On January 24, 2018, Truth In Accounting (TIA) released its second Financial State of the Cities (FSOC) report. The study ranks the 75 most populous U.S. cities based on their “Taxpayer Burden” or “Taxpayer Surplus.” These terms refer to how much each taxpayer would need to pay for a city to be able to pay all of its bills. Based on the this figure, cities are graded according to the following grading system:
- A grade: Taxpayer Surplus greater than $10,000
- B grade: Taxpayer Surplus between $100 and $10,000
- C grade: Taxpayer Burden between $0 and $4,900
- D grade: Taxpayer Burden between $5,000 and $20,000
- F grade: Taxpayer Burden greater than $20,000
A city that is able to pay all its bills is labeled a “Sunshine City,” whereas a city that cannot is labeled a “Sinkhole City.” After analyzing the most recent data, TIA found that only 11 out of the 75 cities are “Sunshine Cities.” Further analysis revealed some significant similarities among the Top 5 “Sunshine Cities.”
- Each of the top five cities has fewer than 1 million residents within the immediate city limits.
- Four of the five cities hid portions of their retiree healthcare debt.
- Four of the five cities reported all of their pension debt.
- Four of the five cities released their financial reports on time.
These similarities suggest some significant takeaways. Similar to the findings in TIA’s Financial State of the States, areas with smaller populations tend to report their information more efficiently, truthfully, and have a Taxpayer Surplus. This revelation is not so surprising, as more localized governments tend to face greater scrutiny from individual residents, especially when compared to some of the nation’s biggest cities, such as New York City, Chicago, and Los Angeles.
Unfortunately, none of the 75 most populous cities earned an “A” from TIA; even the cities in the best fiscal shape still have a ways to go. Most of the top five cities still hid portions of their health care debt. This omission is concerning, regardless of a city’s ability to pay its bills. Given the fact that most of these cities are in states that have a Taxpayer Burden, there is reason to worry that they will follow the example of their state governments.
The “Sunshine” cities did have a significant number of differences, which may be cause for optimism. With the exception of Stockton and Irvine, which are both in California, the “Sunshine” cities were located in different states. Even though Stockton and Irvine are in California, they are located in starkly different geographical locations within the state. The fact that the cities with a surplus are spread out across the country may encourage more cities to follow their example.
Example setting is exactly what is needed at the moment. With 64 of the 75 most populous cities unable to pay all their bills, residents, taxpayers, and elected officials need to demand change. The release of the Financial State of the Cities can act as a wake-up call for other cities, which hopefully will lead to improved accounting practices in the future.