Miami has the highest taxpayer burden out of Florida’s four largest cities, according to an analysis from Truth in Accounting. In its annual report that assesses the financial health of the 75 most populous U.S. cities, TIA found that two-thirds of them didn’t have enough money to pay their bills. Their combined debt totals $266.5 billion; combined pension debt totals $109.8 billion; and combined OPEB (other post-employment benefits) debt totals $168.7 billion.
Miami, run by a Republican mayor, was the outlier among the 10 worst cities with the highest taxpayer burden and debt. The nine other worst cities are run by Democratic mayors.
Jacksonville fell just shy of the bottom 20, ranking 55 out of 75. Both cities received D grades for their financial health.
By contrast, Tampa ranked in the top ten and Orlando just barely missed the top 20. They ranked 7th and 21st best, respectively, reporting taxpayer surpluses of $4,200 and $1,200, respectively.
The analysis evaluated fiscal 2021 data and ranked cities by their taxpayer burdens (the amount of money each taxpayer would owe if the city were to pay all of its accumulated debt to date) and surpluses (the amount of money the city has left over after all of its bills are paid divided by the estimated number of taxpaying residents).
Miami’s financial condition stems from elected officials repeatedly making “financial decisions that left the city with a debt burden of $2 billion,” costing every taxpayer $14,000, according to the report. The city’s financial problems “stem mostly from unfunded retirement obligations that have accumulated over the years,” it explains.
Miami needed $2 billion to pay its bills, which was $109.9 million less than it needed in 2020, the report notes. “High, short-lived gains in the value of pension plan assets” helped reduce its pension debt by $108.1 million and its pension fund for firefighters and police saw “a short-lived investment return of almost 20%.”
Miami’s financial condition improved in 2021 “in large part due to unrealized gains in stock market valuation of its pension investments and federal government stimulus money,” and “an exceptionally good year in the markets in 2021” resulting in its pension assets’ values being higher than they otherwise would have been. City officials set aside only 76 cents for every dollar of promised pension benefits and none for promised retiree health care benefits, the report notes.
Jacksonville’s elected officials also “repeatedly made financial decisions that left the city with a debt burden of $2.6 billion,” the report states, costing every city taxpayer $8,400. The city’s financial problems “stem mostly from unfunded retirement obligations that have accumulated over the years,” TIA says.
Jacksonville needed $2.6 billion to pay its bills, which was $432.8 million less than it needed in 2020, according to the report. While its pension debt decreased by $333.2 million from short-lived gains in pension investments, TIA projects its financial standing reversed in 2022 “as some pension plan values decreased significantly.”
Jacksonville’s pension liability also was less than it otherwise would have been because of “an exceptionally good year in the markets in 2021.” Even with inflated pension asset values, city officials had set aside only 61 cents for every dollar of promised pension benefits and eight cents for every dollar of promised retiree health care benefits, TIA found.
In 2022, with markets producing negative returns on investment and with federal COVID relief funds dwindling, TIA expects the financial conditions of Miami and Jacksonville to worsen. Both cities “could struggle to maintain current levels of government services and benefits without further negative impact on its financial health,” it says.
By contrast, Tampa and Orlando reported taxpayer surpluses.
Tampa had a surplus of $518 million to pay future bills, resulting in a taxpayer surplus of $4,200 per taxpayer. This was $218.1 million more than it had in 2020, the report states. “High, short-lived gains in the value of pension plan assets” helped reduce pension debt by $75.7 million, the report found, also boosting its Police and Fire Pension trust fund by nearly 20%.
TIA pointed out that it was “important to note that inflation and stock market downturns in 2022 will most likely affect this positive outlook next year,” which could potentially cause the value of pension assets to decrease and pension liability to increase. It also notes that market values of pension assets aren’t considered spendable except to pay pension benefits.
Orlando also reported a surplus of $117.8 million to pay future bills, resulting in a taxpayer surplus of $1,200 for every taxpayer. Its fiscal health also improved “primarily due to a temporary decrease in its pension liability,” TIA found. Orlando’s pension values were higher than normal because of an “exceptionally good year in the markets in 2021,” it said. But in 2022, markets turned negative with declines reaching high points of over 14%, which will likely decrease the city’s pension assets value and increase its pension liability, it said.
“The situation could worsen further if Orlando’s elected officials assume extra funds exist based on transitory market increases and spend the money,” TIA warns. “Such actions are not advisable because of future downturns in the markets, as happened in 2022.”