10 Major U.S. Cities on the Edge of Bankruptcy
There seems to be at least some correlation between the cities on this list (seven of ten) facing bankruptcy concerns in that they are democratic party strongholds and sanctuary cities for the most part.
Understand that correlation is not causation - it certainly gives one pause.
S E E D E D C O N T E N T
Fifty of the country’s 75 largest cities are in a substantial deficit, according to Truth in Accounting’s recent Financial State of the Cities report. Carrying high debt can be fiscally risky, putting city employees’ pensions and health care benefits at risk. Is your hometown on the list?
The largest city in the United States also has the most significant debt. In 2021, the city had $171.5 billion in debt. However, when comparing data from 2017, the city’s debt has shrunk by 11%. Yet, if the debt were to be spread out among New York taxpayers, $56,900 would be added to each New Yorker’s financial load.
The Windy City did the opposite of NYC, and instead of decreasing its debt in the past few years, it increased it by 16.4%. Chicago’s elected officials have repeatedly made financial decisions that left the city with a debt burden of $38.2 billion.
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These cities are facing the realities of the choices they have made.
Whether those decisions are correct or incorrect is for each of us to decide for themselves - but the reality of the fiscal disasters will be born by the citizens in the cities.
That's not entirely true. The Federal government really has been imposing unfunded requirements onto larger cities since the Lyndon Johnson administration. And the Federal government has encouraged these cities to take on debt to obtain Federal dollars.
Nerm
Can you elaborate?
Do you think the costs of "sanctuary" status brought on by the cities themselves is not the single largest factor in at least some of these "money crises" in cities?
When the city budget is tight, park maintenance suffers. Sanctuary status is being scrutinized because most people see that as an non-essential service.
The alphabet Federal agency really have been imposing requirements and restrictions on essential services. Water, sewage, garbage, and transportation are required to conform to an ever changing regulatory environment. Cities are required to oversee and manage things like asbestos and lead mitigation, brownfield cleanup, building code compliance, water treatment, and sewage & garbage disposal. Federal regulations really do impose requirements on water supply and energy supply. There are many essential services that cities must provide before the social programs are even put on the table. And the Federal government really does regulate all those essential services.
For New York the problem may be the Gateway tunnel under the Hudson. The cost for that one project has been estimated to be more than $17 billion. The Federal government as committed $11 billion to the project. Superstorm Sandy required New York to increase spending for storm water management; Google indicates that amounts to about $0.5 billion each year. And now the Federal EPA is considering imposing discharge limits on pollutants in storm water and requiring treatment of storm water before discharge.
IMO residents aren't going to be happy if illegal immigrants are competing with flood prevention for a piece of the city budget. But the problem is that the cost of providing essential services has increased dramatically. The Federal government keeps changing existing requirements and adds new requirements.
The question is will they?
Will they somehow get bailed out?
Vic
I think the citizens of at least some of the cities on the list are already bearing the burden in reduced services, higher crime rates due to manpower reductions in police forces, poorer quality education due to over crowding etc etc
There is also an exodus of citizens and businesses from some of these citizens as taxes continue to rise along with fees and restrictions on businesses.
Will they get bailed out? I hoped not by the federal government as I see this as a local failure that needs to be fixed by the local governments.
It has already begun. in April 2020, for the first time, the Federal Reserve announced it was willing to buy the debt of state and local governments.
The state of Illinois and New York’s Metropolitan Transportation Authority borrowed a total of $6.6 billion before the Fed closed the window at the end of 2020.
Illinois bonds are nearly at a junk bond rating.
Agreed!
There it is!
DotW
That would have been at the end of Trump's administration, I did not remember that
"In addition, the Fed launched the Municipal Liquidity Facility (MLF) in April 2020 to lend up to $500 billion directly to states and local governments with populations above a certain threshold; the list of eligible borrowers was later expanded to include more issuers. However, only the state of Illinois and the New York MTA made use of the program, borrowing $3.2 billion and $3.36 billion, respectively. The MLF stopped lending on December 31st, 2020, after Treasury Secretary Steve Mnuchin withdrew Treasury support."
Sounds like a COVID inspired program - there were many of them in 2019 and 2020 as I recall
Yes, it was inspired by COVID. Of course, once someone gets a hand out, they are likely to come back for another.
I can see a state in the future, maybe CA, looking for an 'investment', not a 'bailout' for a "'dynamic partnership' between the federal government and the states, for 'infrastructure'. In actuality, the money would cover operating deficits and massively underfunded pension promises.
DotY
I have no doubt that Ca would like that but unless there is a dramatic change in the makeup of the Congress to create a super majority, I do not see that type deal passing
Agree that with the current make up, it's slim to no chance.
Click the seeded content link and check out the ten cities on the list - NYC, Chicago, Honolulu, Portland, New Orleans, Philadelphia, St Louis, Dallas, Pittsburgh. Miami.
Not all democratic party strongholds, but mostly
Many of these cities are in states that have high debt load per capita:
2. This is household debt per capita as a percentage of the median household income (2022 data).
3. Data on state and local government debt comes from Q4 2022.
4. Data on gross domestic product (GDP) comes from 2022.
DotW
Thanks for the data but are you suggesting that individual debt is the cause of these cities fiscal crises?
No, the household debt is probably heavily influenced by large mortgage debt unrelated to their states' profligate spending.
DotW
No, the household debt is probably heavily influenced by large mortgage debt unrelated to their states' profligate spending.
And to shrinkflation, the high performance of wall street at the expense of main street, the cost of health care and many other factors as well
It should be noted those are also amazing cities to be raped and mugged in.
Perhaps, but not relevant to the discussion topic
Thanks for playing
Tax and spend baby, tax and spend.
Sparty On
Tax and spend baby, tax and spend.
Indeed, but would you agree that the "tax" part of that is leading to exodus from certain cities amd the "spend" is resulting in the financial crises faced by these cities?
Yes, it’s a death spiral in many places. Need to tax more to pay for debt and social programs, which drives people to more tax friendly locales, which reduces tax revenues, which requires raising taxes even more, etc, etc.