10 U.S. Cities Facing Imminent Bankruptcy Risk
A meticulously conducted study has recently unveiled some alarming findings concerning the fiscal health of America’s most densely populated cities.
This analysis delves into the economic status and potential financial risks these cities might face in the coming years.
Understanding the Study's Criteria and Terminology
The study’s framework examined the financial standing of 75 prominent American cities, focusing primarily on their tax surpluses and burdens.
To simplify, cities that were failing to meet their monetary commitments were labeled as “sinkhole” cities. Conversely, those demonstrating a robust fiscal stance were designated as “sunshine” cities.
The Grading System Explained
For a more systematic evaluation, each city’s fiscal health was assigned a grade, ranging from A to F.
The most concerning of these is the F grade, which indicates an overwhelming tax burden on citizens, specifically when it surpasses $20,000 per resident. This is a clear indicator of significant financial stress.
New York City's Financial Hurdles
New York City, which has always been regarded as the nation’s economic linchpin, has sadly received a grade of F.
The reasons behind this troubling grade include an accumulation of unfunded retirement entitlements, coupled with a series of legislative measures that weren’t financially favorable, resulting in an increased tax burden on New York residents.
Chicago's Mounting Fiscal Pressures
Chicago, another vital U.S. metropolis, is not faring well either, earning an F grade. This unfortunate ranking is largely due to the city’s surmounting debt, positioning it as the second most indebted American city.
Compounding these challenges are the increasing crime rates and a significant gap in pension commitments, with only 25% of the needed pension funds being set aside last year.
The Financial State of Honolulu
Honolulu, known for its natural beauty, also finds itself in distress with an F grade. To offset its fiscal imbalance, each resident might be looking at a staggering $26,100 tax contribution.
While there has been some improvement in reducing the tax burden compared to previous years, Honolulu ended its fiscal year with a substantial deficit.
Portland's Financial Landscape
The city of Portland, Oregon has been handed an F grade, predominantly due to its sizable debt of $5.2 billion.
Despite having a large population, which can sometimes help distribute the tax burden, Portland’s financial situation, particularly concerning pension funds, remains precarious.
Fiscal Uncertainty in New Orleans
The city of New Orleans is another cause for concern, ranking 71st out of the 75 cities analyzed and bearing a grade of F.
The city’s fiscal challenges can be traced back to historical underfunding of pension commitments and unmet healthcare promises to retirees, all of which have only magnified its financial strain.
Philadelphia's Economic Landscape
Philadelphia, despite witnessing some financial recovery in its post-pandemic phase, still finds itself in a challenging spot with an F grade.
This is largely due to its close to $12 billion deficit, which necessitates a substantial tax contribution from its numerous residents to stabilize its economic health.
Examining St. Louis's Finances
St. Louis, popularly dubbed the Gateway to the West, has been given a D grade.
Though its financial challenges are slightly less daunting than cities receiving an F grade, the impending unbudgeted healthcare obligations for city workers, which sum up to $654.5 million, present a cause for concern.
The Economic Scenarios in Dallas
The city of Dallas in Texas, graded D, encountered a series of financial setbacks in 2022. Mainly, dormant retirement commitments and an unfavorable market environment led the city to accrue a significant $5.9 billion debt.
This scenario necessitates a sizable tax input from its citizens to rectify the financial imbalance.
A Glance at Pittsburgh and Miami
Pittsburgh, grappling with a debt of $1.5 billion mainly due to certain policy decisions, has been given a D grade.
Miami, with nearly $2 billion in unfunded pension and healthcare commitments, also holds a D grade. However, there’s a silver lining for Miami as its pension-related debts have recently shown a decline.