Mesa, Phoenix and Tucson ranked in the bottom half of the 75 most populated cities in the U.S. for fiscal health, all earning D grades, according to the 4th annual "Financial State of the Cities” report published by the nonprofit educational organization, Truth in Accounting (TIA).
Mesa ranked 42nd, Phoenix 45th, and Tucson 51st out of 75.
Twelve of the largest cities in the U.S. counted surpluses in 2019, while 63 cities don’t have enough to pay their bills.
The 188-page report provides the most comprehensive analysis of city finances nationwide using previous years as comparisons.
The report surveys the fiscal health of the 75 largest municipalities in the U.S., drawing from 2018 data derived from audited Comprehensive Annual Financial Reports on file in city halls nationwide. It grades them according to how they balanced their respective budgets, whether or not officials include the true costs of the government in their budgets, and other measures.
No cities received an A, 12 received B’s, 27 received C’s, 32 received D’s, and four cities received failing grades. “D” and “F” grades apply to governments that “have not truly balanced their budgets” and have significant taxpayer burdens. TIA divides the amount of money needed to pay bills by the number of city taxpayers to calculate the taxpayer burden.
According to the Government Accounting Standards Board (GASB), laws requiring balanced budgets prevent the current generation of taxpayers from shifting the burden of paying for current-year services to future-year taxpayers. By definition, if a city has a balanced budget requirement, then spending should be equal to revenue, TIA explains.
Some of the financial problems of Mesa, Phoenix and Tucson stem from unfunded retirement obligations that have accumulated, TIA notes.
“Mesa’s elected officials have made repeated financial decisions that have left the city with a debt burden of $795.7 million,” the report states. The burden equates to $5,300 for every city taxpayer. Of the $2.7 billion in retirement benefits promised, its $827.7 million in pension and $716.3 million in retiree health care benefits remain unfunded.
Phoenix officials have also made similar repeated financial decisions, TIA says, resulting in the city having a debt burden of $2.7 billion, or $5,500 for every city taxpayer. Of the $9.6 billion in retirement benefits promised, the city has not yet funded $4.6 billion in pension and $141.4 million in retiree health care benefits.
In Tucson, officials’ financial decisions have left the city with a debt burden of $1.3 billion, TIA reports, or $8,100 for every city taxpayer. Of the $2.8 billion in retirement benefits promised, $1.2 billion in pension and $247.6 million in retiree health care benefits remain unfunded.
According to the report, cities have become more transparent because the GASB now requires governments to disclose pension (GASB 68) and other post-employment (GASB 75) benefits on their balance sheets.
Total debt among the 75 most populous cities amounts to $323.2 billion, excluding restricted assets, capital assets or debt related to capital assets. Most of the debt can be attributed to unfunded retiree benefit promises like pension and retiree healthcare liabilities. In the latest data analyzed, pension debt accounted for $176.2 billion, and other unfunded post-employment benefits totaled $149.8 billion.
TIA’s top five “Sunshine cities” reporting surpluses are Irvine, California, Washington, D.C., Charlotte, North Carolina, Fresno, California, and Plano, Texas. The worst five “Sinkhole cities” that can’t pay their bills, are New York City, Chicago, Honolulu, Philadelphia and New Orleans.