A recent study looked at the financial health of 75 of America’s most populous cities. This analysis is based on tax surpluses and city burdens. The tax surplus is the total amount of tax revenue received that year divided by the number of city residents. At the same time, the tax burden is the amount of tax revenue required to pay off the public debt, divided by the same indicator.
Sobering statistics
The survey titled “Financial Health of Cities in 2023” was conducted by Truth in Accounting. It has a hard truth: 50 out of 75 cities couldn’t pay their bills; the combined debt of all 75 cities is $267 billion. Moreover, elected officials have not included the cost of government in this figure, instead passing it on to future taxpayers.
Cities that cannot pay their bills at the end of each fiscal year are known as funnel cities, while those that can are called “sunny” cities. Each city receives grades from A to F – the lowest grade is F, which means that the tax burden per resident is over $20,000.
Here are ten of the most financially disadvantaged sinkhole cities that are in serious danger of going bankrupt.
1. New York – class: F
New York has always been the financial center of the American economy. However, due to a backlog of unsecured pension rights and a host of bad legislative decisions, New York has the highest tax burden of any state.
2. Chicago, IL – Grade: F
Chicago ranks second in America in terms of debt. The city is facing incredible problems due to crime and now pension debt. The City has released only 25 cents on the dollar of promised retirement benefits in 2022.
3. Honolulu, Hawaii – Grade: F
The city will seek a tax refund of $26,100 per state citizen, which exceeds the F-Class threshold of $20,000 per taxpayer. Although his 2020 tax burden was more than half a billion more than it is now, he still ended the fiscal year with a $3.3 billion deficit. Honolulu ranks third out of 75 cities.
4. Portland, Oregon – Grade: F
With a higher debt of $5.2 billion, Portland receives an F for its financial health. However, due to Portland’s larger population, its tax burden is lower than Honolulu’s. Despite a short-term appreciation in the value of its pension assets, Portland has set aside only 44 cents on the dollar for promised pension payments.
5. New Orleans, Louisiana – Grade: F
Big Easy is ranked 71st out of 75 cities in the study and is in a terrible F-zone for its financial report. In the past, city governments have been guilty of underfunding pension benefits and failing to meet pensioners’ health obligations. In addition, the city is one of many that have submitted their financial report late, meaning that poorer financial behavior has worsened their overall debt.
6. Philadelphia, PA – Grade: F
Philadelphia’s post-pandemic landscape is looking better lately; however, they still have an F for their nearly $12 billion deficit. However, Philadelphia is a big city, so taxpayers will have to shell out $21,800 per person to balance the books.
7. St. Louis, MO – Grade: D
Gateway to the West has a much smaller deficit than its predecessor, and it falls into Column D with a lower tax burden of $18,000. However, things aren’t looking good, given the unbudgeted $654.5 million in health care retiree payments for city workers.
8. Dallas, Texas – Grade: D
In 2022, dormant pension obligations and negative market returns impacted Dallas’ financial health, leaving the city with $5.9 billion in debt. That figure is the $14,700 each taxpayer needs to solve Dallas’ financial problems.
9. Pittsburgh, PA – Grade: D
The decisions of elected officials have exacerbated Pittsburgh’s problems, and the city currently has $1.5 billion in unpaid debt. Federal funding for the pandemic has dried up in a bear year for markets. Subsequently, Pittsburgh taxpayers had to pay $14,600 each to save Steel City’s finances.
10. Miami, Florida – Class: D
Finally, Miami is ranked tenth. Magic City has nearly $2 billion in unsecured pensions and medical benefits, and a tax burden of $14,000 for working residents. However, pension arrears are decreasing. Curiously, investment in police and firefighter pension plans has achieved nearly 20% returns in 2021.
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