Four Cities Earn F Grade for Poor Financial Health
Report Finds Widespread Debt in City Halls Across the Nation
From Truth In Accounting, January 28, 2020
CHICAGO — Truth in Accounting (TIA), a think tank that promotes government financial transparency, today released an analysis of the 75 most populous U.S. cities and found four that have accumulated Taxpayer Burdens in excess of $20,000. That is the amount that each local taxpayer would have to contribute for their city government to pay off all its bills. This represents a catastrophic challenge for city lawmakers and earns each of the cities a failing F grade on TIA’s grading scale. These findings are released today in TIA’s latest Financial State of the Cities. TIA analysts draw their data from the fiscal year 2018 audited Comprehensive Annual Financial Reports on file in city halls across the country, which are not analyzed on this scale by any other organization.
The four cities that received an F grade and their respective Taxpayer Burdens are as follows:
- Philadelphia: $25,500
- Honolulu: $26,400
- Chicago: $37,100
- New York City: $63,100
(73rd out of 75) HONOLULU is one of this study’s worst cities because of its ever-increasing Taxpayer Burden which now stands at $26,400. If future revenues do not increase or promised retirement benefits are not decreased, then future taxpayers could have to pay $26,400 in taxes without receiving any related services and benefits. While people have focused on the city’s $2.6 billion pension debt, its debt related to retiree health care benefits is almost as high at $2.2 billion.
These new findings are notable for several reasons. For example, Truth in Accounting’s rigorous methodology cuts through common bookkeeping gimmicks to present data free of political distortions. Fiscal year 2018 was the first year city governments reported all retirement liabilities, but Truth in Accounting has been including this information in their analysis for the last several years. This study uncovers exactly how much debt will fall into future taxpayers’ laps.
“Taxpayer Burdens occur when politicians decide to make promises on paper without fully funding the programs,” said TIA founder and CEO Sheila Weinberg. “We need to fix the wording of balanced budget requirements so civil servants can count on their retirement programs, and future generations are not forced to pay for our bills.”
The full Financial State of the Cities report can be found online here.
The Financial State of the Cities report is an in-depth study of the financial condition in America’s largest cities. Data for this report was derived from cities’ 2018 comprehensive annual financial reports, and related retirement plans’ actuarial reports using the most up-to-date information available.
Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. Sheila Weinberg is a Certified Public Accountant with more than 40 years of experience in the field.
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HONOLULU FINANCES STILL IN PERIL -- THE FINANCIAL STATE OF HONOLULU
A new analysis of the audited financial reports found Honolulu has a Taxpayer BurdenTM of $26,400, earning it an “F” grade from Truth in Accounting. Honolulu is one of four cities to receive an “F” grade for its financial condition.
Honolulu’s elected officials have made repeated financial decisions that have left the city with a debt burden of $3.3 billion. That burden equates to $26,400 for every city taxpayer. Honolulu’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years. Of the $8.5 billion in retirement benefits promised, the city has not funded $2.6 billion in pension and $2.2 billion in retiree health care benefits.
Honolulu and other cities have become more transparent over the last few years, thanks to the Generally Accepted Accounting Principles (GAAP) set by the Governmental Accounting Standards Board (GASB), which now require governments to disclose pension (GASB 68) and other post-employment (GASB 75) benefits on their balance sheets.
- 73 Ranking: out of 75
- $3.3 billion Money needed to pay bills
- $26,400 Taxpayer Burden
HONOLULU FINANCIAL BREAKDOWN
- Honolulu has $2.7 billion available to pay $6 billion worth of bills.
- The outcome is a $3.3 billion shortfall, which breaks down to a burden of $26,400 per taxpayer.
- Honolulu’s reported net position is inflated by $969.3 million, largely because the city defers recognizing losses incurred when retirement liabilities increase.
Bottom line: Honolulu would need $26,400 from each of its taxpayers to pay all of its bills. According to Truth in Accounting’s grading scale, any government with a Taxpayer Burden greater than $20,000 receives an “F” grade.
PBN: Report: Honolulu among cities with the biggest tax burden in the US