May 11, 2009--While Dallas Mayor Tom Leppert and incumbent City Council members scored decisive political victories Saturday night, their celebrations were short-lived.

Horrendous economic conditions threaten to delay construction of a publicly owned Dallas convention hotel that, at Leppert's behest, voters allowed to proceed by rejecting Proposition 1.

And council members, new and seasoned alike, must determine -- perhaps through a combination of service cuts and tax increases -- some method of closing a yawning 2009-10 budget deficit.

Leppert on Sunday confirmed that the deficit, which the council must close by late September, will be "over $100 million" when city staff members present policymakers an updated budget forecast next week.

"Without a doubt, we have some challenges ahead of us," Leppert said.

For the $500 million-plus hotel project, its most pressing challenge is the municipal bond market.

Market conditions are so unfavorable that City Hall leaders acknowledge there's little hope any time soon for the city to obtain a desired 5.5 percent interest rate (or better) on revenue bonds designed to fund hotel construction. The lower the interest rate, the less debt Dallas incurs.

That means months may pass before hotel construction commences, Leppert said Sunday.

"We've got to make sure we make a good deal. I'm not going to rush into it," the mayor explained.

"The date construction starts I don't know when that is."

Leppert added that city staff members will closely monitor actions the federal government could take in an attempt to improve municipal bond market conditions -- and thereby, expedite Dallas' planned hotel revenue-bond sale.

In the interim, District 14 council member Angela Hunt says she'll push her colleagues to press forward with developments related to the convention hotel, such as creating a downtown streetcar system and helping build ancillary development near the Dallas Convention Center.

Hunt, who supported Proposition 1 and opposed a publicly owned convention hotel, said "the people of Dallas have spoken" and "all of us now need to work together to ensure it's as successful a project as possible."

To that point, Hunt vowed to fight for several "safety nets" -- such as the creation of a reserve fund -- that would buffet taxpayers from any financial losses incurred by the hotel.

While Dallas intends to fund the hotel's construction with revenue bonds -- which would be repaid by hotel users -- Dallas' general fund could ultimately subsidize the facility if it experiences sustained financial losses.

That would be bad news for taxpayers under the best of financial circumstances. But it is particularly problematic as the city wrestles with one of the most serious financial crises in its history.

City officials already have pruned various municipal departments' current fiscal year budgets because of weak tax-revenue returns.

Next fiscal year's budget outlook is bleak and growing bleaker, as city sales and property tax revenue figures continue to fall below projections, month after month.

Leppert, meanwhile, is loath to curtail the third part of a four-year plan to add 200 police positions to the city's police force each year.

"The deficit -- it's going to be a tough number. But I want to make sure our priorities are on the public-safety aspect," he said.

For Ann Margolin, to date the only nonincumbent this election cycle to win a City Council seat -- two other races have advanced to June 13 runoffs -- her budget homework begins now, even if she doesn't take office until late June.

"I'm really going to take a lot of time to meet with city staff and explore the ins and outs of this budget," said Margolin, who on Saturday defeated tax firm executive Brint Ryan in a bitter race for District 13. "I know I'm coming into a tough year."

Among her more aggressive cost-saving ideas: postponing elements of Dallas' 2006 bond program and revamping the city's municipal court system to ensure more fines are properly collected.

If nothing else, the council will have the advantage of experience when it enters 2009-10 budget negotiations this summer.

Two years ago, eight of the council's 15 members were freshmen. This year, three council members at most will start anew.

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