While an annual report from a financial watchdog shows most U.S. cities are poorly prepared to face the fiscal fallout from the COVID-19 pandemic, the three North Carolina cities examined showed stronger numbers.
Chicago-based Truth in Accounting released its annual Financial State of the Cities study on Tuesday, Jan. 26, examining the monetary health of the 75 largest cities in the U.S. by using fiscal 2019 audited comprehensive annual financial reports in each municipality.
TIA found that 62 of the cities carried varying levels of debt, numbers almost certainly exacerbated in fiscal 2020 by the economic downturn caused by the pandemic.
“Even the fiscally healthiest cities are projected to lose millions of dollars in revenue as a result of the coronavirus pandemic,” the report notes. “The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but these cities’ overall debt will most likely increase.”
The three North Carolina cities examined in the report fared better than most, with two of them showing a taxpayer surplus in fiscal year 2019. TIA defines that surplus as the balance sheet showing more assets than liabilities. Charlotte ranked fifth with a surplus of $3,000 per taxpayer, while Raleigh ranked eighth with a surplus of $2,200. Although Greensboro shows a per-taxpayer burden of $1,000, that was good enough for a placement of 19th.
Although Charlotte placed highly, TIA noted its financial position worsened by 15% from the previous year, mostly due to its firefighters’ pension plan that received less investment income because it lowered its discount rate. Those factors resulted in a larger pension liability.
On the other hand, Raleigh saw a big improvement in its outlook. The city’s financial position improved by 50% mostly because the city’s revenues exceeded its expenses.
Greensboro’s financial position worsened by 39%, mostly due to an increase in the city’s bonded debt. TIA also points out that of the $910.2 million in retirement benefits promised to its public-sector workers, Greensboro hasn’t funded $90.2 million in pension and $114.5 million in retiree health-care benefits.
Sheila Weinberg, founder of TIA, told Carolina Journal that the North Carolina cities studied have largely avoided the trap that has ensnared other municipal governments – letting unfunded retiree liabilities to pile up – although Greensboro’s situation looks somewhat tenuous.
She notes that governments tend to have a “pay as you go” mentality when it comes to health benefits, but pre-funding avoids debt for retirement costs piling up in the future.
“We encourage every government to not put current costs onto future taxpayers,” she said. “Current taxpayers should be paying them as they go along.”
Weinberg recommends cities with surpluses should put some of that money into funding those retiree health-care benefits or just sit tight on the money to see how the pandemic affects their budgets.
“It will be interesting to see if they have enough of a cushion,” she said.
The most financially sound cities, according to the report, are Irvine, California; Washington, D.C.; Lincoln, Nebraska; Stockton, California and Charlotte. Those with the greatest taxpayer burdens are New York City, Chicago, Honolulu, Philadelphia, and Nashville.
Cities usually rank poorest when they owe billions of dollars in unfunded retirement plans for government employees. This is the fifth straight year NYC fared poorest on the study, and has a pre-taxpayer burden of $68,200.
The average taxpayer burden for all 75 cities examined is $7,355, according to TIA.
Johnny Kampis is a freelance writer for Carolina Journal.