COVID-19 and the resulting economic downturn made a considerable impact in many areas of the U.S. economy during 2020, but most certainly in municipal budgets. Taking a look at the nation’s 75 largest municipalities, Truth in Accounting found that most could ill afford a large-scale health crisis.
The organization’s just-released 2021 Financial State of the Cities found that in fiscal 2019, just 13 of the largest cities had more assets than obligations, a key indicator of long-term financial health. The remaining 62 cities carried varying levels of debt, with many cities already billions of dollars in hock prior to the onset of the pandemic.
“The bottom line is that the majority of cities went into the pandemic in poor fiscal health and they will most likely come out of it even worse,” says Sheila Weinberg, founder and CEO of Truth in Accounting.
Even the fiscally healthiest cities are projected to lose millions of dollars in revenue as a result of the coronavirus pandemic, according to the FSOC report. The uncertainty surrounding the health crisis makes it impossible to determine how much will be needed to maintain government services and benefits. However, these cities’ overall debt will most likely increase.
Going into the pandemic, Irvine, CA had the best city finances in the U.S. with a $370.3-million surplus, according to Truth in Accounting’s analysis. If you were hypothetically to divide that figure by the number of Irvine taxpayers, each taxpayer’s share is $4,100. Other cities with relatively healthy finances include Charlotte, Plano, TX and Washington, DC.
Moving past the 13 cities with budget surpluses, the waters get progressively deeper and choppier. Many larger and older cities owe billions of dollars to unfunded retirement plans for public sector employees.
New York City claimed the dubious distinction of worst municipal finances in the U.S. for the fifth year in a row—and that was before the nation’s largest city became an early epicenter for the pandemic. Every taxpayer in the Big Apple would have to pay $68,200 in order for the city to retire all of its debt.
Chicago (second-worst in the nation), Truth in Accounting’s hometown, would need each taxpayer to pay $41,100. The average taxpayer burden across all 75 cities in the report works out to $7,355.
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