Financial Health Major USA Cities

Financial Health Major USA Cities

I finally got off my butt and did some primary research to compare some of the largest cities in the USA to the financial health of Detroit just before that city declared bankruptcy. The good news is that currently, no major city has the same crappy financials that Detroit had before it went bust in 2012. The bad news is two major cities are knocking on bankruptcy’s door and at least one other that needs to get its act together.

The chart is a 2017 snapshot of the financial health of a city using two ratios. The Y axis is total debt to one year’s revenue. The higher up the chart you go, the worse the problem is. The X axis is the net income or “profit” of the City as a ratio of total revenue. A negative number here means the city spent more money than it brought in for that year. The further to the left you go, the more the city lost.

Detroit is at the top of the plot and solid in the negative net income side of the chart. Bad combination. It means for several years, they spent more than they made and in the current year, they were doing the same thing.

Next comes Chicago followed by Dallas. Both cities are within a few years of needing to declare bankruptcy. Dallas has already cut pensions to first responders. Chicago doesn’t have the guts to do that, so they well spend more than they make until the bond kings cut them off from the debt market.

Next is San Jose, they need to get their act together or within ten years, they will be bankrupt.

The following cities are treading water, but still need to reign in expenses: Boston, New York, Philadelphia, Los Angeles, San Diego, and San Antonio.

Baltimore is a curious city. They ran a huge surplus in 2017. Maybe they should have spent more on cops to keep the out-of-control violence from taking over the streets.

Finally, Houston has a ton of debt (higher ratio than San Jose) but ran a huge surplus in 2017. The year before was not so kind as they ran a deficit. Why such big swings? O-I-L.

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