hold elections, pass a law. We get three years.

Put the two halves together and you have your answer. The magnitude threshold is interest running about two points above growth, and staying there. The speed is three years to full damage. Multiply them and you get a required fix bigger than any peacetime democracy has ever voluntarily made, arriving faster than this Congress has ever passed anything.

That is the scenario. Not a dramatic failed auction. Just a vise, closing slowly, on a government that cannot agree on what day it is.

And what “a crash” would actually look like

Not bankruptcy. Let me be clear about this, because there is a lot of foolishness talked about it. The United States borrows in dollars and prints dollars. It cannot be forced to default. That is not the risk.

The risk is the thing that happened last time.

Between 1946 and 1980, what this country owed fell from more than a full year’s national output down to about a third of one. Almost none of that was repayment. It was inflation, and it was rules that held what bondholders earned below the rate at which prices were rising, year after year after year.

Every bondholder got paid every dollar he was promised, right on time. Those dollars just did not buy what they used to.

That is the American way of handling too much debt. It requires no vote. No debate. Nobody’s name on it. It is what happens if nobody does anything, and doing nothing is the one thing this system reliably produces.

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SIX: WHO IS BUYING ALL THIS

Short version: about $32 trillion is out there in the market. Three groups hold it.

Foreign countries and foreign investors: about $9.5 trillion, roughly 30 cents of every dollar.

You hear that foreigners are dumping our debt. In total, they are not. Foreign holdings hit a record this year — up $587 billion over twelve months.

The biggest holders as of December:

Country	Holdings
Japan	$1,185B
United Kingdom	$863B
China	$684B
Belgium	$477B
Canada	$468B

Two cautions on that list. First, it tracks where the bonds are kept, not who owns them. A Saudi fund holding through a London bank shows up as Britain. Belgium’s number is mostly one big clearinghouse in Brussels. Second, most foreign holding is now private investors, not central banks — about 59% private. That matters, because a central bank holds bonds for policy reasons and does not much care about the yield. A private fund manager cares about nothing else. Price-sensitive money is fickle money.

And China is genuinely leaving. Down from $759 billion a year ago to $684 billion. Down roughly by half from where it was in 2013. Japan and Britain bought enough to cover the gap. So far.

The Federal Reserve: about $4.3 trillion, roughly 14 cents of every dollar.

The Fed bought enormous amounts of Treasury debt after 2008 and again during COVID, then spent three years letting it run off. That runoff ended December 1, 2025.

And I owe you a correction here. The standard line — the one I have used myself — is that the Fed’s holdings do not really count, because the Fed sends its interest earnings back to the Treasury. Money out of one pocket into the other.

That stopped being true in September 2022.

The Fed now pays more interest to banks on their reserves than it earns on the bonds it holds. It has been losing money. Payments back to the Treasury have been zero since September 2022 — the first time that has happened since 1934. The shortfall got booked as something called a “deferred asset,” an accounting device no regulated bank on earth is permitted to use, and it peaked above $240 billion.

The Fed turned a small profit again this spring. But payments to the Treasury do not resume until that whole $240 billion hole is filled — projected 2030 or later.

So a revenue line that brought in $76 billion in 2022 has been zero for four years and stays zero for four more. And the budget office’s projections assume it comes back.

Everybody else: about $18 trillion, roughly 56 cents of every dollar.

This is the biggest group and it gets the least attention. Mutual funds and money market funds — the money funds now hold about 40% of all short-term Treasury bills. Banks. Pension plans. Insurance companies. State and local governments, which means every Texas city and school district with a portfolio. And ordinary households, buying directly, more than they have in a generation, because for the first time since 2007 the yield is worth having.

The thing to understand about all of this: the buyers used to be people who did not care much about the price. Foreign central banks buying for reserves. The Fed buying for policy. Trust funds buying automatically.

The buyers now are people who care about nothing but the price.

That is a different market entirely. And it is why the government is now paying better than five dollars and twenty cents per hundred for thirty-year money.

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SEVEN: WHAT IF THEY QUIT BUYING

Let me knock down the scary version first, because it is wrong.

“Nobody shows up at the auction and the government cannot borrow.” That does not happen. There are two dozen firms legally obligated to bid. The auction clears. It always clears.

The question is never whether it clears. The question is at what price.

And we have a live example from six days ago.

On August 13, Treasury sold $25 billion of thirty-year bonds. Plenty of buyers showed up — demand was actually a hair above the recent average. But they demanded five dollars and twenty-two cents on every hundred — the steepest price the government has paid for thirty-year money since 2001. And they demanded more than the market had expected that morning.

Read that carefully, because it is the whole story in one auction.

Demand did not disappear. Demand got expensive.

The bonds already on the books cost about three dollars and forty-four cents per hundred. New thirty-year money costs five dollars and twenty-two cents. That difference is not a forecast and it is not a worry. It is an appointment. Every dollar of old cheap debt that comes due walks up to the window and gets replaced by a dollar that costs half again as much.

The day after, Treasury announced it would start buying back more long bonds to prop up the market. When the debt manager starts doing that, pay attention.

What actually happens as it gets worse

First, the price goes up. That is where we are. Yields climb until somebody bites.

Second, Treasury borrows shorter to dodge the expensive long rates — which is exactly what it has been doing, and exactly what makes the three-year damage clock run faster.

Third, the dealers fill up. There are limits on how much inventory the big banks can carry, and they are near them. Behind the dealers sit hedge funds running borrowed money into Treasury bonds — a trade worth trillions that provides real liquidity in calm weather and evaporates in a storm. It evaporated in March 2020, the deepest bond market in the world simply stopped working, and the Fed had to buy hundreds of billions in a matter of days just to get it started again.

Fourth, the Fed. Which brings us to the honest question nobody in Washington wants asked out loud: at what point does the central bank buying government bonds stop being monetary policy and start being printing money to cover the government’s checks?

There is no line in the accounting that tells you. It is a matter of why, and how much, and whether anybody believes you.

And if you want to know how fast it can go wrong, look at Britain in September 2022. The government announced a budget the market did not believe. Pension funds got margin calls, had to sell, which pushed prices down, which caused more margin calls. Thirty-year bond yields moved more in days than they normally move in years. The Bank of England had to step in with emergency purchases and the budget was withdrawn.

Start to finish: about three weeks.

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EIGHT: WHAT THIS MEANS AT HOME

I have spent fifty-four years working on Texas city and school budgets. Let me bring this down off the mountain.

Your city’s projects cost more now. Municipal bonds are priced off Treasury bonds. When the thirty-year Treasury goes from four dollars per hundred to five, city bonds follow it up. On a hundred-million-dollar bond issue over twenty years, that one extra dollar per hundred costs $13.3 million in additional interest. That is a fire station. That is two elementary school gyms. That is a stretch of arterial road. Every five-year capital plan in North Texas built on 2021 numbers is now a work of fiction.

Your tax bill has a second half you have not been watching. Your city and school tax rate has two pieces: one for operations, one for debt service. As debt gets more expensive, the debt piece grows. It does not fall under the same voter-approval limits as the operations piece — but it is the same total rate on the same bill, and it squeezes out room for everything else.

Bond elections that voters approved when money cost two and a half dollars per hundred are being sold at five. Voters approved a project. They did not approve doubling the interest. Somebody has to have that conversation honestly.

Federal grant money is the first thing to go. This is the one I would watch hardest. When interest is eating 19% of the federal budget and Social Security, Medicare, and defense cannot be touched politically, there is only one place left to cut. It is the discretionary budget, and inside the discretionary budget the easiest thing to cut is money sent to somebody else’s government. Community development grants. Water infrastructure funds. Transportation formula money. Police and fire grants. Every one of those lines is in the shrinking bucket, and every city in Texas has some of them built into a plan right now.

And watch the tax exemption on municipal bonds. The federal government gives away about $1.9 trillion a year in tax breaks — more than it spends on all domestic programs combined. When the day comes that Congress has to find real money, everything on that list gets looked at, and the exemption for city and school bond interest has been on the chopping block in every serious deficit conversation for forty years. Cap it and every issuer in Texas pays more the next morning.

One piece of good news. For the first time since 2007, city investment portfolios are earning real money. A city sitting on $200 million is generating meaningful interest income. Take it and be grateful — and do not you dare build a permanent payroll on top of it, because it is the most cyclical dollar on your books.

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CLOSING

Let me gather it up.

Forty trillion dollars is what we have already borrowed. It grew under every president since 1980, faster under each one than the one before, with one exception in forty-six years.

The seven point seven trillion sitting in the Social Security and Medicare trust funds is not money. It is a stack of notes describing money that was spent a long time ago, and the dates those notes come due are 2032 and 2033.

And behind all of that sits the number that does not appear on any balance sheet: somewhere around eighty-eight trillion dollars in promises beyond what will ever be collected. It grew by nearly seven trillion last year. The government’s own auditor could not form an opinion on two-thirds of it. And under the rules the government wrote for itself, it is officially not a debt.

Forty trillion is the small number.

Nobody is refusing to lend us money. The auctions clear every week. The world still wants dollars.

It just costs 5.216% now. That is not a warning shot. That is a receipt.

And the thing I want you to take with you is this. The arithmetic in this piece is not hard. There is nothing in it that a careful person cannot follow. It has been published, every year, by the Treasury Department, audited, printed, and posted on a website where anyone can read it.

We have not been deceived. We have been informed, thoroughly and repeatedly, and we have decided not to look.

The interest on this debt is already bigger than the United States Army, Navy, Air Force, and Marine Corps combined. Nobody voted for that. It was not in any platform. No congressman ran on it.

It is just the bill for forty-six years of promising more than we were willing to pay for, and it is coming due on our children, and every year that we do not deal with it, the payment gets larger and the choices get fewer.

Forty trillion is the small number.

Let us at least be honest about the big one.

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SOURCES

Debt figures: U.S. Treasury, Debt to the Penny and Historical Debt Outstanding. Budget projections: Congressional Budget Office, The Budget and Economic Outlook 2026–2036, February 2026, with the August 2026 update. Trust fund dates, benefit cuts, and unfunded obligations: 2026 Social Security and Medicare Trustees Reports, June 9, 2026. Present value figures and the “not considered liabilities” language: Financial Report of the United States Government, FY2025, Statements of Social Insurance and Statements of Long-Term Fiscal Projections, Bureau of the Fiscal Service. Disclaimer of opinion on HHS social insurance statements: GAO-26-108073. Foreign holdings: Treasury International Capital System, December 2025. Federal Reserve remittances and deferred asset: Federal Reserve H.4.1 and Combined Quarterly Financial Report, Q1 2026; CRS IF12147. Auction results: TreasuryDirect, August 13, 2026. Debt limit: P.L. 119-21.

The interest-versus-revenue projections and the required-adjustment tables are my own calculations under the assumptions stated in the text. They are arithmetic, not forecasts. Historical fiscal consolidation figures are approximate.

FACT-CHECK & ANALYSIS

A collaboration between Lewis McLain & AI

How the Legislature built the machine it is now trying to stop

Subject article: “Texas lawmakers turn against massive power lines they ordered after outcry” — Kelsey Brown, San Antonio Express-News / Austin American-Statesman, August 17, 2026

Prepared: August 17, 2026

Method: 18 discrete claims checked against primary sources — ERCOT filings, enrolled bill text, PUC orders, and the CCN applications themselves — plus contemporaneous reporting from ten outlets.

The short version Your instinct is right — this is big, and it is bigger than the article makes it look. The core narrative checks out: Texas legislators voted 135–0, 31–0 and 139–3 for the bill that produced this buildout, and a bipartisan-but-mostly-Republican bloc is now trying to stop it. That reversal is real and well documented. But three headline numbers are wrong or stale, two material facts are missing, and the single most damning finding never appears: House Bill 5066 itself created the 180-day permitting clock that landowners are now furious about, and Sen. Charles Schwertner — who is demanding the applications be denied — was the bill’s Senate sponsor.

Contents

Contents

1. Verdict

1.1 Scorecard

1.2 Why this is bigger than the article suggests

2. Claim-by-claim verification

3. How Texas built the machine it is now trying to stop

3.1 What HB 5066 actually did

3.2 Who actually chose 765 kV

4. Is 765 kV the right answer?numbers

4.2 What the article got right, and what it left on the table

5. Is the need real? The demand case is the weak link

5.1 What Texas actually uses, and what it is projected to use

5.2 The Permian numbers specifically

5.3 The counter-case, which is also strong

6. Who pays — and the December deadline nobody is covering

6.1 The postage stamp

6.2 What the buildout adds to a household bill

6.3 The CREZ precedent, which everyone should be citing and nobody is

7. Is gas generation a real alternative?

7.1 You cannot buy a turbine

7.2 The economics are worse than the supply chain

7.3 The state already tried subsidizing it

7.4 And the gas itself is harder than it looks

8. The box the commission is in

8.1 Denial is legally available — on the right grounds

8.2 The middle path nobody is discussing

8.3 Why abatement is the weakest option

8.4 Litigation risk is lower than it looks

9. Why this is a political earthquake, not a zoning dispute

9.1 The polling

9.2 The map problem

9.3 The coalition is not unified — and the article flattens it

9.4 Texas is an outlier on scale and a laggard on tools

9.5 The tax fight running in parallel

10. What to watch1

10.1 Three questions the reporting has not answered

Sources

Confidence levels

1. Verdict

The article is a competent, directionally accurate account of a genuinely significant story. It is also loose with three numbers in ways that matter, and it leaves out the two things that would make the piece land hardest.

1.1 Scorecard

Dimension	Verdict	Note
Core narrative — lawmakers ordered it, now oppose it	SOUND	Vote counts, hearing, and reversal all confirmed by primary sources.
Named officials, titles, party, hometown	ACCURATE	Schwertner, Kolkhorst, Campbell, Sparks, Gleeson, Staples all correctly identified.
Procedural chronology	MOSTLY ACCURATE	July 29 hearing and Aug. 14 PUC meeting confirmed. The Aug. 19 House State Affairs hearing could not be confirmed — no notice appears in Texas Legislature Online’s posted House committee meetings as of Aug. 17.
Headline dollar figures	1 WRONG, 1 LOOSE	“$1.4 billion” is one utility’s share of a $2.9 billion line. “$33 billion” is the statewide plan, not the Permian plan — a conflation most Texas outlets share.
Demand forecast	STALE	“Quadruple by 2032” is a number ERCOT’s CEO superseded at the very hearing the article covers.
Direct quotes	2 UNSOURCED	Campbell and Staples quotes could not be found in any other account. Not evidence they are wrong — evidence they are exclusive or paraphrased.
Political completeness	MATERIAL GAP	Lt. Gov. Dan Patrick called for denial and made it a 2027 priority. He is not mentioned.
Structural analysis	MISSED	HB 5066 created the 180-day clock and the statutory deference to utility forecasts. Schwertner sponsored it in the Senate.

1.2 Why this is bigger than the article suggests

The story is usually told as a property-rights fight: ranchers versus power lines. That framing is accurate but small. Three larger things are happening underneath it.

• A statutory boomerang. The Legislature did not merely order a plan. It shortened the approval clock from one year to 180 days and wrote into law that the PUC “must consider” load forecasts supplied by the utilities — including load with no signed interconnection agreement. It then expressed surprise at the result.
• A cost-allocation reckoning. Under ERCOT’s postage-stamp method, every ratepayer in the state pays for every line regardless of who benefits. That is precisely what Sen. Campbell was attacking. A rulemaking that could change it must conclude by December 31, 2026 — and almost nobody is covering it.
• A possible partisan realignment on energy. One July 2026 poll found Texas Republicans wanting more regulation of data centers than Texas Democrats do — 75–14 versus 59–30. That is a single question in a single survey and should not be over-read, but the state’s agriculture commissioner is publicly warning his own party it will lose seats over this. Transmission is where three Republican orthodoxies — property rights, permissive permitting, and cheap power — collide and cannot all survive.

2. Claim-by-claim verification

Eighteen checkable assertions, in the order they appear. “Partly” means the substance survives but a detail does not.

#	Claim	Verdict	Finding
1	The Permian Basin Reliability Plan is a “$33 billion” plan	PARTLY	ERCOT’s own Permian plan totals $13.77B for the 765-kV option ($12.95B for 345-kV, $15.32B for 500-kV). The $33B ($32.99B) figure is ERCOT’s statewide 765-kV Strategic Transmission Expansion Plan, of which the Permian plan is one component. Most Texas outlets make the same conflation, so the article is in good company — but it overstates the Permian plan by roughly 2.4x.
2	A “$1.4 billion line” through 14 Hill Country counties, San Antonio to West Texas	WRONG	This is Docket 59336, Howard–Solstice — a joint AEP Texas / CPS Energy application filed March 2, 2026, running ~371 miles from CPS’s Howard Road station in southwest Bexar County to AEP’s Solstice station near Fort Stockton. The 14 counties are right. But $1,369,459,891 is CPS Energy’s share alone. AEP’s share is $1.516B; the project totals roughly $2.886B. Also: only about half the 14 counties are Hill Country — Pecos, Terrell, Crockett, Val Verde, Sutton and Kinney are Trans-Pecos and border country.
3	In 2023 legislators “overwhelmingly voted” for the bill requiring the plan	VERIFIED	HB 5066 (Rep. Charlie Geren, R-Fort Worth). House 135–0 on May 6, 2023; Senate 31–0 on May 21; House concurrence 139–3 on May 25. Signed June 13, effective immediately. “Overwhelmingly” understates it — it was very close to unanimous.
4	A “15-hour public hearing last month”	VERIFIED	Senate Committee on Business and Commerce, Wednesday July 29, 2026, running past midnight. Interim charge: “Managing the Impacts of 765-kV Transmission Lines on Private Property Rights.” Attendance reports vary — 100+ testified, 200+ attended.
5	Schwertner chairs Senate Business & Commerce; his quote and call to deny	VERIFIED	Confirmed by at least two independent outlets. His July 31 letter asked the PUC to reject the applications and called for “a complete overhaul” of the process before they advance.
6	Thomas Gleeson is PUC chairman; plan submitted mid-2024 before ERCOT’s forecast	VERIFIED	Gleeson is chair as of the Aug. 14, 2026 meeting. ERCOT filed the Permian plan July 25, 2024. The chronology holds — and is more damaging than the article says, because the plan was built on load forecasts supplied by the transmission companies, which ERCOT’s COO testified were “substantially higher” than ERCOT’s own.
7	ERCOT forecast peak demand “could more than quadruple by 2032”	WRONG	Arithmetically defensible against an April 2026 statewide figure, but regulators called that forecast almost certainly flawed and ERCOT has withheld official forecasts while reworking its methodology. At the July 29 hearing the article covers, ERCOT CEO Pablo Vegas gave the committee roughly 175,000 MW by 2032 — “nearly double,” not quadruple. Attributing “quadruple” to ERCOT on August 17 is the most substantive accuracy problem in the piece.
8	Sen. Donna Campbell: “We ask data centers to bring their own power…”	UNVERIFIED	Campbell is correctly identified as R-New Braunfels and the argument is squarely hers. But this exact wording appears in no other account. Her documented hearing line was: “It just seems like it’s just a rich daddy that doesn’t want to pay for developing transmission lines.” Worth noting the article omits Schwertner’s on-the-spot rebuttal: “There is a universal benefit of a public utility, whether it’s water or electricity.”
9	Kolkhorst: Permian demand is electrification, not population growth	PARTLY	Correctly identified as R-Brenham. The substance is right and supported by ERCOT’s data. But her most-quoted line that day was different and far better: “We voted on House Bill 5066, and I’m not sure we knew what that was going to become.”
10	Sen. Kevin Sparks voted for the plan; “overlooking the obvious” on gas	VERIFIED	Sparks (R-Midland) voted for HB 5066 in the 31–0 Senate vote. Quote confirmed. The article omits his stated motive: “If we charge through with these lines right now, it’s almost guaranteed that what we’ll fill these up with is more wind, mostly solar.” That reframes his objection considerably.
11	Todd Staples is TXOGA president; his “five years” quote	PARTLY	Title confirmed. The quote could not be located in any other account. His documented lines are different but make the same point: “This is not an academic exercise. These are real people with a real crisis.”
12	One 765-kV line carries as much as three or four 345-kV lines	PARTLY	Conservative. ERCOT’s own claim is five, and physics supports it — capacity scales with the square of voltage, and (765/345)² ≈ 4.9. But ERCOT’s actual plan delivers only 1.57x per import path (2,105 MW vs 1,340 MW). Both numbers are true and measure different things; the gap between the marketing and the engineering has fed a lot of the distrust.
13	Exxon, ConocoPhillips and Chevron commissioned a 2022 study	PARTLY	It was six companies, not three — add Devon Energy, Diamondback and Pioneer Natural Resources. Conducted by S&P Global, December 2022. It projected Permian demand growing from 4.2 GW to 17.2 GW by 2032, and ERCOT relied on it. That the demand case rests partly on an industry-funded study is a fact the article should have surfaced.
14	At the Aug. 14 meeting the PUC took no action to halt development	VERIFIED	Special open meeting requested by Gleeson. His advance memo said explicitly that no final decisions would be made on any individual line. More than 20 landowners testified. Rep. Brad Buckley told commissioners: “The only remedy to this is denial of all applications of CCN.”
15	A House committee hearing Wednesday; PUC could review a line Friday	UNVERIFIED	Reported as House Committee on State Affairs, 8 a.m. Wednesday Aug. 19, chaired by Rep. Ken King, announced by Speaker Dustin Burrows. Two independent research passes could not confirm it: Texas Legislature Online’s posted House committee meetings run current through Aug. 17 and show no State Affairs hearing on Aug. 18 or 19, and the only House hearing located that week is an Aug. 18 broadband hearing. This may simply be a notice posted after publication — but do not repeat the date without checking. The Aug. 21 PUC item is the northern line (Dockets 59029 and 59315), not the Hill Country line.
16	Jimmy Fair of Lingleville testified	UNVERIFIED	Circumstantially strong. “Jimmy Fair” and “Lingleville” both appear in PUC Docket 59315 filings dated April 8, 2026, and Lingleville sits in Erath County directly on the Oncor Dinosaur–Longshore route. The vineyard, the reclaimed-wood house and the 35-year insurance career could not be independently confirmed — presumably direct reporting.
17	Lt. Gov. Dan Patrick	OMITTED	Not mentioned in the article at all. Patrick publicly endorsed denial — “and not consider re-applications” — and pledged the Senate would prioritize the issue in the 90th session. Every other major outlet led with him. Omitting the lieutenant governor materially understates the political weight behind the reversal.
18	Whether lawmakers actually approved 765 kV	OMITTED	HB 5066 contains no voltage specification. It ordered a plan; the PUC chose the technology, in two separate decisions (Sept. 26 / Oct. 7, 2024 to authorize applications on all eight import paths, and April 24, 2025 to select 765 kV). Gleeson acknowledged as much at the July hearing. This is the crux of the entire legal and political fight and the article does not raise it.

On the two unsourced quotes Neither the Campbell nor the Staples quote could be found in any other account of the July 29 hearing. That is not evidence they are fabricated — a staff reporter at a 15-hour hearing will capture lines nobody else does, and both are consistent with what those speakers demonstrably argued. But if this analysis is going anywhere it can be challenged, the safe move is to source them to the hearing recording before quoting them onward. The same applies to Jimmy Fair. The docket filings put a person of that name in the right county on the right route in April 2026, which is about as good as external confirmation gets without the recording.

3. How Texas built the machine it is now trying to stop

The most useful thing to understand about this story is that almost nothing went wrong procedurally. The Public Utility Commission did roughly what the Legislature instructed, on the schedule the Legislature imposed, using the inputs the Legislature told it to weigh. The outrage is real, but it is outrage at an outcome that the 2023 statute made close to inevitable.

3.1 What HB 5066 actually did

Four provisions matter. Only one of them is widely discussed.

Provision	What it says	Consequence
§39.166 The general power	Requires reliability plans for any region with rapid electrical load growth, as determined by transmission service providers. No expiration date.	Almost never mentioned, and it is the durable one. §39.167 expired; this did not. Whatever happens to the Permian lines, the statutory machinery for the next region remains in force.
§39.167 The Permian plan	Directs the PUC to direct ERCOT to develop a reliability plan for the Permian Basin under §39.166, addressing transmission to mineral-production areas. Expired Sept. 1, 2025.	The only part anyone remembers. Notably voltage-neutral — it says nothing about 765 kV, 345 kV, or any technology.
§37.057 The 180-day clock	Changed the PUC’s decision deadline from “the first anniversary” of filing to “the 180th day,” enforceable by mandamus in Travis County district court.	This is the compressed timeline landowners are now protesting. It was not imposed by the PUC or the utilities. The Legislature wrote it.
§37.056(c-1) The deference rule	For ERCOT reliability projects, the PUC “must consider” forecasted load growth and load seeking interconnection — “including load for which the electric utility has yet to sign an interconnection agreement, as determined by the electric utility with the responsibility for serving the load.”	The quiet one, and the most consequential. It writes statutory deference to the utilities’ own load projections, including speculative uncontracted load, into the need finding. Transmission owners earn a regulated return that scales with capital deployed.

Read together, the provisions do something specific: they expanded what the commission must weigh while halving the time it has to weigh it, and told it whose numbers to use. A Bell County landowner put it more crisply than any analyst has: “More to evaluate, half the time to evaluate it.”

The finding the article missed Sen. Charles Schwertner was HB 5066’s Senate sponsor — and it moved through his own committee. The chairman now demanding the PUC deny these applications, and calling for “a complete overhaul” of the certification process, carried in the Senate the bill that created the 180-day clock and the deference rule he is objecting to. Texas Legislature Online lists the bill as “By: Geren; Morales, Eddie (Schwertner)” — Rep. Charlie Geren as author, Rep. Eddie Morales as joint author, Schwertner as the Senate sponsor. Confirmed independently by LegiScan, which lists him as the only senator on the bill. It was referred to Senate Business and Commerce — the committee he chairs, and where he held the July 29, 2026 hearing that produced the reversal. This is not a gotcha. Near-unanimous votes mean almost every legislator now complaining voted for it, and Sen. Kolkhorst has said as much candidly. But it is the strongest available evidence for the article’s own headline premise, and it appears in none of the coverage located.

3.2 Who actually chose 765 kV

Not the Legislature. The record is unambiguous and it happened in two steps a year apart:

• September 26 / October 7, 2024. The PUC approved the Permian plan and authorized transmission providers to prepare applications for all eight import paths — three at 765 kV and five at 345 kV — while deferring the voltage decision. ERCOT’s own January 2025 report records that the commission “deferred a decision on the voltage level of the import paths,” with a determination anticipated by May 1, 2025, and approved the plan “irrespective of the voltage level.”
• April 24, 2025. A second order selected the three 765-kV paths and terminated authorization for the 345-kV alternatives.
• December 9, 2025. ERCOT’s board endorsed the first two 765-kV projects — the AEP Texas / CPS Energy / Oncor / CenterPoint “Eastern Backbone” and the Oncor / AEP “Drill Hole to Sand Lake to Solstice” project. This is the step between the voltage selection and the 2026 applications, and it is missing from most accounts.

That deferral is the crux. The commission plainly understood the voltage choice to be its own discretionary call, made nine months after it approved the plan and nearly two years after the statute passed. Critics who say the Legislature never voted for a statewide 765-kV grid are correct on the record.

The counter-argument is equally fair: the Legislature ordered a reliability plan, wrote a deference rule favoring the utilities’ forecasts, and imposed a deadline that made deliberation harder. Having done all that, complaining about the technology the commission selected is a thin position. Both things are true, which is why this will be litigated politically rather than resolved factually.

4. Is 765 kV the right answer?

Better than its critics allow, and worse than its promoters imply. Here is ERCOT’s own comparison, which almost nobody in the public debate has read.

4.1 ERCOT’s own numbers

Permian import paths, 2038 (2024 dollars)	345 kV	500 kV	765 kV
Meets ERCOT / NERC criteria	Yes	Yes	Yes
Incremental N-1 transfer capability, MW	1,340	1,712	2,105
Transmission losses at system peak	3.0%	2.8%	2.7%
Import paths required	5	4	3
New right-of-way, miles	1,676	1,370	1,255
Average line cost, $M per mile	4.04	6.86	6.10
Total cost, $ billions	12.95	15.32	13.77

Three things fall out of that table that change how you should read the political fight.

• 765 kV is not the cheapest option. 345 kV is roughly $820 million cheaper in the Permian plan. The case for 765 kV rests on fewer corridors, lower losses, and — per ERCOT’s long-run simulation for 2039 — about $229 million a year in consumer energy cost savings plus $28 million in production cost savings. Not on capital cost. Anyone claiming 765 kV was chosen to save money is wrong; anyone claiming it was chosen despite being more expensive is right but incomplete.
• The right-of-way argument is the strongest one, and it is regionally true but statewide false. In the Permian, 765 kV needs 25% less new corridor — 1,255 miles versus 1,676. Across the full statewide plan, ERCOT’s own comparison states that the 765-kV build “includes 434 more miles of new ROW impact” than the 345-kV alternative, offset by roughly 1,443 fewer miles of upgrades to existing lines. “Fewer lines, less land” is a defensible regional claim being deployed as a statewide one.
• The capacity ratio depends entirely on which number you cite. The widely repeated framing is that one 765-kV line on a 200-foot corridor replaces five 345-kV lines needing 750 feet combined. That is textbook-correct for long-distance transfer and consistent with the physics. But the incremental transfer capability in ERCOT’s plan is 2,105 MW for the 765-kV configuration against 1,340 MW for the 345-kV configuration — a ratio of about 1.57, because the 345-kV costing assumes double-circuit construction while the 765-kV paths are single-circuit. Both figures can be honest and still leave a legislator with two very different impressions.

4.2 What the article got right, and what it left on the table

“One 765-kV line can carry the same amount of energy as three or four 345-kV lines” is a fair, conservative rendering. The more interesting story is that a 5:1 framing and a 1.57:1 engineering result are both circulating in the same hearing room and nobody has reconciled them publicly. That gap is worth a direct question to ERCOT rather than an accusation — but it is exactly the kind of thing that, once a landowner’s engineer notices it, corrodes trust in the rest of the case.

One caveat on sourcing: ERCOT publishes the underlying Permian study as a ZIP archive, and the 1,340 / 2,105 MW figures could not be re-verified independently of the research trail. Confirm them against the study itself before building an argument on the ratio.

5. Is the need real? The demand case is the weak link

If the plan gets stopped, this is where it will be stopped. Not on property rights — on the forecast.

5.1 What Texas actually uses, and what it is projected to use

Measure	Figure	Context
All-time peak, Aug. 10, 2023	85,508 MW	The standing official record for most of the period this plan was designed in.
Peak, July 22, 2026	~91,089 MW	Up 6.5% over three years — real growth, but nothing like the forecast curve.
2030, transmission-company reported	208 GW	The number the utilities filed. HB 5066 requires ERCOT to count this, including load with no signed agreement.
2030, ERCOT adjusted	138 GW	ERCOT’s own screen of the same pipeline.
2030, independent (Ascend Analytics)	~120 GW	Applies a 55% success rate to announced projects.
2032, cited in the article as ERCOT	“more than quadruple”	Traceable to an April 2026 figure regulators have called almost certainly flawed.
2032, per ERCOT CEO on July 29, 2026	~175 GW — “nearly double”	Given to the committee at the hearing this article is about.
Large-load interconnection queue	474 GW, ~90% data centers	Roughly five times the state’s all-time peak. About 205 GW survive ERCOT’s first viability screen; 315 projects had no qualifying study at all.

The spread between 208 GW and 120 GW for the same year is not a rounding difference. It is the difference between a $33 billion emergency and a very expensive mistake, and the statute tilts the commission toward the high number.

5.2 The Permian numbers specifically

Chairman Gleeson told senators the buildout is “mostly based on oil and gas electrification.” By ERCOT’s own arithmetic it is about half.

Permian load component	2030	2038	Share
Oil and gas electrification	11,964 MW	14,705 MW	51% → 56%
Everything else	11,695 MW	11,695 MW	49% → 44%
Total projected	23,659 MW	26,400 MW	vs ~7 GW today

Two facts inside that table deserve far more attention than they have received.

• The non-oil-and-gas half is mostly crypto and hydrogen, not data centers. Roughly 59% is crypto mining, 22% green hydrogen, 13% general commercial and industrial, and only about 6% data centers. Federal hydrogen credits expire after 2027. Only 39% of this load is confirmed by executed contract; more than half rests on officer letters. This is the softest load in the plan and it is nearly half the plan.
• The oil-and-gas estimate itself varies by a factor of four. The S&P Global study commissioned by six oil majors put it at 11,964 MW. The University of Texas Bureau of Economic Geology put it at 5,291 MW in its base case. ERCOT’s own long-term load forecast implies roughly 3.1 GW. ERCOT built the plan on the highest of the three — the one paid for by the companies that benefit from the lines.

The strongest argument against the plan, and the article barely touches it Not “this crosses my ranch.” The argument is: the need finding rests on a forecast supplied by parties with a financial interest in it being large, using an input study funded by the industry that benefits, under a statute that requires the regulator to count uncontracted load, on a 180-day clock that makes independent verification impractical. That is a serious regulatory-capture argument that a court could engage with. “We want to revisit this next session” is not.

5.3 The counter-case, which is also strong

None of the above means the lines are unnecessary. ERCOT’s technical case is not speculative:

• The Permian has roughly 2,800 MW of conventional generation against 28,400 MW in North Central Texas and 25,900 MW on the Coast. The region is structurally short.
• ERCOT’s base cases for both 2030 and 2038 failed to solve — voltage instability even at N-0, meaning before any equipment fails.
• ERCOT’s COO told the committee rolling blackouts in the Permian are possible as soon as next year, and that pushing the required power through existing lines “would damage the existing infrastructure.” He also said the lines are necessary “with or without” HB 5066.
• Todd Staples’ fairness point is legitimate and rarely rebutted: West Texas ratepayers helped fund transmission buildouts for Houston, San Antonio and the Rio Grande Valley under the same postage-stamp method now being questioned when the money flows the other direction.

One wrinkle worth flagging for anyone tracking this closely: on July 29 the COO said blackouts were possible “next year.” On August 14 the framing had become “within five years.” That may be a difference between speaking to a hostile committee and speaking to a friendly regulator, or a genuine revision. Either way it is the kind of drift that opponents will notice.

6. Who pays — and the December deadline nobody is covering

Sen. Campbell asked the right question: why can’t the Permian Basin pay for it themselves? The answer is structural, and it is the reason this fight exists.

6.1 The postage stamp

• How it works. Each transmission provider’s revenue requirement is recovered across all of ERCOT based on the four coincident peak (4CP) method — the average of the single highest 15-minute load intervals in June, July, August and September. There is no locational or beneficiary-pays element. A line built for the Permian and a line built for Houston recover identically, statewide.
• Why residential customers pay more than their share. Large industrial and transmission-level customers are billed on their own measured 4CP, so they can — and increasingly do — shut down during the four intervals that set their bill. Residential customers are billed volumetrically per kWh and cannot. At CenterPoint in 2023, residential customers were 33% of energy consumed but bore 49% of allocated transmission cost. Per-utility residential allocators run 41.6% to 49.3%.
• It is getting worse fast. ERCOT’s transmission cost of service went from about $1.5 billion in 2010 to $5.1 billion in 2024, with projections near $13 billion by 2034. Transmission and distribution together have gone from roughly 30% of a Texas residential bill in 2002 to roughly 40% today. The ERCOT transmission rate is up 116% since 2013, and the number of large customers actively dodging the 4CP intervals grew from 418 in 2022 to 1,080 in 2024 — which shifts more cost onto everyone who cannot dodge.

6.2 What the buildout adds to a household bill

Source	Estimate	Basis
NRG (Feb. 2025)	+$178 to $268 per year	Residential transmission and distribution component up 24–32% at a $32.99B buildout with 4CP unchanged. Assumes 7.0% weighted cost of capital, 30-year depreciation, ~48% residential allocation. Also finds the buildout at least doubles annual ERCOT transmission cost of service, adding more than $6B/year.
Texas Public Policy Foundation (Jan. 2026)	“At least $100 per year”	Adds more than $3 billion annually in transmission cost of service across the 2030s; normalized to $18/MWh by 2034. TPPF opposes the plan and also opposes the renewable buildout — read accordingly.
Public Utility Commission	None	A commission spokesperson confirmed in February 2025 that the agency does not have an estimate. That is, on its own, a finding.
Sierra Club (June 2026)	Residential charges could fall ~10%	If 4CP is replaced with 12CP plus a large-load demand charge — the pending rulemaking. The ERCOT-wide residential allocator would drop from 30.75% to 27.53%. (Note this is the system-wide allocator, not the per-utility figures cited above.)

6.3 The CREZ precedent, which everyone should be citing and nobody is

Texas has done exactly this before. Between 2009 and 2014 the state built roughly 3,600 miles of transmission to unlock West Texas wind under the Competitive Renewable Energy Zones program — also on the postage stamp, also with no cost assigned to the generators who benefited.

CREZ	Outcome	Read-across
PUC cost estimate, 2008	$4.93 billion	—
Final capital cost	$6.9 billion	A 40% overrun, driven largely by route changes that added more than 600 miles.
Bill impact	“Several dollars” per month	Never officially quantified. Reconstructed from cost-of-service data at roughly $4/month at the 2015 peak, falling to about $2.50 by 2024.
Offsetting benefit	$31.5 billion	Comptroller’s estimate of wholesale price savings from CREZ wind, 2010–2022. The strongest argument that these buildouts can pay for themselves.
Applied to this plan	$33B → ~$46B	If the same 40% overrun rate holds. Route litigation is already heavier than CREZ faced.

The deadline nobody is covering Senate Bill 6, passed in 2025, requires the Public Utility Commission to reevaluate the 4CP cost allocation methodology and amend its rules no later than December 31, 2026 — before the Legislature convenes. That is Project 58000. It proposes replacing 4CP with 12CP, codifying the settlement interval, and imposing a minimum billing demand on large loads. Comments closed August 11, 2026. A decision is expected in December. If it lands as proposed, it could cut the residential share of transmission cost by roughly a tenth and put real cost on the large loads driving the buildout — which is precisely what Campbell, Abbott and most Texas voters say they want. It may move more money than the entire certification fight, it requires no legislation, and it arrives one month before the session that everyone is waiting for. If you write one thing about this story that nobody else is writing, this is it.

7. Is gas generation a real alternative?

Sen. Sparks says the utilities are “overlooking the obvious” by not building gas plants in a region swimming in natural gas. It is the most intuitive objection in the debate and the one that survives contact with the evidence least well.

7.1 You cannot buy a turbine

• GE Vernova was taking reservations for 2031 delivery as of July 2026. Siemens Energy quotes three years or more. Mitsubishi’s recent orders deliver 2028–2030.
• GE Vernova’s gas power backlog went from 83 GW at the end of 2025 to 116 GW by mid-2026. Global orders are running near 110 GW a year against 60–70 GW of manufacturing capacity. The bottleneck is single-crystal turbine blades, which cannot be scaled quickly.
• Prices have moved accordingly: roughly $785/kW in 2022 to about $2,400/kW today. BloombergNEF put US combined-cycle capital cost at $2,157/kW in 2025, up 66% against 2023, with build times 23% longer.

A gas plant ordered today does not reliably serve load before 2029–2031 — which is the same window the transmission lines are targeting, at a cost that is no longer obviously lower.

7.2 The economics are worse than the supply chain

• ERCOT’s scarcity pricing mechanism was active for 57 hours in 2025, against 1,458 hours in 2022. The revenue that justifies a peaker has largely evaporated.
• The West zone’s average real-time price in 2024 was $35.71/MWh — below the lowest new combined-cycle levelized cost, and below even a fully depreciated plant’s marginal cost 55% of the time.
• Brattle’s cost-of-new-entry study found no merchant combined-cycle plant met its criteria; aeroderivative turbines accounted for 98% of recent merchant thermal entry, at a levelized cost above solar-plus-storage.
• Revealed preference settles it. ERCOT’s 2025 additions were 6.2 GW of solar, 7.3 GW of storage, and 280 MW of gas. Developers are not declining to build gas in West Texas because they overlooked it.

7.3 The state already tried subsidizing it

The Texas Energy Fund offers 3% twenty-year loans covering up to 60% of project cost for dispatchable generation of 100 MW or more. It drew more than 70 applications totaling over 38 GW.

Texas Energy Fund	Figure	Note
Selected for due diligence, Aug. 2024	17 projects, 9.7 GW	$5.38 billion requested.
Withdrawn by November 2025	≥8 projects, ~35% of proposed capacity	ENGIE cited “equipment procurement constraints.” WattBridge withdrew 1,620 MW across four projects.
Loans finalized as of June 2026	8	Several were already under development before the fund existed.
Statutory disbursement deadline	Dec. 31, 2025	Extended to Dec. 31, 2027 — the mechanical trigger for most withdrawals.

7.4 And the gas itself is harder than it looks

• Flared gas is not a fuel supply. Total reported Permian flaring runs around 275 MMcf/d. A single 1,000 MW plant running at 90% capacity factor consumes 133–181 MMcf/d depending on heat rate — half to two-thirds of everything flared in the Texas Permian, and that assumes 100% capture, which is not achievable across thousands of dispersed wells. No grid-interconnected flare-gas power plant exists in the basin, and the sum of all genuine flare-gas generation ever built nationwide is well under 500 MW.
• Permian gas is often off-spec. Pipeline specification is 4 ppm hydrogen sulfide; some Permian wells run above 4% — ten thousand times that — with CO₂ above 10%. Treating requires amine plants and acid-gas injection wells. There is precedent: when Odessa built a 62-mile pipeline to burn local high-nitrogen gas in 2010, the turbines could not run on it at all above a 50% blend.
• Air permitting risk is rising. No part of the Permian is currently in ozone nonattainment, but a petition filed in April 2026 seeks that designation for 36 Texas counties. If granted, major-source thresholds drop sharply, emission offsets must be sourced from inside the area — and the Permian has no offset bank — and the required control standard does not consider economic impact. The limiting pollutant would be nitrogen oxides, which is exactly what turbines emit.

Where this leaves Sparks and Staples They are describing the same market from opposite ends, and both are right. Staples is right that so much Permian demand is now met by intermittent solar and wind that a gas plant running only in the gaps cannot earn its capital back. Sparks is right that building 765-kV transmission into a region full of wind and solar will, in practice, move more wind and solar. Neither is describing a gas plant that can be financed, permitted, supplied with turbines and energized before 2030. That is the part of the argument that does not survive.

8. The box the commission is in

Everyone is demanding the PUC “deny” or “pause.” Those are not equivalent, and only one of them is durable.

8.1 Denial is legally available — on the right grounds

Utilities Code §37.056(a) says the commission “may approve an application and grant a certificate only if” it finds the line necessary for the public convenience and necessity. Approval, not denial, is the burdened act. Subsection (b) expressly permits the commission to grant as requested, grant only a portion, or refuse to grant.

The problem is the stated reason. “The Legislature intends to revisit this next session” is not among the statutory factors. A denial order resting on that rationale is squarely exposed on substantial-evidence and arbitrary-and-capricious review in Travis County district court.

The durable path is to deny on grounds already in the record: defective notice and due process — roughly 1,300 landowners were added to proceedings after route changes — plus community values and environmental integrity, all of which are statutory factors. Legislative timing then operates as unstated motive rather than stated basis.

8.2 The middle path nobody is discussing

Section 37.056(b)(2) lets the commission grant a certificate for only a portion of the requested system. Given that the three import paths differ substantially in contestedness — the northern line is far further along than the Hill Country line — a partial grant would let the commission preserve the reliability case for the least-contested segments while sending the rest back. It has appeared in essentially no public commentary.

8.3 Why abatement is the weakest option

The 180-day clock in §37.057 is enforceable by mandamus — but mandamus compels the commission to decide, not to approve. Any party can force a decision, and the commission could then deny. Docket 59182 has already blown past its deadline with no order. Indefinite delay is not a stable position; it just moves the fight to a courthouse.

This also explains why opponents specifically want denial rather than delay. A denial kills the application; the utilities can refile, but a 2027 refiling would run under whatever rules the 90th Legislature writes. Delay leaves the current applications alive under current law. Following HB 5066’s own transition-rule pattern — new law governs proceedings commencing after enactment — denial-then-refile is the only route that actually changes the governing rules.

8.4 Litigation risk is lower than it looks

The industry is not united. The Association of Electric Companies of Texas appears to have publicly conceded the process was inadequate — its president is quoted saying “it’s become clear that the existing transmission routing process has been inadequate for the geographic expanse of these projects.” If that quote holds up, it is a remarkable admission from the trade association of the applicants, and it substantially weakens any later argument that denial on process grounds was arbitrary. It rests on a single sourcing chain and should be confirmed before it is relied on in an argument.

Oncor is the most likely lone litigant. The Permian Basin Petroleum Association has said it is “agnostic about the voltage, routes, or other considerations” and cares only about delay. No utility has publicly threatened suit.

Two political facts sit underneath all of this. Every sitting commissioner was appointed by Gov. Abbott — close to tautological given he has been governor since 2015, but it matters for how a denial would be read. And both Abbott and Patrick are on the November ballot.

No precedent for the PUC denying a major transmission certificate was located in any source consulted. That is an argument from absence and should be treated as one — the commission also routinely grants applications in part, which may be the more likely outcome here than a clean denial.

9. Why this is a political earthquake, not a zoning dispute

The article correctly notes that public sentiment has turned against data centers. The numbers behind that sentence are more dramatic than the sentence.

9.1 The polling

Poll	Result	Detail
UT / Texas Politics Project, June 5–12, 2026	29% support, 56% oppose	Data centers in your community. 1,200 registered voters. Republicans 42–44. Rural 22–62, with 50% strongly opposed. Suburban women 18–65. Pollster Jim Henson: “we were a little surprised by the lopsidedness.”
Emerson College / Nexstar, Aug. 9–10, 2026	33% support, 60% oppose	1,000 likely voters. Six weeks later, no improvement.
Texas A&M Bush School, July 27–30, 2026	65–22 for regulating data centers	Republicans 75–14. Democrats 59–30. Republicans want more regulation than Democrats — potentially the most politically consequential number in this story, though it is one question in one survey of 619 likely voters and the Republican crosstabs here sit oddly against the UT poll’s 42–44. Worth a second data point before building on it.
UH Hobby School, April 2026	78–79% say data centers should pay	Under 5% say households should pay for the grid upgrades data centers require. Identical across party lines.
Abbott job approval on the grid	36 approve / 40 disapprove	Republicans 61–13, down from 43/39 overall in February 2024. His weakest issue with his own base.

9.2 The map problem

An analysis of project locations found that at least 82 data centers — nearly 60% of those planned or under construction — sit in state House districts that voted for Trump and elected a Republican in 2024. More than half of planned Texas data centers are in unincorporated areas, up from 12% of existing ones — meaning they land in exactly the places with the least local authority to say no.

Agriculture Commissioner Sid Miller said it plainly in Lubbock on August 6: “Republicans should be on this issue and we’re not. The Democrats are, and they’re right on the issue. I’m not endorsing any Democrats, but we’re going to lose some elections in the midterms because of this one subject.”

9.3 The coalition is not unified — and the article flattens it

Reporting this as “landowners versus the lines” obscures at least five distinct positions that want incompatible things.

Position	Who	What they actually want
Deny outright	Sen. Schwertner; Rep. Brad Buckley; most July 29 witnesses; Lt. Gov. Patrick (per most coverage)	Denial, so the 90th Legislature rewrites the process and utilities refile under new law.
Defer the need finding	American Stewards of Liberty; 43 legislators via a TPPF-drafted amicus brief	Reopen the demand case and force consideration of local gas generation.
Reroute	Hill Country Preservation Coalition; Bandera, Real, Edwards and Val Verde county resolutions; Devils River Conservancy	Move the lines to highway and existing corridors. The lines still get built. “We’re not against progress.”
Reform and build	Association of Electric Companies of Texas; Sen. Kolkhorst; Patrick’s own words	Fix notice and routing. Patrick said explicitly the lines are ones “many believe must be built.”
No delay	Oncor; Texas Oil & Gas Association; Permian Basin Petroleum Association	Proceed. “The greatest risk of failure is for these necessary projects to falter under any sort of delay.”

The ideological cross-current the coverage keeps missing The intellectual engine of the pause campaign is the Texas Public Policy Foundation, which drafted the 43-legislator amicus brief. TPPF also opposes the state’s wind and solar buildout, and its policy director argues Texas should “expand local gas generation” rather than transport power “to manage the problems associated with overbuilding wind and solar.” Sen. Sparks made the same point at the hearing: “If we charge through with these lines right now, it’s almost guaranteed that what we’ll fill these up with is more wind, mostly solar.” So one of the strongest currents against these lines is not property-rights conservatism at all — it is opposition to renewables, wearing property rights as a coalition partner. And the pro-transmission counterweight includes environmental groups, because 765-kV lines would move a great deal of West Texas wind and solar. Framing this as ranchers versus oil companies gets the alignment backwards.

9.4 Texas is an outlier on scale and a laggard on tools

Local governments elsewhere kill data center projects by denying rezoning. Texas counties cannot — they have no zoning authority. The consequences are visible:

• Hood County: commissioners rejected a six-month pause 3–2 after a state senator sent a same-day letter to the attorney general asserting counties lack moratorium authority. They then cut allowed lot coverage from 50% to 10% — one commission member conceded the strategy was to make the rules strict enough “so none of them come.” Two developer lawsuits are pending.
• Hill County: passed the state’s first county data-center moratorium on May 12, 2026. A developer sued for $100 million in federal court on May 27. The moratorium was rescinded unanimously on June 4. Preemption did in four weeks what politics could not.
• San Marcos: voted 4–3 on June 16, 2026 to make data centers ineligible anywhere in the city — the first outright Texas municipal ban. A state senator has said he will challenge it.
• Fort Worth: voted unanimously on August 11, 2026 to take the first step toward a moratorium and to require every new application to show PUC and ERCOT interconnection approval — precisely when the state approval process is frozen.
• Texas has no statewide initiative process, so the referendum route available in other states is closed. At least 34 counties have formally asked the state for more information.

Where Texas is genuinely ahead is market design — SB 6’s curtailment mandate, its 75 MW interconnection regime, and the December 4CP rewrite have no real peer in other states. The gap is in land use and water, not electricity markets.

9.5 The tax fight running in parallel

The data-center sales tax exemption has gone from costing the state $5–30 million a year between 2014 and 2022 to at least $1.3 billion in fiscal 2026. The biennial estimate for 2027–28 was revised from roughly $180 million to $3.2 billion. At a July 27 Senate Finance hearing it emerged that of 138 qualified data centers, only 20 had been audited — and 6 of those 20 were in breach. The Finance chair, who voted for the exemption in 2013, said: “No tax exemption should operate on autopilot.”

10. What to watch

When	What	Why it matters
Aug. 18–19, 2026 (unconfirmed)	Reported House Committee on State Affairs hearing on the 765-kV regulatory and planning process, chaired by Rep. Ken King	First House engagement. The Senate has moved; whether the House matches determines if this is a Patrick project or a chamber-wide one. Call before relying on the date — no notice appears in Texas Legislature Online as of Aug. 17.
Aug. 21, 2026	PUC may act on Dockets 59029 and 59315 — the northern line	The first real test. Not the Hill Country line, contrary to some coverage.
Aug. 25–27, 2026	AEP Texas open houses on the Blu Lacy–Howard segment	A 150-mile segment from Nueces to Bexar County — evidence the buildout extends well beyond the Hill Country.
End of Aug. 2026	PUC deadline on Howard–Solstice, Docket 59336	The Hill Country line. The single most-watched decision.
Sept. 2026	LCRA expects a decision on Bell County East–Big Hill, Docket 59475	122 alternative routes, 14 counties including Burnet, Llano and San Saba. The PUC already delayed this once in June.
Overdue	Docket 59182 (Big Hill–Sand Lake) is past its 180-day deadline	Anyone can seek mandamus to force a decision. Watch for whoever moves first.
Nov. 2026	Bill pre-filing opens; Abbott and Patrick on the ballot; possible Lubbock moratorium ballot measure	The first electoral read on whether the backlash converts into votes.
Dec. 31, 2026	Statutory deadline for the PUC to amend its cost allocation rules — Project 58000	The most consequential and least covered date on this list. Could shift roughly 10% of transmission cost off residential bills without any legislation, one month before the session convenes.
Jan. 2027	90th Texas Legislature convenes	Schwertner wants “a complete overhaul” of the certification process. Abbott wants data centers to bring their own generation, pay their own interconnection, use closed-loop water, and lose the sales tax exemption.

10.1 Three questions the reporting has not answered

1. Has the Public Utility Commission ever denied a major transmission certificate? No precedent was found in any source. If the answer is genuinely no, that reframes both the political demand and its likelihood.
2. ERCOT commissioned its own study from the University of Texas Bureau of Economic Geology, which put Permian oil and gas load at roughly half what the industry-funded S&P study projected. Why did the higher number drive the plan? Someone should ask that question on the record.
3. If the cost allocation rewrite lands in December and shifts real cost onto large loads, does it defuse enough of the political pressure to let the lines proceed — or does it arrive too late, after the applications have already been denied?

What to tell someone who asks why this matters Texas is about to spend roughly $33 billion statewide — of which the Permian plan is about $14 billion, and which could reach $46 billion if the CREZ overrun rate repeats — recovered from every electricity customer in the state, on infrastructure justified by a demand forecast that ranges by nearly a factor of two depending on whose numbers you use. The statute requires the regulator to weigh the highest one. The Legislature ordered it near-unanimously, compressed the review window, and told the commission to defer to the applicants. Now, facing voters who oppose the development driving it by roughly two to one, it wants the decision back. Whichever way it resolves, someone pays: ratepayers for lines that may not be needed, or West Texas for reliability it has been promised for a decade. There is no version where nobody loses.

Sources

Primary documents were prioritized over reporting wherever both existed. Two constraints on this research are worth stating: the PUC Interchange document server and texasscorecard.com both block automated retrieval, so filings and some quotes are sourced through trade press, party filings and search extraction rather than the original pages. Docket numbers are given so they can be pulled directly.

Primary — statute and orders

• HB 5066 enrolled text (88th Legislature, 2023) — capitol.texas.gov/tlodocs/88R/billtext/html/HB05066F.htm
• SB 6 enrolled text (89th Legislature, 2025) — capitol.texas.gov/tlodocs/89R/billtext/html/SB00006F.htm
• Texas Utilities Code Chapter 37 — statutes.capitol.texas.gov/Docs/UT/htm/UT.37.htm
• PUC First Order approving the Permian Basin Reliability Plan, Oct. 7, 2024 (Project 55718)
• PUC Second Order selecting the 765-kV import paths, Apr. 24, 2025
• 16 TAC §25.192, four coincident peak allocation — puc.texas.gov/agency/rulesnlaws/subrules/electric/25.192/25.192.pdf
• Howard–Solstice CCN application, Docket 59336 — cpsenergy.com (Part 2 filing, Mar. 2026)
• Buckley/Sparks pause request, Docket 59029 Item 483; 43-legislator amicus brief, Item 465

Primary — ERCOT

• Permian Basin Reliability Plan Study, July 2024 — the source of the 345/500/765 comparison table
• 2024 Regional Transmission Plan: 345-kV Plan and Texas 765-kV STEP Comparison, Jan. 2025
• Senate Business & Commerce presentations, July 29, 2026 — Panel 1 (Vegas, load) and Panel 2 (Rickerson, 765 kV)
• ERCOT all-time peak demand records — ercot.com/static-assets/data/news/content/a-peak-demand/all-time-records.htm
• ERCOT West Texas Load Study, June 2022

Analysis and advocacy — read with the source’s position in mind

• NRG, ERCOT Transmission Costs and Rate Design, Feb. 25, 2025 — the $178–268/year residential estimate
• Texas Public Policy Foundation, The Explosion of Transmission Costs in ERCOT, Jan. 2026, and the 765-kV STEP assessment, June 2026 — TPPF opposes both the plan and the renewable buildout
• Sierra Club, Texas’ $33 Billion Transmission Plan, June 2026
• Brattle Group, ERCOT Cost of New Entry for the 2026 Online Year
• Potomac Economics, 2025 State of the Market Report for ERCOT
• American Stewards of Liberty, Motion to Defer Determination of Need, Docket 59029

Reporting

• Texas Tribune — July 31 and Aug. 14, 2026 coverage of the hearing, Patrick’s intervention, and the PUC special meeting
• KUT — July 30, 2026, the fullest account of the 15-hour hearing
• E&E News — “$33B transmission build-out leaves Texas ranchers fuming” and “Texas regulators urged to halt $33B transmission plan”
• The Texan — official reactions to the July 29 hearing
• Texas Scorecard — the Gleeson “never explicitly approved” reporting (advocacy-aligned; the verb “admitted” is theirs, though the substance is independently corroborated by the Oct. 2024 order)
• Utility Dive and RTO Insider — the 2024–25 PUC approval sequence
• DailyTrib — Aug. 7, 2026, on the scheduling of the House hearing and PUC meeting
• San Antonio Express-News — “Century-old H-E-B-tied farm threatened by biggest-ever Texas transmission line,” July 26, 2026
• Polling: UT/Texas Politics Project (June 2026), Emerson College/Nexstar (Aug. 2026), Texas A&M Bush School/ReconMR (July 2026), UH Hobby School (Apr. 2026)

One correction to carry forward The Express-News story the article links to describes Constanzo Farm in Atascosa, southwest Bexar County — the Adamek family. The H-E-B connection is a roughly 90-year supplier relationship dating to the 1930s, when the current owner’s grandfather drove produce to San Antonio’s Market Square in a Model T. The Butt family does not own the farm. Any summary saying “H-E-B’s farm” would be wrong.

Confidence levels

Not everything in this document is equally well established. Three tiers:

• Verified against primary documents. All HB 5066 content and vote counts; Schwertner’s Senate sponsorship; the §37.057 and §37.056(c-1) statutory text; the ERCOT 345/765 cost comparison ($12.95B / $13.77B statewide $30.75B / $32.99B); the 434-mile right-of-way differential; the $229M and $28M savings figures; the April 2025 voltage selection; the December 2025 ERCOT board endorsements. Build on these freely.
• Corroborated across independent reporting but not re-read from the source. The July 29 hearing and its quotes; the Aug. 14 PUC meeting; Patrick’s and Schwertner’s statements; the docket details for Howard–Solstice and the other lines; the polling; the local data-center fights; the Texas Energy Fund figures. Solid, but cite the underlying source rather than this document.
• Single-chain sourcing — confirm before publishing. The Aug. 19 House hearing (probably wrong); the AECT president’s quote; the 1,340 / 2,105 MW per-path transfer figures; the NRG and CREZ bill-impact numbers; the flaring baseline; Jimmy Fair’s testimony; and the Campbell and Staples quotes carried over from the article itself. The PUC Interchange server and several news sites block automated retrieval, which is the reason for most of these gaps.

What the audited numbers show in Collin and Dallas Counties

A collaboration between Lewis McLain & AI

The core assertions in the original post hold up. Texas school districts are adopting deficit budgets in large numbers, campuses are closing, and the funding formula has not kept pace with cost growth. But “the system is broken” is a conclusion, not a diagnosis. Five districts within a thirty-mile radius — Plano, Frisco, Richardson, McKinney, and Allen — all operate under the identical state formula, and their 2026-27 outcomes range from a balanced budget to a $44,800,000 shortfall. That spread is where the real explanation lives.

Every figure below for fiscal year 2025 is audited. All five districts received unmodified opinions.

Two corrections before going further

The average teacher salary figure of $63,749 is one year stale. That was the Texas Education Agency’s calculation before last year’s statewide raises took effect. The current TEA figure is $68,001, against an NEA-computed national average of $76,552. Texas ranks 29th nationally in average teacher pay — the third consecutive year at that position. Adjusted for inflation, Texas teachers earn 3.67% less than in 2017, a compound annual real decline of 0.47% over eight years. That is the more durable number, and the one worth citing.

Second, the post’s framing implies inaction. The 89th Legislature appropriated $8.5 billion in new public education funding through House Bill 2 in June 2025. What it did not do is raise the basic allotment meaningfully — the per-student allotment moved from $6,160 to $6,215, an increase of 0.89%, with most of the $8.5 billion routed into teacher pay mandates and program-specific allotments rather than the base amount districts can deploy against inflation. That distinction separates “the state spent nothing” (false) from “the state spent a great deal in ways that do not close operating deficits” (demonstrably true, as the five districts below prove).

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District	County	Revenue	Expenditures	Deficit	Deficit as % of expenditures
Plano ISD	Collin	$634,600,000	$691,600,000	$44,800,000	6.48%
Richardson ISD	Dallas	$403,800,000	$427,700,000	$20,800,000	4.86%
Allen ISD	Collin	$220,700,000	$226,000,000	$5,314,470	2.35%
McKinney ISD	Collin	$276,000,000	$282,000,000	$5,800,000	2.06%
Frisco ISD	Collin	$751,900,000	$751,900,000	$0	0.00%

Every one of these boards adopted in June 2026. Every one operates under the same basic allotment, the same tax compression schedule, the same special education and transportation mandates, and the same House Bill 2 allotments. Four of the five are in the same appraisal district. The 6.48-point spread between Plano and Frisco is not a difference in state treatment.

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The audited picture: fiscal year ended June 30, 2025

Adopted budgets are projections. The annual comprehensive financial reports are the ground truth, and they change the story materially.

District	Revenues	Expenditures	Net change in fund balance	Ending fund balance
Frisco ISD	$754,569,861	$733,947,380	+$22,494,543	$263,799,633
Plano ISD	$686,920,617	$677,146,430	+$3,386,247	$276,399,468
Allen ISD	$214,896,617	$216,790,527	−$916,685	$73,258,476
McKinney ISD	$256,206,330	$267,673,202	−$10,711,346	$99,861,556
Richardson ISD	$414,279,418	$430,319,383	−$16,993,327	$166,520,684

Note McKinney. Its adopted 2025-26 budget anticipated a $7,500,000 draw. The audited fiscal 2025 result was a $10,711,346 decline — 9.69% of beginning fund balance in a single year, the steepest proportional drawdown of the five. Richardson’s larger dollar decline was 9.26% of its beginning balance.

District	Total fund balance	Unassigned	Total FB as % of expenditures	Unassigned as % of expenditures	Unassigned as % of total FB
Plano ISD	$276,399,468	$82,118,880	40.82%	12.13%	29.71%
Richardson ISD	$166,520,684	$108,523,219	38.70%	25.22%	65.17%
McKinney ISD	$99,861,556	$93,080,833	37.31%	34.77%	93.21%
Frisco ISD	$263,799,633	$248,420,281	35.94%	33.85%	94.17%
Allen ISD	$73,258,476	$50,220,294	33.79%	23.17%	68.55%

This is the finding that only the audits produce. Rank the districts by total fund balance and Plano leads at 40.82%. Rank them by usable reserves and Plano finishes last, at 12.13% — less than half the next-lowest and roughly a third of McKinney’s and Frisco’s.

Only 29.71% of Plano’s general fund balance is unassigned. McKinney’s is 93.21% unassigned and Frisco’s is 94.17% — essentially unencumbered. The difference is that Plano’s board has pre-committed the balance: $170,000,000 assigned to cash flow requirements, $10,000,000 to insurance deductible, $7,800,000 to the following year’s budgeted deficit, and $4,577,161 to purchases on order — $192,377,161 in total assignments. McKinney carries $2,550,000. Frisco carries $14,388,186.

District	Days of operations, total FB	Days of operations, unassigned	Unassigned ÷ adopted FY27 deficit
Plano ISD	149.0	44.3	1.83 years
Richardson ISD	141.2	92.1	5.22 years
McKinney ISD	136.2	126.9	16.05 years
Frisco ISD	131.2	123.5	Not applicable — balanced
Allen ISD	123.3	84.6	9.45 years

Plano holds 44 days of unassigned reserves. McKinney holds 127 — nearly triple, on a district roughly 40% Plano’s size. The district running the largest deficit in absolute dollars and the highest deficit as a share of expenditures also has the least discretionary cushion behind it.

McKinney’s board policy sets a floor at three months of operating expenses, or 25%. At $267,673,202 in fiscal 2025 general fund expenditures, that floor is $66,918,301 — leaving $26,162,532 of headroom above policy, or 4.51 years at the adopted $5,800,000 deficit. That is materially better than the estimate available from board presentations alone, which suggested roughly 2.6 years.

Frisco’s audit states the reserve convention explicitly: the standard practice is roughly 25% of annual expenditures, and Frisco has deliberately raised its own target to about 30% to absorb enrollment decline without leaning on additional state aid. Its unassigned balance at June 30, 2025 equals 32.6% of the fiscal 2026 adopted budget.

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Variable one: recapture exposure

Chapter 49 recapture does more work in this comparison than any other single line item, and the audited figures make the disparity unmistakable.

District	Amount	% of GF expenditures	Per student
Plano ISD	$136,249,803	20.12%	$3,110
Frisco ISD	$13,398,645	1.83%	$205
McKinney ISD	$7,041,655	2.63%	$302
Richardson ISD	$5,452,555	1.27%	$147
Allen ISD	$3,423,716	1.58%	$170

Plano remitted 20.12% of its total general fund expenditures to the state in fiscal 2025 — more than one dollar in five, before a single teacher was paid. Frisco, a district with a larger budget, remitted 1.83%. Per student, Plano’s recapture burden is roughly fifteen times Frisco’s and twenty-one times Richardson’s.

The mechanism deserves stating plainly, because it is counterintuitive and it is the heart of the problem. Recapture is calculated on taxable value per student in weighted average daily attendance. When a district loses students but retains its property wealth, value-per-student rises, and the recapture obligation rises with it. Plano’s certified net taxable value grew from $61,900,000,000 in tax year 2021 to $74,400,000,000 in tax year 2025 — 20.09% cumulative, a compound annual growth rate of 4.71% across four growth periods — while enrollment fell at a compound annual rate of 5.21%.

So Plano loses formula revenue on the way out and pays more recapture on the way in. Each departing student subtracts state entitlement and simultaneously increases the share of local collections classified as excess wealth. The district is penalized twice for the same demographic event, and it has no policy lever that touches either side. Richardson’s audit documents the inverse: the September 2025 amendment reflecting House Bill 2, Senate Bill 4, and Senate Bill 23 reduced its recapture, because the enlarged homestead exemptions cut taxable value 5% against a budget built on 5% growth.

McKinney’s audit isolates the same pressure at smaller scale. Its $10,711,346 general fund decline is attributed in part to a $1,610,473 increase in recapture — a 29.65% jump in one year — alongside a $14,300,000 drop in state program revenue.

This is the single most important specific to add to the original post. Underfunding and recapture are different problems requiring different legislative fixes. A basic allotment increase helps Richardson, McKinney, and Allen considerably. It helps Plano far less, because a meaningful share of any increase is recaptured back. Districts on Plano’s side of the line need the wealth-per-student threshold indexed, not just the allotment raised.

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Variable two: enrollment and cost per pupil

District	Prior	Current	One-year change	Multi-year CAGR
Plano ISD	43,808 (2025-26)	41,830 (2026-27 proj.)	−4.52%	−5.21% (2024-25 to 2026-27)
Allen ISD	20,140 (2025-26)	19,575 (2026-27 proj.)	−2.81%	−3.15% (Oct. 2024 to 2026-27)
Frisco ISD	66,698 (FY2024)	65,289 (FY2025)	−2.11%	−1.22% from 2023 peak
Richardson ISD	36,970 (2024-25)	36,247 (2025-26)	−1.96%	−0.44% over five years
McKinney ISD	23,306 (FY2024)	23,296 (FY2025)	−0.04%	−0.68% over nine years

District	Enrollment CAGR, 2016–2025	Operating cost per pupil, 2016	2025	Cost per pupil CAGR
Frisco ISD	+2.28%	$7,276.48	$10,297.80	+3.93%
McKinney ISD	−0.68%	$9,112	$13,527	+4.49%

Both districts’ own statistical schedules tell the same story from opposite demographic positions. Frisco grew enrollment 2.28% annually for a decade; McKinney shrank 0.68% annually. Cost per pupil rose 3.93% and 4.49% respectively. Growth did not protect Frisco and stability did not protect McKinney, because in both cases per-pupil cost outran the basic allotment, which rose 0.89% in the same period that these districts absorbed compounding increases in salary, utilities, insurance, and mandated services.

McKinney is the cleanest proof available that this is not an enrollment story. Its enrollment fell 10 students last year — 0.04%. It still drew $10,711,346 out of fund balance.

Richardson supplies the second control case. Its five-year decline is 2.2%, a 0.44% compound annual rate, and it still adopted a $20,800,000 deficit and drew $16,993,327 in fiscal 2025.

The state demographer attributes the broader regional decline to out-migration toward the outer ring counties — Rockwall, Wise, Parker, Johnson, Ellis — and to falling birth rates. Neither originates in Austin. Any honest version of this argument concedes that some North Texas district distress is demographic. But McKinney and Richardson demonstrate that demographics are not the binding constraint.

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District	Primary approach	Documented actions	Result
Frisco ISD	Revenue generation	Renegotiated TIRZ agreement with City of Frisco permitting operating use (+$29,000,000 GF revenue in FY2025); Access Frisco open enrollment (870 students, $8,400,000); tuition pre-K (600 students); fare-based busing; $20 Chromebook fee; $21,800,000 personnel savings via attrition	FY2025 closed +$22,494,543 against a budgeted −$30,800,000; FY2027 balanced with 2% raises, rate held at $1.0194
Richardson ISD	Expenditure reduction	$25,700,000 in cuts this cycle; nearly $42,000,000 over three years; four elementary consolidations plus Dobie Pre-K Center	$20,800,000 deficit remains; another $20,000,000 sought in August
McKinney ISD	Facility consolidation	Three elementary closures (Eddins, McNeil, Wolford) effective fall 2026; position eliminations cut the budgeted FY26 draw from $17,000,000 to $7,500,000	$5,800,000 deficit; audited FY25 draw $10,711,346
Allen ISD	Administrative attrition	More than $8,000,000 reduced in a single year, primarily administrative positions	$5,314,470 deficit; FY2025 draw only $916,685
Plano ISD	Not yet restructured	Four campus closures approved June 2024; $5,200,000 annual savings, $20,100,000 one-time capital savings, $340,000,000 avoided future replacement cost	$44,800,000 deficit; leadership states structural change now required

The TIRZ finding reframes the Frisco story. The commonly cited elements — open-enrollment transfers, tuition pre-K, bus fares, device fees — total roughly $10,000,000. The renegotiated tax increment reinvestment zone agreement with the City of Frisco, which permitted the district to apply TIRZ proceeds to operating costs rather than only construction, added $29,000,000 to general fund revenue in a single year. That is nearly three times the fee-and-transfer package.

Frisco balanced its budget primarily by finding a municipal partner willing to redirect an existing revenue stream. That is a genuine achievement and a replicable strategy only where a city has an active TIRZ and a cooperative council. It is not available to Plano, Richardson, McKinney, or Allen on comparable scale, and it should not be presented as evidence that better management alone closes these gaps.

The transfer program does carry a second-order consequence worth naming. Those 870 students came from somewhere, and in Collin County the somewhere is Plano, McKinney, Allen, and Prosper. In a county where every district is shrinking, one district has begun competing directly for average daily attendance — a rational response by a single board and a destructive equilibrium if all of them adopt it.

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The non-recurring revenue problem, across all five

Two districts posted fiscal 2025 gains. Neither is repeatable.

Plano’s fund balance grew $3,386,247, from $273,013,221 to $276,399,468 — 1.23%. The growth came from a $22,600,000 initial Chapter 313 payment from Texas Instruments and a $31,400,000 state aid increase driven by an Available School Fund per-capita rate that rose from $423.747 to $619.868 per average daily attendance. The unassigned balance also rose partly for a mechanical reason: the assignment for budget deficit dropped from $35,000,000 to $7,800,000 as the prior-year deficit failed to materialize.

Frisco’s $22,494,543 gain came against a budgeted $30,800,000 deficit — a favorable swing of $53,294,543 — attributed by its audit largely to the TIRZ reallocation. A revenue stream can only be reallocated once. Frisco’s fiscal 2027 revenue of $751,900,000 is already down $19,790,000, or 2.56%, from the $771,690,000 budgeted for fiscal 2026.

McKinney shows what the year looks like without a one-time item: state program revenue fell $14,300,000, or 25%, expenditures rose 5%, and the fund balance absorbed $10,711,346.

Every one of these districts is one non-recurring item away from the structural gap becoming fully visible. Plano arrives there first because its recapture obligation compounds against it.

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What this adds up to

The original post’s underlying claims survive scrutiny. Deficit budgets are widespread. Campuses are closing. Teacher compensation trails inflation in real terms. Mandated programs are underfunded — Plano projects six required programs costing $141,300,000 in 2026-27 against $66,900,000 in state funding, a $74,400,000 local subsidy for services no district may legally decline.

What the audited specifics add is precision about the mechanism. This is not uniform starvation. It is a formula in which per-pupil cost growth of roughly 4% annually meets a basic allotment that moved 0.89%, and in which one district’s recapture obligation consumes 20.12% of its budget while a larger neighbor’s consumes 1.83%. Plano and Frisco sit eleven miles apart under identical law, with a 6.48-point difference in fiscal outcome and a 44-day versus 124-day gap in usable reserves. That is a structural design problem, and a basic allotment increase alone will not solve it.

The 2027 session will decide two things: whether the basic allotment gets indexed to anything, and whether the education savings account program expands from $1 billion toward the $3.3 billion the Legislative Budget Board projects for 2028. More than 274,000 families applied for roughly 90,000 available accounts, leaving a waitlist above 180,000 students — now the most potent political argument in the building.

Districts should expect both dollars to be argued over at once, and expect the basic allotment to lose that argument again unless someone makes the recapture case with numbers this specific.

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Note on data and method

Fiscal 2025 general fund figures for all five districts are audited, drawn from each district’s annual comprehensive financial report for the year ended June 30, 2025. All five received unmodified opinions — Weaver and Tidwell for Plano and Richardson, Hankins Eastup Deaton Tonn & Seay for Allen, Eide Bailly for McKinney. Fiscal 2026-27 figures are budgets as adopted in June 2026 and are projections, not actuals.

Percentage changes spanning more than one year are stated as compound annual growth rates; single-year changes are stated as simple percentage change. Days of operations are computed as fund balance divided by total general fund expenditures divided by 365. Recapture is function 91, contracted instructional services between public schools; per-student recapture uses each district’s most recent reported enrollment. McKinney and Frisco enrollment and cost-per-pupil figures are from ACFR statistical schedules and are fiscal-year figures on those districts’ own operating-expenditure definitions, which differ slightly — McKinney excludes debt service and most capital, Frisco excludes intergovernmental charges — so the cost-per-pupil CAGRs are comparable in direction but not to the decimal. Other districts’ enrollment is school-year data from board presentations.

One caution on the reserve comparison. The cash flow assignment — $170,000,000 at Plano — is technically available but functionally is not, because Texas districts collect the bulk of ad valorem revenue between December and February and need working capital to cover July through November payroll. Frisco’s audit describes the same four-to-five month cash flow deficit but carries the equivalent cushion as unassigned rather than assigned, and McKinney does likewise. Part of the 44-day versus 127-day gap is a real difference in liquidity and part is a difference in classification convention. The direction of the finding survives the adjustment, but the precise day counts should be treated as indicative rather than exact, and anyone using this comparison in testimony should say so.

Five Districts, One Formula

What the audited numbers show in Collin and Dallas Counties

The core assertions in the original post hold up. Texas school districts are adopting deficit budgets in large numbers, campuses are closing, and the funding formula has not kept pace with cost growth. But “the system is broken” is a conclusion, not a diagnosis. Five districts within a thirty-mile radius — Plano, Frisco, Richardson, McKinney, and Allen — all operate under the identical state formula, and their 2026-27 outcomes range from a balanced budget to a $44,800,000 shortfall. That spread is where the real explanation lives.

Every figure below for fiscal year 2025 is audited. All five districts received unmodified opinions.

Two corrections before going further

The average teacher salary figure of $63,749 is one year stale. That was the Texas Education Agency’s calculation before last year’s statewide raises took effect. The current TEA figure is $68,001, against an NEA-computed national average of $76,552. Texas ranks 29th nationally in average teacher pay — the third consecutive year at that position. Adjusted for inflation, Texas teachers earn 3.67% less than in 2017, a compound annual real decline of 0.47% over eight years. That is the more durable number, and the one worth citing.

Second, the post’s framing implies inaction. The 89th Legislature appropriated $8.5 billion in new public education funding through House Bill 2 in June 2025. What it did not do is raise the basic allotment meaningfully — the per-student allotment moved from $6,160 to $6,215, an increase of 0.89%, with most of the $8.5 billion routed into teacher pay mandates and program-specific allotments rather than the base amount districts can deploy against inflation. That distinction separates “the state spent nothing” (false) from “the state spent a great deal in ways that do not close operating deficits” (demonstrably true, as the five districts below prove).

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District	County	Revenue	Expenditures	Deficit	Deficit as % of expenditures
Plano ISD	Collin	$634,600,000	$691,600,000	$44,800,000	6.48%
Richardson ISD	Dallas	$403,800,000	$427,700,000	$20,800,000	4.86%
Allen ISD	Collin	$220,700,000	$226,000,000	$5,314,470	2.35%
McKinney ISD	Collin	$276,000,000	$282,000,000	$5,800,000	2.06%
Frisco ISD	Collin	$751,900,000	$751,900,000	$0	0.00%

Every one of these boards adopted in June 2026. Every one operates under the same basic allotment, the same tax compression schedule, the same special education and transportation mandates, and the same House Bill 2 allotments. Four of the five are in the same appraisal district. The 6.48-point spread between Plano and Frisco is not a difference in state treatment.

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The audited picture: fiscal year ended June 30, 2025

Adopted budgets are projections. The annual comprehensive financial reports are the ground truth, and they change the story materially.

District	Revenues	Expenditures	Net change in fund balance	Ending fund balance
Frisco ISD	$754,569,861	$733,947,380	+$22,494,543	$263,799,633
Plano ISD	$686,920,617	$677,146,430	+$3,386,247	$276,399,468
Allen ISD	$214,896,617	$216,790,527	−$916,685	$73,258,476
McKinney ISD	$256,206,330	$267,673,202	−$10,711,346	$99,861,556
Richardson ISD	$414,279,418	$430,319,383	−$16,993,327	$166,520,684

Note McKinney. Its adopted 2025-26 budget anticipated a $7,500,000 draw. The audited fiscal 2025 result was a $10,711,346 decline — 9.69% of beginning fund balance in a single year, the steepest proportional drawdown of the five. Richardson’s larger dollar decline was 9.26% of its beginning balance.

District	Total fund balance	Unassigned	Total FB as % of expenditures	Unassigned as % of expenditures	Unassigned as % of total FB
Plano ISD	$276,399,468	$82,118,880	40.82%	12.13%	29.71%
Richardson ISD	$166,520,684	$108,523,219	38.70%	25.22%	65.17%
McKinney ISD	$99,861,556	$93,080,833	37.31%	34.77%	93.21%
Frisco ISD	$263,799,633	$248,420,281	35.94%	33.85%	94.17%
Allen ISD	$73,258,476	$50,220,294	33.79%	23.17%	68.55%

This is the finding that only the audits produce. Rank the districts by total fund balance and Plano leads at 40.82%. Rank them by usable reserves and Plano finishes last, at 12.13% — less than half the next-lowest and roughly a third of McKinney’s and Frisco’s.

Only 29.71% of Plano’s general fund balance is unassigned. McKinney’s is 93.21% unassigned and Frisco’s is 94.17% — essentially unencumbered. The difference is that Plano’s board has pre-committed the balance: $170,000,000 assigned to cash flow requirements, $10,000,000 to insurance deductible, $7,800,000 to the following year’s budgeted deficit, and $4,577,161 to purchases on order — $192,377,161 in total assignments. McKinney carries $2,550,000. Frisco carries $14,388,186.

District	Days of operations, total FB	Days of operations, unassigned	Unassigned ÷ adopted FY27 deficit
Plano ISD	149.0	44.3	1.83 years
Richardson ISD	141.2	92.1	5.22 years
McKinney ISD	136.2	126.9	16.05 years
Frisco ISD	131.2	123.5	Not applicable — balanced
Allen ISD	123.3	84.6	9.45 years

Plano holds 44 days of unassigned reserves. McKinney holds 127 — nearly triple, on a district roughly 40% Plano’s size. The district running the largest deficit in absolute dollars and the highest deficit as a share of expenditures also has the least discretionary cushion behind it.

McKinney’s board policy sets a floor at three months of operating expenses, or 25%. At $267,673,202 in fiscal 2025 general fund expenditures, that floor is $66,918,301 — leaving $26,162,532 of headroom above policy, or 4.51 years at the adopted $5,800,000 deficit. That is materially better than the estimate available from board presentations alone, which suggested roughly 2.6 years.

Frisco’s audit states the reserve convention explicitly: the standard practice is roughly 25% of annual expenditures, and Frisco has deliberately raised its own target to about 30% to absorb enrollment decline without leaning on additional state aid. Its unassigned balance at June 30, 2025 equals 32.6% of the fiscal 2026 adopted budget.

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Variable one: recapture exposure

Chapter 49 recapture does more work in this comparison than any other single line item, and the audited figures make the disparity unmistakable.

District	Amount	% of GF expenditures	Per student
Plano ISD	$136,249,803	20.12%	$3,110
Frisco ISD	$13,398,645	1.83%	$205
McKinney ISD	$7,041,655	2.63%	$302
Richardson ISD	$5,452,555	1.27%	$147
Allen ISD	$3,423,716	1.58%	$170

Plano remitted 20.12% of its total general fund expenditures to the state in fiscal 2025 — more than one dollar in five, before a single teacher was paid. Frisco, a district with a larger budget, remitted 1.83%. Per student, Plano’s recapture burden is roughly fifteen times Frisco’s and twenty-one times Richardson’s.

The mechanism deserves stating plainly, because it is counterintuitive and it is the heart of the problem. Recapture is calculated on taxable value per student in weighted average daily attendance. When a district loses students but retains its property wealth, value-per-student rises, and the recapture obligation rises with it. Plano’s certified net taxable value grew from $61,900,000,000 in tax year 2021 to $74,400,000,000 in tax year 2025 — 20.09% cumulative, a compound annual growth rate of 4.71% across four growth periods — while enrollment fell at a compound annual rate of 5.21%.

So Plano loses formula revenue on the way out and pays more recapture on the way in. Each departing student subtracts state entitlement and simultaneously increases the share of local collections classified as excess wealth. The district is penalized twice for the same demographic event, and it has no policy lever that touches either side. Richardson’s audit documents the inverse: the September 2025 amendment reflecting House Bill 2, Senate Bill 4, and Senate Bill 23 reduced its recapture, because the enlarged homestead exemptions cut taxable value 5% against a budget built on 5% growth.

McKinney’s audit isolates the same pressure at smaller scale. Its $10,711,346 general fund decline is attributed in part to a $1,610,473 increase in recapture — a 29.65% jump in one year — alongside a $14,300,000 drop in state program revenue.

This is the single most important specific to add to the original post. Underfunding and recapture are different problems requiring different legislative fixes. A basic allotment increase helps Richardson, McKinney, and Allen considerably. It helps Plano far less, because a meaningful share of any increase is recaptured back. Districts on Plano’s side of the line need the wealth-per-student threshold indexed, not just the allotment raised.

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Variable two: enrollment and cost per pupil

District	Prior	Current	One-year change	Multi-year CAGR
Plano ISD	43,808 (2025-26)	41,830 (2026-27 proj.)	−4.52%	−5.21% (2024-25 to 2026-27)
Allen ISD	20,140 (2025-26)	19,575 (2026-27 proj.)	−2.81%	−3.15% (Oct. 2024 to 2026-27)
Frisco ISD	66,698 (FY2024)	65,289 (FY2025)	−2.11%	−1.22% from 2023 peak
Richardson ISD	36,970 (2024-25)	36,247 (2025-26)	−1.96%	−0.44% over five years
McKinney ISD	23,306 (FY2024)	23,296 (FY2025)	−0.04%	−0.68% over nine years

District	Enrollment CAGR, 2016–2025	Operating cost per pupil, 2016	2025	Cost per pupil CAGR
Frisco ISD	+2.28%	$7,276.48	$10,297.80	+3.93%
McKinney ISD	−0.68%	$9,112	$13,527	+4.49%

Both districts’ own statistical schedules tell the same story from opposite demographic positions. Frisco grew enrollment 2.28% annually for a decade; McKinney shrank 0.68% annually. Cost per pupil rose 3.93% and 4.49% respectively. Growth did not protect Frisco and stability did not protect McKinney, because in both cases per-pupil cost outran the basic allotment, which rose 0.89% in the same period that these districts absorbed compounding increases in salary, utilities, insurance, and mandated services.

McKinney is the cleanest proof available that this is not an enrollment story. Its enrollment fell 10 students last year — 0.04%. It still drew $10,711,346 out of fund balance.

Richardson supplies the second control case. Its five-year decline is 2.2%, a 0.44% compound annual rate, and it still adopted a $20,800,000 deficit and drew $16,993,327 in fiscal 2025.

The state demographer attributes the broader regional decline to out-migration toward the outer ring counties — Rockwall, Wise, Parker, Johnson, Ellis — and to falling birth rates. Neither originates in Austin. Any honest version of this argument concedes that some North Texas district distress is demographic. But McKinney and Richardson demonstrate that demographics are not the binding constraint.

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District	Primary approach	Documented actions	Result
Frisco ISD	Revenue generation	Renegotiated TIRZ agreement with City of Frisco permitting operating use (+$29,000,000 GF revenue in FY2025); Access Frisco open enrollment (870 students, $8,400,000); tuition pre-K (600 students); fare-based busing; $20 Chromebook fee; $21,800,000 personnel savings via attrition	FY2025 closed +$22,494,543 against a budgeted −$30,800,000; FY2027 balanced with 2% raises, rate held at $1.0194
Richardson ISD	Expenditure reduction	$25,700,000 in cuts this cycle; nearly $42,000,000 over three years; four elementary consolidations plus Dobie Pre-K Center	$20,800,000 deficit remains; another $20,000,000 sought in August
McKinney ISD	Facility consolidation	Three elementary closures (Eddins, McNeil, Wolford) effective fall 2026; position eliminations cut the budgeted FY26 draw from $17,000,000 to $7,500,000	$5,800,000 deficit; audited FY25 draw $10,711,346
Allen ISD	Administrative attrition	More than $8,000,000 reduced in a single year, primarily administrative positions	$5,314,470 deficit; FY2025 draw only $916,685
Plano ISD	Not yet restructured	Four campus closures approved June 2024; $5,200,000 annual savings, $20,100,000 one-time capital savings, $340,000,000 avoided future replacement cost	$44,800,000 deficit; leadership states structural change now required

The TIRZ finding reframes the Frisco story. The commonly cited elements — open-enrollment transfers, tuition pre-K, bus fares, device fees — total roughly $10,000,000. The renegotiated tax increment reinvestment zone agreement with the City of Frisco, which permitted the district to apply TIRZ proceeds to operating costs rather than only construction, added $29,000,000 to general fund revenue in a single year. That is nearly three times the fee-and-transfer package.

Frisco balanced its budget primarily by finding a municipal partner willing to redirect an existing revenue stream. That is a genuine achievement and a replicable strategy only where a city has an active TIRZ and a cooperative council. It is not available to Plano, Richardson, McKinney, or Allen on comparable scale, and it should not be presented as evidence that better management alone closes these gaps.

The transfer program does carry a second-order consequence worth naming. Those 870 students came from somewhere, and in Collin County the somewhere is Plano, McKinney, Allen, and Prosper. In a county where every district is shrinking, one district has begun competing directly for average daily attendance — a rational response by a single board and a destructive equilibrium if all of them adopt it.

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The non-recurring revenue problem, across all five

Two districts posted fiscal 2025 gains. Neither is repeatable.

Plano’s fund balance grew $3,386,247, from $273,013,221 to $276,399,468 — 1.23%. The growth came from a $22,600,000 initial Chapter 313 payment from Texas Instruments and a $31,400,000 state aid increase driven by an Available School Fund per-capita rate that rose from $423.747 to $619.868 per average daily attendance. The unassigned balance also rose partly for a mechanical reason: the assignment for budget deficit dropped from $35,000,000 to $7,800,000 as the prior-year deficit failed to materialize.

Frisco’s $22,494,543 gain came against a budgeted $30,800,000 deficit — a favorable swing of $53,294,543 — attributed by its audit largely to the TIRZ reallocation. A revenue stream can only be reallocated once. Frisco’s fiscal 2027 revenue of $751,900,000 is already down $19,790,000, or 2.56%, from the $771,690,000 budgeted for fiscal 2026.

McKinney shows what the year looks like without a one-time item: state program revenue fell $14,300,000, or 25%, expenditures rose 5%, and the fund balance absorbed $10,711,346.

Every one of these districts is one non-recurring item away from the structural gap becoming fully visible. Plano arrives there first because its recapture obligation compounds against it.

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What this adds up to

The original post’s underlying claims survive scrutiny. Deficit budgets are widespread. Campuses are closing. Teacher compensation trails inflation in real terms. Mandated programs are underfunded — Plano projects six required programs costing $141,300,000 in 2026-27 against $66,900,000 in state funding, a $74,400,000 local subsidy for services no district may legally decline.

What the audited specifics add is precision about the mechanism. This is not uniform starvation. It is a formula in which per-pupil cost growth of roughly 4% annually meets a basic allotment that moved 0.89%, and in which one district’s recapture obligation consumes 20.12% of its budget while a larger neighbor’s consumes 1.83%. Plano and Frisco sit eleven miles apart under identical law, with a 6.48-point difference in fiscal outcome and a 44-day versus 124-day gap in usable reserves. That is a structural design problem, and a basic allotment increase alone will not solve it.

The 2027 session will decide two things: whether the basic allotment gets indexed to anything, and whether the education savings account program expands from $1 billion toward the $3.3 billion the Legislative Budget Board projects for 2028. More than 274,000 families applied for roughly 90,000 available accounts, leaving a waitlist above 180,000 students — now the most potent political argument in the building.

Districts should expect both dollars to be argued over at once, and expect the basic allotment to lose that argument again unless someone makes the recapture case with numbers this specific.

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Note on data and method

Fiscal 2025 general fund figures for all five districts are audited, drawn from each district’s annual comprehensive financial report for the year ended June 30, 2025. All five received unmodified opinions — Weaver and Tidwell for Plano and Richardson, Hankins Eastup Deaton Tonn & Seay for Allen, Eide Bailly for McKinney. Fiscal 2026-27 figures are budgets as adopted in June 2026 and are projections, not actuals.

Percentage changes spanning more than one year are stated as compound annual growth rates; single-year changes are stated as simple percentage change. Days of operations are computed as fund balance divided by total general fund expenditures divided by 365. Recapture is function 91, contracted instructional services between public schools; per-student recapture uses each district’s most recent reported enrollment. McKinney and Frisco enrollment and cost-per-pupil figures are from ACFR statistical schedules and are fiscal-year figures on those districts’ own operating-expenditure definitions, which differ slightly — McKinney excludes debt service and most capital, Frisco excludes intergovernmental charges — so the cost-per-pupil CAGRs are comparable in direction but not to the decimal. Other districts’ enrollment is school-year data from board presentations.

One caution on the reserve comparison. The cash flow assignment — $170,000,000 at Plano — is technically available but functionally is not, because Texas districts collect the bulk of ad valorem revenue between December and February and need working capital to cover July through November payroll. Frisco’s audit describes the same four-to-five month cash flow deficit but carries the equivalent cushion as unassigned rather than assigned, and McKinney does likewise. Part of the 44-day versus 127-day gap is a real difference in liquidity and part is a difference in classification convention. The direction of the finding survives the adjustment, but the precise day counts should be treated as indicative rather than exact, and anyone using this comparison in testimony should say so.

A collaboration between Lewis McLain & AI

A note on where I’m standing

I started in Texas municipal finance in 1972, as budget director for the City of Garland. By the time this story started, I was the Dallas County Budget Officer, the first in Texas. I watched Dallas City Hall open in 1977 — I.M. Pei’s inverted wedge, the most confident building any Texas city put up in that decade. I have now read roughly fifty budget seasons’ worth of editorials explaining that a Texas city faces hard choices, that the city manager has produced a serious proposal, and that more must be done.

The editorials are almost always right in the sense that nothing in them is false. They are almost always useless in the sense that nothing in them is checkable. “More must be done” is not an analytical claim. It has no denominator, no date, and no way to be wrong.

So let me try to write the version with numbers in it.

The claim I’m making

Dallas is not just experiencing a budget shortfall. Dallas is experiencing the arrival of obligations it created in prior decades, on a schedule that was published, disclosed, and available to anyone who wanted to read it. The city’s own documents have shown for twenty years+ that the fixed claims on the General Fund were growing faster than the General Fund itself, and that the gap would have to be closed eventually by someone who was not in the room when the promises were made.

That structure has specific mechanical features in common with a Ponzi arrangement. I want to be precise about which features, because the analogy is useful exactly to the degree that it is disciplined — and misleading past that point. I’ll do the honest version of both halves below.

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Part One: The Cycle, Documented

Set the current numbers down first. The budget under discussion is FY 2027 — the fiscal year beginning October 1, 2026, which the city labels FY 2026-27.

City Manager Kimberly Bizor Tolbert’s recommended FY 2027 budget totals $5.6 billion, built after the city identified a projected General Fund shortfall of $50.9 million. The preliminary General Fund revenue estimate was reduced in a June 18 memorandum to approximately $2.02 billion. The recommendation eliminates 296 budgeted positions, of which roughly 108 are currently occupied. It holds the property tax rate essentially flat — a symbolic tenth-of-a-cent reduction. Council takes a final vote September 16.

Getting to that point required the city to work through FY 2026 with a projected gap that opened at roughly $34 million in May. The drivers were specific and are worth naming rather than summarizing as “rising costs”: employee health benefits ran $13.8 million over budget, other General Fund expenditures ran $16.4 million over, and sales tax came in about $3.8 million short. The city responded with an April hiring freeze on non-public-safety positions, overtime restrictions, a travel and non-essential purchase freeze, and then three mandatory unpaid furlough days for General Fund non-uniform employees on July 10, September 4, and September 28 — with police, fire, EMS, 911, and self-funded enterprise operations exempt.

Now the part that makes it a cycle rather than an event.

In 2011, Dallas held budget hearings on projected deficits that ranged between $41 million and $96 million before settling at roughly $32 million. City Manager Mary Suhm told the public that things were getting slightly better because sales tax was improving a little, while warning that state and federal cuts could undo it. Libraries were, as always, the first thing on the table.

In 2020, city revenues came in $49.6 million below budget. Nearly 500 employees were furloughed. The projected shortfall for the following year ran between $61 million and $101 million. Mayor Eric Johnson said publicly that City Hall carried bloat and fat that could be trimmed and that the bureaucracy needed to share in the pain.

In 2026, the shortfall is $50.9 million, employees are furloughed, libraries have already absorbed layoffs, recreation centers have closed on individual Fridays to save money, and the mayor has issued a July 24 memorandum asking for reduced City Hall spending, more non-tax revenue, and another rate reduction.

Same script. Same vocabulary. Three different city managers, two different mayors, one unchanged structure.

The editorial writers are correct that the song is on repeat. What they never do is ask why the recording keeps playing, or who put it in the machine?

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Part Two: The Four Senior Claims

A city budget is not a list of priorities. It is a waterfall. Certain claims are satisfied before anyone gets to decide anything, and the discretionary layer — the part that gets debated in council chambers and covered in the paper — is whatever is left after the senior claims are paid.

Dallas has at least four senior claims, and every one of them is growing faster than the revenue base that services them.

Claim one: the police and fire pension.

The Dallas Police and Fire Pension System carries a total accrued liability of about $5.3 billion against assets of roughly $1.8 billion, leaving an unfunded liability near $3.2 billion and a funded ratio in the low forties. The city contributes 34.5% of pay plus an additional $13 million annually; employees contribute 13.5%. Under the funding structure that prevailed before the most recent revisions, full funding was projected for the year 2105. Read that again. The amortization horizon ran to a date at which no one now living in Dallas will be paying taxes.

The origin story is well documented and is not in dispute: real estate investments made between 2005 and 2009 — ultra-luxury residential in Hawaii, Aspen, and California, and the Museum Tower downtown — went badly, and the Deferred Retirement Option Plan (DROP) credited returns the fund was not earning, which produced a run on the fund in 2016. House Bill 3158 in 2017 reduced the unfunded liability by about $1 billion and reformed governance. It did not solve the problem. It rescheduled it.

Claim two: Proposition U.

In November 2024, Dallas voters approved, by 50.5%, a charter amendment requiring the city to appropriate no less than 50% of any year-over-year revenue increase to the police and fire pension, with the remainder going to police starting pay, and requiring a sworn force of at least 4,000 officers — roughly 900 more than the city had — with that officer-to-population ratio maintained going forward.

Here is the number that should have been the entire editorial.

In FY 2026, the city’s contribution to the pension system was $225.67 million. The year-over-year growth in unrestricted revenue was $30.8 million. The pension contribution was 7.3 times the entire increase in unrestricted revenue. Even measured against total General Fund growth of $61.6 million, the pension contribution was 3.7 times larger.

Proposition U did not create a funding mechanism. It created a mandatory lien on growth in an environment where growth is capped by state law at 3.5% for property tax revenue without voter approval. The Texas Attorney General is now suing the city over the calculation, asserting that projected excess revenue was approximately $220 million while the CFO reported roughly $61 million — which tells you that the mandate’s own denominator is contested, in court, two years after adoption.

Claim three: deferred maintenance.

This is the one I want to spend the most time on, because it is where “more must be done” does its worst work. I started pointing this out in articles I wrote in 1987.

Dallas City Hall — the building I watched open in 1977 — carries approximately $345 million in deferred maintenance. A study this year put the urgent tier at $329 million for the failing roof, outdated electrical, and plumbing, with a full repair-and-update figure of at least $906 million and up to $1 billion over twenty years.

Now trace how it got there:

• The 2012 bond program set aside $400 million for city facilities. City Hall received none of it. Flood control, economic development, and streets took priority.
• The 2017 bond program allocated $7 million to City Hall.
• The 2024 bond program initially requested $61 million for the building. $28 million was advanced and then reallocated to other priorities.
• In May 2026, a council majority declined to support a $1.2 million budget amendment for ADA accessibility compliance in the building.

Four consecutive opportunities. Four deferrals. And the reported number moved from an implied low-single-digit-millions per year of maintenance to $906 million of accumulated need.

This is the mechanism the editorials describe as “the city needs billions for neglected maintenance that will take ten years to resolve.” What they never say — and this is the observation I’ve been making to clients since the Carter administration — is that the ten-year horizon resets every year. It has been ten years away since it was ten years away.

Claim four: debt service on growth-chasing.

The Kay Bailey Hutchison Convention Center rebuild was estimated at $1.9 billion in 2021. It is now $3.3 billion to $3.5 billion. The city took a $1 billion bridge loan from JP Morgan to keep the project moving while it waited to issue $1.5 billion in revenue bonds — an issuance that slipped to fall 2026. The original debt estimate at the time voters approved the 2% hotel occupancy tax increase in November 2022 was up to $2.1 billion. The opening date has moved from 2029 to 2030.

The convention center debt is hotel-tax-secured, not General Fund-secured, and defenders will say correctly that residents don’t pay it. That is true of the debt service and false of the institutional bandwidth, the staff attention, the bridge-loan risk, and the opportunity cost of the city’s borrowing capacity and political capital. It is also false of the assumption underneath it, which is that visitor volume grows forever.

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Part Three: The Velocity Problem

The editorials say the problem is getting worse. They are right, and it is measurable. Deferral is not free storage — it accrues at a rate.

Item	Earlier estimate	Current estimate	Elapsed	Compound annual escalation
Police training academy	$140 million (2021)	$227 million (2026)	5 years	10.15%
Convention center rebuild	$1.9 billion (2021)	$3.5 billion (2026)	5 years	13.00%
City Hall (bond request → assessed urgent need)	$61 million (2024)	$329 million (2026)	2 years	scope discovery, not inflation

Two of these are honest escalation measurements. The third is different in kind and worse: the City Hall figure did not grow at an inflation rate, it grew because nobody had actually assessed the building until the number became unavoidable. That is not a cost increase. That is the discovery that the cost was always there and had never been recognized.

Note the police academy specifically. The 2024 bond designated $50 million for it against a project now estimated at $227 million, leaving a funding gap of $82 million — for a facility whose 2021 estimate was $140 million. Groundbreaking is expected in September 2026, opening in June 2028. The gap is a proposed line item in the very bond package now being debated.

So, 10.5% per year is the number that answers the velocity question. As long as the city’s main revenue growth is capped near 3.5% and its deferral inventory escalates above 10%, the gap between what is owed and what can be paid widens every single year by simple arithmetic, regardless of who is city manager and regardless of how many positions get cut.

You cannot manage your way out of a compounding differential with a hiring freeze.

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Part Four: The Number Nobody Reads — Percent Depreciated

Everything in Part Three came from press coverage and council briefings. The most important asset-condition evidence in Dallas is not in either place. It is in Note 8 of the Annual Comprehensive Financial Report, it has been published every year since GASB 34 took effect 27 years ago, and I have never once seen a Dallas editorial reference it. Can anybody tell me if the external auditors or anyone in Accounting/Finance has ever briefed the Council, Commissioners Court or School Board Trustees?

The metric. Take accumulated depreciation and divide it by gross capital assets being depreciated. That is the percent depreciated — the share of the city’s recorded asset base already consumed on the books. In the credit work I’ve done for four decades the working thresholds are roughly: under 40% is a young asset base; 40% to 55% is normal for a mature city; above 60% means reinvestment has fallen behind consumption; above 70% means the capital program is not keeping up and the failures are coming whether or not they’re budgeted.

Here is what the FY 2025 ACFR, audited by Weaver and issued March 24, 2026, actually reports.

	Gross depreciable	Accumulated depreciation	Percent depreciated
Governmental activities, FY 2025	$7,760.2 million	$3,415.0 million	44.01%
Governmental activities, FY 2024	$7,328.2 million	$3,222.2 million	43.97%
Business-type activities, FY 2025	$10,756.0 million	$4,481.3 million	41.66%
Business-type activities, FY 2024	$10,372.2 million	$4,252.9 million	41.00%
Combined, FY 2025	$18,516.1 million	$7,896.4 million	42.65%

FY 2025 depreciation and amortization expense was $235.6 million for governmental activities — $184.0 million of actual depreciation plus $51.6 million of amortization — and $241.1 million for business-type activities, of which $160.9 million was Dallas Water Utilities and $43.4 million was Airport Revenues. Total: $476.8 million of capital consumed in one year.

Now the uncomfortable part, and I am going to report it against my own expectation.

I went into this analysis expecting the governmental ratio to be alarming and to find reinvestment running below depreciation. It isn’t, and it doesn’t. Both ratios sit in the normal band for a mature city. Governmental moved four one-hundredths of a point in a year. And on the aggregate reinvestment test — additions to depreciable capital assets against depreciation and amortization expense — Dallas passes comfortably:

• Governmental: $476.1 million of additions against $235.6 million of expense, a ratio of 2.02
• Business-type: $398.0 million against $241.1 million, a ratio of 1.65

By the headline numbers, Dallas has a mid-life asset base and is reinvesting at roughly twice the rate it is consuming. Net capital assets grew from $13.59 billion to $14.46 billion during FY 2025.

That is the finding. And it is exactly the problem.

Because the same city that posts those numbers and ratios cannot afford its own city hall.

Look at what the governmental buildings line actually says:

• Gross historical cost of every building the governmental side of Dallas owns: $1,692.9 million
• Accumulated depreciation: $791.9 million
• Net book value of the entire governmental building portfolio: $901.0 million

The low-end engineering estimate to restore one building — City Hall — is $906 million.

Restoring a single structure costs 100.6% of the recorded net book value of every library, fire station, police station, recreation center, service center, and office the general side of this city owns. Even the urgent-only tier of $329 million is 36.5% of the whole portfolio’s book value.

Those two numbers cannot both be describing the same reality, and the reason they can coexist on the same set of audited statements is the thing I most want readers to understand: historical cost accounting is not a condition assessment. City Hall went into service in 1977 and sits on the books at 1977 construction dollars. The engineering estimate is in 2026 replacement dollars. The ratio between them is not a measure of deterioration. It is a measure of forty-nine years of construction inflation, and no line on any financial statement discloses it.

Where the audited numbers do sound the alarm.

The aggregate hides it; the components do not. Disaggregate governmental activities by class:

Class	Gross	Accumulated	Percent depreciated
Equipment	$1,186.7 million	$733.9 million	61.84%
Buildings	$1,692.9 million	$791.9 million	46.78%
Infrastructure	$3,538.9 million	$1,411.8 million	39.89%
Improvements other than buildings	$1,027.1 million	$368.2 million	35.85%

And on the business-type side, equipment stands at 71.74% depreciated — $747.2 million consumed against $1,041.5 million gross — while utility property, the rate-supported core, sits at a healthy 33.43%.

Then run the reinvestment test on buildings alone rather than on the aggregate:

Governmental buildings received $17.5 million in additions during FY 2025 against $34.0 million in depreciation. A ratio of 0.52. The city consumed its building stock at roughly twice the rate it replenished it, in a single year, in book dollars — and book dollars understate replacement cost by whatever inflation has run since the buildings went up. The real shortfall is a multiple of the $16.5 million nominal gap.

That is the number the editorial should have printed. Not “more must be done.” Zero point five two.

Three reasons the aggregate looks better than the city is.

Construction in progress inflates the picture. Land, artwork, water rights, and CIP are excluded from the depreciation calculation but counted in total capital assets. Business-type CIP stands at $2,194.7 million — 24.9% of net business-type capital assets — and $645.3 million of the $692.7 million in non-depreciable additions during FY 2025 went into it. A convention center under demolition does not make a 1968 water main any younger. Governmental CIP is $614.3 million.

Software is masquerading as capital reinvestment. Governmental amortization was $51.6 million in FY 2025, 21.9% of all governmental depreciation and amortization. Subscription-based IT arrangements grew from $57.1 million to $153.8 million gross in one year — a 169.5% increase. General government amortization alone, at $49.9 million, exceeded depreciation on every building the city owns ($34.0 million). Software subscriptions are being capitalized and amortized on a five-year clock while the roof on Marilla Street goes another year. Both are “additions to capital assets.” Only one keeps the rain out.

Fully depreciated assets in service go silent. An asset past its estimated useful life stops generating depreciation expense. It sits at 100% and contributes nothing further to the trend. Note the implied average useful life embedded in the governmental infrastructure line: $3,538.9 million gross against $64.0 million of annual depreciation implies 55.3 years — longer than the top of the 10-to-50-year range the city’s own Note 1K discloses for governmental infrastructure. That gap is the signature of a stock carrying assets past book life.

The deeper objection: the line isn’t straight.

Everything above accepts the city’s numbers on their own terms. Now I want to attack the method itself, because this is the part that no editorial I can find has ever raised and it is the part that matters most.

Note 1K of the ACFR states the convention plainly: depreciation is computed using the straight-line method over estimated useful lives. Equal cost, allocated equally to every year. Governmental buildings get 10 to 50 years; infrastructure 10 to 50; equipment 3 to 20. Business-type infrastructure gets 50 to 100 years, utility property 33 to 75, water rights 100.

Straight-line is a cost-allocation convention. GASB does not claim it measures condition, and it doesn’t. Physical deterioration is not linear. It is convex — slow, then fast, then catastrophic.

Take a thirty-year building. Here is what the two curves say.

Year	Straight-line, book	Condition-based, illustrative
5	16.7%	2.8%
10	33.3%	11.1%
15	50.0%	25.0%
20	66.7%	44.4%
25	83.3%	69.4%
30	100.0%	100.0%

Read it by decade instead. Straight-line consumes 33.3% in each of the three decades — by construction. The condition curve consumes 11.1% in the first decade, 33.3% in the second, and 55.6% in the third. The last ten years of a thirty-year building deteriorate at five times the rate of the first ten.

Anyone who has ever owned a roof knows this. A membrane at year eight needs inspection. The same membrane at year twenty-two needs replacement, and if it isn’t replaced it stops being a roof problem — water reaches the decking, then the electrical, then the finishes, and a $2 million roof becomes a $20 million restoration. That is not deferred maintenance compounding at an interest rate. That is a physical cascade, and it is why the police academy went from $140 million to $227 million and City Hall’s assessed urgent need went from a $61 million bond request to $329 million in two years. The escalation rates I computed in Part Three are this curve, expressed in dollars.

Three consequences, and they are severe.

Percent depreciated is a lagging indicator that is most wrong precisely when accuracy matters. In the front half of an asset’s life, straight-line overstates consumption — the book says 33% at year ten when physical loss is nearer 11%. That’s conservative and harmless. In the back half, the relationship reverses in the dimension that counts: book says 83% consumed at year twenty-five, but the cost to restore, measured in current dollars against a historical-cost denominator, is a multiple of the remaining book value. The metric is comforting when you don’t need comfort and misleading when you do.

Straight-line implies a level funding need. The real need is a wave. This is the practical failure. A city reading its own depreciation schedule sees a smooth $235.6 million annual signal for governmental activities and reasonably concludes that steady reinvestment at that rate keeps it whole. The actual requirement is lumpy and back-loaded. A city that funds to the straight-line signal is structurally under-reserved at exactly the moment the wave arrives, and it will experience that shortfall as a surprise — which is precisely how Dallas has experienced every one of the last five budget cycles.

And Dallas built its civic stock in a compressed window, so the waves are correlated. City Hall opened in 1977. Much of the library, recreation center, fire station, and service center inventory dates from the same postwar-through-1980s expansion, as do large portions of the 11,656 paved lane miles and 9,121 miles of water and wastewater mains. Assets built together reach the steep part of the curve together. Straight-line depreciation smooths that correlation into a flat line and hides the single most important fact about the portfolio: the bills do not arrive evenly, they arrive in cohorts.

That is how you get 44.01% depreciated and a $906 million bill for one building in the same audited document. The aggregate ratio is a weighted average of assets sitting at very different points on very different curves. The $476.1 million of FY 2025 additions pulled that average down and made the portfolio look younger — while the buildings that are on the steep part of the curve received $17.5 million.

What the engineers publish instead.

The facilities discipline has a counterpart metric and it has existed for decades: the Facility Condition Index, deferred maintenance divided by current replacement value. Under 5% is good, 5 to 10% fair, 10 to 30% poor, and above 30% is generally treated as past the point where restoration beats replacement. It is denominated in current dollars on both sides, which is exactly what percent depreciated is not.

Dallas does not publish an FCI. It does not publish a facility condition assessment inventory. It commissioned one building’s assessment, got a number with a comma and three groups of digits, and the council responded by declining a $1.2 million ADA amendment.

And the accounting fact underneath all of it.

Depreciation is recognized only in the government-wide statements, on the full accrual basis. It never appears in the governmental fund statements, and it is never appropriated. The FY 2027 budget the council adopts in September, and that the newspaper covers, does not contain a line for the $235.6 million of governmental capital the city consumed last year.

That is how a city posts a balanced budget every year for fifty consecutive years — as Texas law requires — while its building stock is replaced at half the rate it wears out. The balanced budget is a cash statement. The consumption is an accrual fact. They are reported in different documents, on different bases, and nobody is required to reconcile them in public.

The percent depreciated ratio is the only routinely published number that connects them. It is on three pages of a document the city posts every March. It has a clean opinion on it. Nobody reads it — and when someone finally does, the aggregate is reassuring enough to end the inquiry before it reaches the buildings line.

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Part Five: Where the Ponzi Analogy Holds — and Where It Doesn’t

I use the comparison deliberately, and I want to be disciplined about it, because a sloppy version invites easy dismissal.

Features Dallas genuinely shares with a Ponzi structure:

Obligations to earlier participants are satisfied from later inflows rather than from returns on the underlying asset. The DROP program is the cleanest case: it credited returns to participants that the fund was not earning, which is definitionally paying earlier participants from the contributions of later ones. When participants recognized this in 2016, they did what participants in such arrangements always do — they ran.

The structure requires continuous growth in the inflow base to remain solvent. Dallas is landlocked. It cannot annex its way to a larger base. It is therefore dependent on appraisal growth and new development for the “new money” the structure requires — which is precisely why the editorial ends on a plea for growth and against NIMBYism. That plea is correct and also revealing: it is an acknowledgment that the arrangement cannot service itself from its existing base.

Solvency is maintained by rolling obligations forward rather than amortizing them. Bridge loans in place of bond issuance. Deferral in place of maintenance. $235.6 million of governmental capital consumed in FY 2025 and never appropriated. And now the proposal to issue $500 million in pension obligation bonds — which the Government Finance Officers Association classifies as high risk precisely because it wagers that investment returns will exceed the interest owed, and which can leave a city carrying both the taxable debt service and the unfunded liability.

The redemption date lies outside every decision-maker’s horizon. Full funding projected for 2105. No council member, no city manager, no editorial writer, and no taxpayer voting today will be present for the settlement.

The disclosure is technically complete and functionally useless. This is the feature I find most damning, and it is the one that distinguishes municipal finance from actual fraud. Nothing here is hidden. It is all in the ACFR, in Pension Review Board filings, in bond official statements, in council briefing decks. But it is never consolidated. There is no single document that says: here is the total fixed claim on the general fund, here is the growth rate of that claim, here is the growth rate of the revenue that services it, and here is the year they cross. Every individual number is public. The aggregate has no owner.

Features it does not share, and I won’t pretend otherwise:

There is no fraud and no intent to deceive. The disclosure is real, the audits are real, the actuaries are real. Dallas has received a clean opinion and a GFOA certificate every year for decades. The people running this system are, in my direct experience, competent and mostly candid.

There is a genuine underlying asset: the taxing power of a large and productive city, which a Ponzi scheme categorically lacks. Dallas has a real claim on real future income.

The participants receive real services, not paper returns. Police respond. Water runs. That is not nothing.

And critically: the failure mode is different. A Ponzi collapses when redemptions exceed inflows and the whole thing stops at once. Dallas will not stop. Texas cities do not default on general obligation debt and do not, as a practical matter, enter bankruptcy.

So what does failure actually look like here?

Not a crash. A hollowing.

The General Fund does not disappear. It converts. It becomes a pass-through for pension contributions, debt service, and a police department, with a thin residue of everything else. Libraries close a branch at a time. Recreation centers shut on Fridays. Pools go from seven days to five to three. Street resurfacing slips from a maintenance program to a bond program to a bond program that doesn’t fund it. Percent depreciated climbs one or two points a year, published every March, unread. The budget stays balanced every single year, as state law requires, and the city that the budget purports to fund quietly ceases to exist as a service organization.

That is already visible in this budget. It is not a forecast.

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Part Six: The Business Community Question

I want to be careful and fair here, because this is where I most disagree with how these editorials assign responsibility.

The consistent editorial posture is that councils lack the courage to make hard choices and residents lack the civic maturity to accept development. Both contain truth. Neither is the whole ledger.

Consider where organized civic energy in Dallas actually went over the past decade:

It went into passing a 2% hotel occupancy tax increase for a convention center whose cost estimate has since risen 84.2%.

It went into the 2024 bond campaign — $1.25 billion, ten propositions, 850 projects, endorsed by the sitting mayor and four living former mayors — which allocated $50 million to a police academy needing $227 million and reallocated City Hall’s $28 million elsewhere.

And it went, through Dallas HERO — funded in part by a hotelier and Republican donor — into Proposition U, which constitutionalized a spending mandate that in its first full year required a pension contribution 7.3 times the growth in unrestricted revenue.

Each of those was defended, at the time, as fiscal responsibility. Each of them tightened the structural vise. The convention center added leverage. The bond added debt service while underfunding the thing it was ostensibly for. Proposition U removed the council’s discretion over the marginal dollar precisely when marginal dollars became scarce.

I do not think the people behind these efforts were acting in bad faith. I think they were doing what civic leadership in Texas cities has done for fifty years: funding the visible and assuming the invisible would keep. The pension is invisible. The roof is invisible. A 0.52 reinvestment ratio on buildings is invisible. The academy was invisible until it was 62.1% more expensive.

And now the irony arrives on schedule. The city spent a decade and $3.5 billion building convention and entertainment capacity downtown — and the Mavericks have signed option agreements on 104 acres at the old Valley View Mall site, more than $50 million for land, leaving the American Airlines Center when the lease expires in 2031. The Stars have signed a nonbinding letter of intent with Plano for an arena at the Shops at Willow Bend, reportedly around $1 billion. Both anchors of the downtown entertainment district are leaving downtown.

The Mavericks’ CEO has said publicly that the city manager approached the team over a year ago about the City Hall site — because, in his account, she told them she could not afford to operate the building going forward for the taxpayers.

That is where we are. The city cannot afford to maintain its own seat of government, and its proposed solution was to see whether a basketball team wanted the land.

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Part Seven: What an Editorial Could Have Asked

I do not object to newspapers taking positions. I object to positions that cannot be checked. Here is what specificity would look like — questions with answers, on which someone could later be shown to have been right or wrong.

On the aggregate. What is the total annual fixed claim on the General Fund — pension ADC, debt service, Proposition U mandate, and contractual escalators — expressed as a percentage of General Fund revenue, for each of the past ten years and projected ten forward? What year does that percentage reach 100%? The city has every input. It has never published the ratio.

On percent depreciated. I have run FY 2025 above; the city should publish the ten-year trend by asset class, not in aggregate, for both governmental and business-type activities — and set additions beside depreciation for each class. The aggregate is uninformative by construction. The buildings line at 0.52 is the whole story, and it took twenty minutes with Note 8 to find. Every number in that chart is already audited.

On the pension bonds. Proposition C would issue $500 million in pension obligation bonds with estimated repayment exceeding $1 billion. What is the assumed spread between the taxable borrowing rate and the fund’s 6.5% assumed return? At what realized return does the transaction lose money? What happens to the city’s position if the fund earns its actual trailing ten-year return rather than its assumed one?

On the bond package generally. Propositions A and B would issue $460 million in general obligation debt against estimated repayment exceeding $653 million. One council member notes the 2024 program is not a third complete. What is the completion percentage, the cost variance to date on completed projects, and the projected variance on the remainder? Asking voters for new money while the prior program runs over is a specific, answerable claim — not a matter of tone.

On condition, not book value. Commission and publish a Facility Condition Index for the governmental building portfolio — deferred maintenance over current replacement value, both sides in current dollars. Percent depreciated will never answer the question because straight-line depreciation is a cost convention, not a condition measurement. Ask the city what share of its facilities exceeds an FCI of 30%, the threshold past which restoration stops beating replacement.

On deferred maintenance. Publish a register. Every asset, current condition assessment, cost to restore, cost to restore in five years at observed escalation, and the year of assessment. Dallas has never had one. Until it does, “billions in neglected maintenance” is a rhetorical figure, not a management document, and it will still be ten years away in 2036.

On the fire department. The editorial gestures at this and then leaves. The specific question: what is fire department overtime as a percentage of fire salaries, in each of the past ten years, against authorized strength and actual staffed strength by shift? If overtime has not fallen as headcount rose, that is a schedule and minimum-staffing question, and it is answerable in a week from the payroll system.

On the civilian pension. The editorial calls for reform of defined benefit plans. Which plan, which tier, which benefit multiplier, which effective date, and what is the projected liability reduction? “Someone has to have the courage” is not a proposal. A tier change with an actuarial note is a proposal.

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Part Eight: The Thing Nobody Says

Here is my actual conclusion, and it is not the one the editorial reaches.

Tolbert’s FY 2027 budget is a competent piece of work. Cutting 296 positions, roughly 108 of them occupied, in a political environment that punishes exactly that, is a real act. She deserves the credit she’s getting.

It also does not matter very much.

If the fixed claims on the general fund compound at 10% and the revenue that services them is capped near 3.5%, the annual exercise of finding $50.9 million is not a solution. It is a payment. Every year the payment gets larger and the thing being paid for gets smaller, and the budget balances every single time, and the newspaper writes that the city manager has produced a serious proposal and more must be done.

The recognition event — the moment the structure is priced honestly — does not arrive as a bankruptcy. It arrives as a bond rating action, or a pension board demanding contributions the council cannot appropriate, or a court reading Proposition U the way the Attorney General reads it, or a fifty-year-old water main under Ross Avenue deciding the question on its own schedule. Or simply the day residents notice that they are paying near-peak Texas municipal tax rates for a library system that is open four days a week.

We are closer to that day than the editorial suggests, and the reason is not a lack of courage in the council chamber. It is that the arithmetic was published, was audited, was true, and was ignored by everyone including the people who write about it — for fifty years, in language calibrated to sound authoritative and commit to nothing.

I was there in 1972. I watched the building go up in 1977. It is still on the books at what it cost to build then — and the net book value of every building this city owns, all of them together, is $901.0 million against a $906 million estimate to fix that one.

The numbers were legible all along. They are legible now. They are on page 72 of the ACFR.

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Sources: City of Dallas FY 2026-27 recommended budget materials and council briefings; City of Dallas Annual Comprehensive Financial Report, Note 8 (Capital Assets) and Management’s Discussion and Analysis; City of Dallas Government Affairs pension funding materials; Texas Pension Review Board plan data; KERA News reporting on the proposed 2026 bond election and City Hall deferred maintenance; Dallas Observer, D Magazine, WFAA, NBC 5, CBS Texas, and Bond Buyer reporting; Dallas city charter Chapter XI as amended November 5, 2024.