United States Forget the National Debt - Most of America's Big Cities Are Broke

[DarthOne]

Forget the National Debt - Most of America's Big Cities Are Broke

Forget the National Debt - Most of America's Big Cities Are Broke

redstate.com

A majority of America's largest cities are broke and unable to meet their liabilities, according to a new analysis.

In its eighth annual Financial State of the Cities report, the right-leaning think tank Truth in Account determined that as of 2022, 53 of the country's 75 largest cities have fewer assets than liabilities.


The report notes:

At the end of the fiscal year 2022, 53 cities did not have enough money to pay all of their bills. This means that to claim their budgets were balanced—as is required by law in the 75 cities—elected officials have not included the actual costs of the government in their budget calculations and have pushed costs onto future taxpayers.
Together, the 75 cities had $307.4 billion worth of assets available to pay bills; their debt, including unfunded retirement benefit promises, amounted to $595.3 billion. Pension debt totaled $175.9 billion, and other post employment benefits (OPEB), mainly retiree health care, totaled $135.2 billion.

According to the analysis, the biggest obligation faced by large cities is their pension liabilities, which become more affordable based on the market worth of investments:

In 2022, the cities continued to receive and spend federal COVID-19 relief funds, and as the U.S. economy reopened, they took in additional tax revenue. Such economic gains were offset by increases in their pension liabilities, which were caused in large part due to decreases in the market value of pension investments.
Over the past few years, investment market value shave swung dramatically. In 2022, this volatility negatively impacted most cities' pension investments and their financial condition, which demonstrates the risk to taxpayers when cities offer defined pension benefits to their employees.

Of the 75 cities the report examined, only one received an A grade for fiscal health. The most common grade was D, followed by C and B.



The cities are also analyzed on their respective taxpayer burden, which means the amount of money every taxpayer would have to pay in order for the budget to be balanced.

Unsurprisingly, nine out of the ten cities with the largest taxpayer burden are run by Democrats. Leading the pack is New York City( -$61,800), followed by Chicago (-$42,900), Honolulu (-$24,200), Philadelphia (-$20,400), Portland (-$20,100), New Orleans (-$18,200), Miami (-$15,500), Milwaukee (-$15,300), Baltimore (-$14,100), and Pittsburgh (-$13,000).

It was not all bad news, however. Some cities were in taxpayer surplus, meaning they could afford to give every taxpayer a certain sum of money and still have a balanced budget. The five cities with the greatest surpluses were Washington, D.C. ($10,700), Irvine, California ($6,100), Plano, Texas ($5,100), Lincoln, Nebraska ($4,100), and Oklahoma City ($2,900).



The report concedes its limitations, including the fact that 2022 was still at the peak of the COVID-19 recovery process. However, it also notes that all of these cities received billions in federal relief funds, which should have helped the process of balancing out their budgets.

 

[Cherico]

This is true through out pretty much the entire world.

I don't see any other option then mass defaults everywhere.

 

[ATP]

This is true through out pretty much the entire world.

I don't see any other option then mass defaults everywhere.

Or, WW3.If all bigger cities on entire world get nuked,their debts would vanish,too.
And,partially normal countries,like Poland or USA would survive that.Only kgbstan after loosing Moscov and 10 bigger cities would cease to exist.

I live in polish capital,so i would die,but - it would be better world for survivors.

 

[Vetrom]

This is true through out pretty much the entire world.

I don't see any other option then mass defaults everywhere.

Not sure even defaults would help when so many municipalities are still in love with giving corporations and land developers sweetheart tax deals and even payments in the hopes that they set up shop. on a financial scale, thats done even more damage over thr decades than any amount of migrant silliness.

 

[LordsFire]

Not sure even defaults would help when so many municipalities are still in love with giving corporations and land developers sweetheart tax deals and even payments in the hopes that they set up shop. on a financial scale, thats done even more damage over thr decades than any amount of migrant silliness.

I'm curious how you think low taxes are harmful.

 

[Poe]

Not sure even defaults would help when so many municipalities are still in love with giving corporations and land developers sweetheart tax deals and even payments in the hopes that they set up shop. on a financial scale, thats done even more damage over thr decades than any amount of migrant silliness.

Just like with most states and the federal government, there is not an income problem here. Most of these cities tax the hell out of every person and business within them and raise these taxes nearly every year. The common thread between the federal government, states like Illinois and these cities is that they spend way more than they are capable of earning and they design their budgets to be income + N% so that even if they did make enough to cover the spending they'd take this as a sign to spend more not get ahead.

 

[Morphic Tide]

I'm curious how you think low taxes are harmful.

The problem is that a lot of these municipalities are making the cuts but then get nowhere near enough business moving in to replace the old tax base at the lower rate, so the municipality that handles things like maintaining roads ends up even deeper in the whole because they gutted their revenue.

There are only so many services these small cities have that can be cut in the first place, and it's hardly out of the question for this to end up with them unable to handle basic infrastructure commitments, let alone their pension backlog.

 

[Poe]

The problem is that a lot of these municipalities are making the cuts but then get nowhere near enough business moving in to replace the old tax base at the lower rate, so the municipality that handles things like maintaining roads ends up even deeper in the whole because they gutted their revenue.

There are only so many services these small cities have that can be cut in the first place, and it's hardly out of the question for this to end up with them unable to handle basic infrastructure commitments, let alone their pension backlog.

>so many services these small cities have that can be cut in the first place
>small cities
>we're specifically discussing a list of americas largest cities

 

[LordsFire]

The problem is that a lot of these municipalities are making the cuts but then get nowhere near enough business moving in to replace the old tax base at the lower rate, so the municipality that handles things like maintaining roads ends up even deeper in the whole because they gutted their revenue.

There are only so many services these small cities have that can be cut in the first place, and it's hardly out of the question for this to end up with them unable to handle basic infrastructure commitments, let alone their pension backlog.

Can you give me some actual examples of this?

 

[Morphic Tide]

>we're specifically discussing a list of americas largest cities

Cherico and Vetrom, who we are in a reply-chain with, shifted to discussing a much more general case:

This is true through out pretty much the entire world.

when so many municipalities are still in love with giving corporations and land developers sweetheart tax deals

Can you give me some actual examples of this?

Apparently not because I have no clue what terms to search for "using tax breaks to bait in businesses in general" without hitting a brick wall of unrelated reporting on budget shortfalls from shenanigans with state and federal grands and general taxation reduction, and am generally awful at holding onto citations.

And compiling the numbers for how it's a risk is going to need coming over hundreds of pages of documents to compare revenues and expenses across separately listed funds and organizations while also trying to categorize the latter by level of requirement for the municipal government to function.

 

[Vetrom]

I'm curious how you think low taxes are harmful.

The examples im thinking of arent 'low taxes', its cases where some cities have ended up with a multi-decade history of giving business sweetheart deals that don't pan out in any of business income/property taxes, jobs gained (thus more income and investment in the city) or even population base (indirect income via property taxes).

its not the tax rate thats a problem, its cities repeatedly impovershing themselves on what should be better known as bad deals by now.

The biggest example that comes to mind for me is tax increment financing.

 

[Poe]

The examples im thinking of arent 'low taxes', its cases where some cities have ended up with a multi-decade history of giving business sweetheart deals that don't pan out in any of business income/property taxes, jobs gained (thus more income and investment in the city) or even population base (indirect income via property taxes).

its not the tax rate thats a problem, its cities repeatedly impovershing themselves on what should be better known as bad deals by now.

The biggest example that comes to mind for me is tax increment financing.

nonsense. All of these businesses create jobs whose workers pay a ton because, again, these cities tax individuals for literally everything they do in life.

 

[LordsFire]

The examples im thinking of arent 'low taxes', its cases where some cities have ended up with a multi-decade history of giving business sweetheart deals that don't pan out in any of business income/property taxes, jobs gained (thus more income and investment in the city) or even population base (indirect income via property taxes).

its not the tax rate thats a problem, its cities repeatedly impovershing themselves on what should be better known as bad deals by now.

The biggest example that comes to mind for me is tax increment financing.

I don't know enough about that specific bureaucratic trick to give detailed feedback on it, but let's try a different tack.

What do you think is a good municipal-level tax rate, and why?

 

[Skitzyfrenic]

I'm not surprised by this at all.

It's because borrowing money is in vogue.

It's because balancing a budget doesn't matter to the people in charge.

It's because social programs ensure the voter base will vote for them.

It's because money laundering, graft, and corruption are skyrocketing.

Sweetheart deals on taxes to get businesses there and waiting ten years or whatever to start making the investment back isn't really isn't the problem.

It's the out of control spending and borrowing. That the people in power use to increase their personal fortunes and power.

When they put out a project for a bid, you can be sure that someone's cousin is going to get it. And that everyone along the way is going to get a taste.

 

[Vetrom]

nonsense. All of these businesses create jobs whose workers pay a ton because, again, these cities tax individuals for literally everything they do in life.

Uhh. Am I getting whooshed here? I am not sure. In case I'm not, in this case the jobs even fail to materialize, making it a net loss even for corrupt as fuck municipalities.

I don't know enough about that specific bureaucratic trick to give detailed feedback on it, but let's try a different tack.

What do you think is a good municipal-level tax rate, and why?

Thinking about the problem and boning up on some reading, this is my third rewrite of an answer to this. It's not a simple question IMO.

I think a good rate is only enough to require that properties see positive use and to not lay fallow (essentially the Aristotlean theory on property tax, if one has studied these things.).

The rub is I think that value reasonably changes, based essentially on population density. In an area with a denser population, I do think the tax should be higher, as the societal cost of letting a property in a denser area lay fallow rises, maybe even exponentially.

That said, as the tax rate and the stakes attached to such increase, the equality of contribution to a tax base also drops, increasing the risk of corruption and simple mismanagement. While I think neither is well managed, you can look to the cities of San Francisco and Los Angeles for examples of this. San Francisco has a tiny population and area compared to L.A., but it has a similarly sized city budget. There's something suspicious in that sausage.

Back to what makes a just tax rate, I'd start at something that requires that land be used, but not so burdensome that you could lose the land in a single generation through mistakes or variance. In that vein I'd be leery of a property tax rate nearing or over the 1.5%/yearly mark, but anything way less than 0.5% would also make me suspicious that the government is soaking people through other income sources (say, over-policing, corrupt services, overly high sales taxes, municipal income tax etc).

Also, trying to find sources on the history, philosophy, and motivating considerations on any tax subject online is total ass. SRE means 99% of searches on the subject are flooded by shitty tax calculators and lawyers.