Most big cities were in bad fiscal shape before the pandemic. Expect it to get worse
It’s a bit like hiding credit card bills under the mattress and declaring that everything’s fine: Cities, a watchdog group says, don’t include the true costs of government in the budgets they present to the public.
Into this financial house of mirrors strides Truth in Accounting, a nonprofit, nonpartisan organization devoted to translating inscrutable financial documents into a language everyone can understand.
In the group’s fifth annual report card on the nation’s 75 biggest cities, Irvine retains its title as the fiscally healthiest city in America — even while the vast majority of its brethren, both in California and across the nation, sink more deeply in debt thanks to promises they’ve made for pensions and retiree health care that are far more expensive than they ever expected.
Joining Irvine in the black was Stockton — testament to the restorative power of municipal bankruptcy — and the city of Fresno.
In the red in California, from least-in-debt to most-in-debt, were Long Beach, Chula Vista, Bakersfield, Riverside, Sacramento, Los Angeles, San Diego, Santa Ana, Anaheim, San Jose, San Francisco and Oakland.
All told, total debt for the 75 most populous cities exceeded $333.5 billion at the end of the 2019 fiscal year. Most of that was pension debt — $180.1 billion — while the rest was for retiree health benefits, at $160.1 billion.
Beyond the beige that blankets this master-planned metropolis, Irvine is a dynamo.
With more than 287,000 people, this majority-minority city — 43 percent Asian, 40 percent White, 10.3 percent Latino, 5 percent mixed-race, 1.7 percent Black — has a citizenry where nearly 70 percent of residents hold a bachelor’s or higher degree and the median income exceeds $105,000 a year.
Getting the finances right has long been a priority, officials said.
Irvine’s “taxpayer surplus” — the money available to pay all its bills, divided by the number of residents — was $4,100 per person for the fiscal year ending in 2019.
That held steady from the year before, but is down from $4,400 in 2017 and $5,200 in 2016. Next year’s surplus is expected to shrink further due to the pandemic.
“Unlike most cities before the crisis, Irvine had more than enough resources available, $370.3 million, to pay all of its bills, including public employees’ retirement benefits,” the watchdog group said. “This means that Irvine’s elected officials have truly balanced their budgets.”
Irvine relishes the crown.
“The city of Irvine is proud to receive recognition for maintaining a strong financial record for the fourth consecutive year, especially so during the COVID-19 health crisis,” Irvine Mayor Farrah N. Khan said in a statement. “This ranking confirms the city council and city staff remain committed to ensuring resident tax dollars are being wisely managed.”
Weighing in at fourth-healthiest in the nation was Stockton, with a surplus of $3,000 per person. Fresno was No. 7 with a surplus of $2,300 per person.
Truth in Accounting calls these the “sunshine cities.” There are only 13 of them. The rest are dubbed “sinkholes.”
The remaining 62 cities on the largest-75 list are in the red, owing more than what they have.
Long Beach, ranking at No. 14 overall, was closing in on sunshine before the pandemic hit. In 2016, its per-resident deficit was $1,500, but it had shrunk dramatically to just $100 per resident in the year examined.
“Long Beach went into the coronavirus pandemic in mediocre fiscal health, and it will probably come out of the crisis worse,” Truth in Accounting said. “Long Beach’s elected officials have repeatedly made financial decisions that have left the city with a debt burden of $20.2 million.”
Riverside, No. 28, had made strides toward solvency as well. In 2017, it had a taxpayer burden of $3,700 per person; that shrank to $3,100. It, too, was in mediocre fiscal health before the pandemic, and will probably emerge from the crisis worse, TIA said. Riverside’s elected officials have left the city with a debt burden of $330.7 million.
Los Angeles, at No. 38, also has made solid strides. In 2014, its debt burden was $8,000 per person. That has been halved, to $4,000 per person — but it’s also expected to get worse. The city’s total debt burden was $5.1 billion before the pandemic hit.
At No. 43, Santa Ana has been sliding. In 2016, its per-person deficit was $3,400; that yawned to $5,400 per resident. “Santa Ana went into the coronavirus pandemic in poor fiscal health, and it will probably come out of the crisis worse,” TIA said. The city’s debt burden was $571.9 million.
The city, however, says the situation improved substantially as the 2020 fiscal year closed, dropping down to $3,047 per resident. “Of that amount, $2,621 per resident is long-term debt amortized over many years, to be funded in future periods,” spokesman Paul Eakins said by email. Current debt is $426 per resident, more than offset by cash and short-term receivables; and its general fund cash reserve balance exceeded $54 million, nearly a quarter of what it spends in a year. Even with the pandemic, Long Beach was able to preserve its service levels and add funding for public safety, he said.
Anaheim, home to the Happiest Place on Earth and No. 47, had a $6,200-per-person deficit. That’s worse than in 2016, when it was $5,300 per resident, but not as bad as 2017, when it was $7,200 per resident. It, too, entered the pandemic in poor fiscal health, and is expected to suffer more. Its debt burden was $696.1 million.
“We share and applaud interest in the financial health of cities, though often reports like these can be overly broad,” Anaheim spokesman Mike Lyster said. “Like many cities, Anaheim faces pension obligations and real fiscal impacts from the pandemic.
What’s not captured is that Anaheim is a $2 billion city enterprise with its own electric and water utility, public safety and convention center and sports venues, which naturally brings obligations, and also revenue, other cities may not have. And while the pandemic has brought near-term issues for Anaheim, our long-term future is bright with major investments planned aroundour theme parks and sports venues and with millions of visitors waiting to return to our city once it’s safe to do so.”
New York tops
The worst city in America, again, was the Big Apple. New York had a stunning deficit of $68,200 per person. It has only grown since 2014, and is also expected to get worse post-pandemic.