02-01-2017, 05:31 PM
Mary Pat Campbell
Join Date: Nov 2003
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
How Strong Are Your City's Finances? 116 US Cities Ranked
To compile this Fiscal Health Index, we looked at 116 U.S. cities with populations greater than 200,000, using data from 2015 financial reports issued by the cities themselves. Our scoring system is described in a new working paper. It uses five factors:
1. the ratio of a city’s general fund balance to its expenditures (40 percent weighting)
2. the ratio of its long term obligations (including OPEB but excluding pensions) to total government-wide revenues (30 percent weighting)
3. the ratio of actuarially determined pension contributions to total government-wide revenues (10 percent weighting)
4. change in local unemployment rate (10 percent weighting)
5. change in property values (10 percent weighting).
Related: Chicago, New York in Worst Financial Shape Among Large US Cities
Read the full methodology here. Click the table headers below to sort by ranking, city name, state or fiscal strength score. Click each city's name to get more details about its score.
1 Irvine California 100
2 Fontana California 99
3 Moreno Valley California 97
4 Huntington Beach California 94
5 Santa Ana California 94
6 Glendale California 93
7 Boston Massachusetts 92
8 Fayetteville North Carolina 89
9 Washington District of Columbia 88
10 Boise Idaho 88
116 Chicago Illinois 25
115 New York New York 26
114 Toledo Ohio 36
113 Reno Nevada 36
112 St. Louis Missouri 37
111 Philadelphia Pennsylvania 41
110 Fort Wayne Indiana 42
109 El Paso Texas 42
108 Montgomery Alabama 48
107 Columbus Ohio 49
EXCLUSIVE: Chicago, New York in Worst Financial Shape Among Large US Cities
Chicago and New York rank at the bottom of a new analysis of fiscal strength based primarily on data from 2015 financial reports issued by the cities themselves. The analysis includes 116 U.S. cities with populations greater than 200,000. See the full rankings here.
Chicago’s position at the bottom of the ranking is no surprise to anyone who follows municipal finance. The Windy City has become a poster child for financial mismanagement, having suffered a series of ratings downgrades in recent years. Aside from having thin reserves and large volumes of outstanding debt, Chicago is notorious for its underfunded pension plans.
For example, the city’s Municipal Employees' Annuity and Benefit Fund (MEABF) reported $4.7 billion in assets and $14.7 billion of actuarially accrued liabilities at the end of 2015, representing a funded ratio of just 33 percent. The actuarial calculations rely on a controversial practice of discounting future benefits at a rate of 7.5 percent, which is the assumed return on the fund’s portfolio return. If a more conservative assumption was employed, MEABF’s liabilities would be higher and its funded ratio lower.
Because the ranking is based on 2015 financial audits — you can see the full data behind the scores here — it does not take into account more recent news. Last summer, Mayor Rahm Emmanuel announced a plan to resolve MEABF underfunding by raising water and sewer rates and increasing employee contributions to the system. Because these changes don’t take effect until this year, it will take some time for them to impact Chicago’s audited financial statements and their fiscal health scores.
While Chicago’s place at the bottom of the list is unsurprising, New York City’s position — just one step above — was unexpected. An extended bull market and soaring real estate prices have pumped money into the Big Apple’s coffers. Total municipal revenues rose from $60 billion in 2009 to $81 billion in 2015. But the city has been spending the money almost as quickly as it has been coming in.
At the end of its 2015 fiscal year, the city’s general fund reserves amounted to just 0.67 percent of expenditures — well below the Government Finance Officers Association recommendation of 16.67 percent (equivalent to two months of spending). A city’s general fund is roughly analogous to an individual’s checking account.
New York City also carries a very heavy debt burden. According to a report issued by City Comptroller Scott Stringer, New York’s per capita debt greatly exceeds that of all other large U.S. cities, and is even 50 percent higher than that of Chicago. But the comptroller’s report only focuses on bonded debt. Government financial accounting standards require cities to report other long-term obligations such as pensions, compensated absences for municipal employees (accrued sick and vacation leave payable at retirement) and “other post-employment benefits” (or OPEB).
It is New York’s OPEB obligation that really sets the Big Apple apart. In 2015, the city’s OPEB liability was $85 billion — roughly equivalent to its bonded debt.
The large OPEB liability is driven by the size of the city’s workforce and the relatively high cost of health care in New York. According to its most recent OPEB Actuarial Report, the city is providing retiree health benefits to 222,000 retirees, while another 315,000 current and separated employees are potentially eligible for future benefits. In 2015, benefits per retiree ranged as high as $17,000 a year (for workers who were not yet Medicare-eligible and who had eligible dependents).
High debt burdens and insufficient general fund reserves are associated with episodes of fiscal distress, which are marked by employee furloughs, layoffs and, in extreme cases, bond defaults and bankruptcy filings. Still, if New York City continues to record strong revenue growth, it can shoulder its sizeable obligations. With the stock market perking up in the aftermath of Donald Trump’s election victory, the odds of a fiscal crisis in the near term appear long — but a bear market could place the city in jeopardy.