Mesa, Phoenix, Tucson Earn “D” Financial State Grades

According to the government finance watchdog organization Truth in Accounting, Mesa, Tucson, and Phoenix earned “D” grades due to each city’s Taxpayer Burden™. Municipalities that earned “D” grades would need each taxpayer to contribute (Taxpayer Burden) between $5,000 to $20,000 for their city government to pay all of its bills.

Tucson (-$8,700), Phoenix (-$5,300), and Mesa (-$5,900) join Milwaukee, Detroit, Minneapolis, Memphis, Omaha, Jacksonville, Los Angeles, Seattle, Lexington, Cleveland, Virginia Beach, San Diego, Toledo, Columbus, Pittsburgh, St. Louis, Honolulu, Nashville, Cincinnati, Fort Worth, Miami, Boston, Houston, Atlanta, Baltimore, San Jose, Kansas City, MO, Anaheim, Denver, and Saint Paul.

Report highlights:

The motivation and foundation for the nonpartisan mission of Truth in Accounting is to educate and empower citizens with understandable, reliable, and transparent government financial information. TIA is a nonprofit, politically unaffiliated organization composed of business, community, and academic leaders interested in improving government financial reporting. TIA makes no policy recommendations beyond improvements to budgeting and accounting practices that will enhance the public’s understanding of government finances.

Because government financial statements do not report all liabilities, elected officials and citizens are making financial decisions without knowing the true financial condition of their government. The lack of accuracy and transparency in government accounting prevents even an experienced user of government financial documents from understanding and evaluating a public-sector entity’s financial health.

Since all levels of government derive their just powers from the consent of the governed, government officials are responsible for reporting their actions and the results in ways that are truthful and comprehensible to the electorate. Providing accurate and timely information to citizens and the media is an essential part of government responsibility and accountability. The lack of transparency in financial information, city budgets, and financial reports makes it difficult for governments to meet this democratic responsibility.

The total amount of combined municipal unfunded debt of cities analyzed in this report stands at a staggering $335.4 billion. Of that, unfunded pension liabilities account for $210.7 billion and retiree healthcare debt another $119.5 billion.

While none of the 75 most populous cities received an A grade, 11 cities earned a B for their Taxpayer Surplus. The remaining cities had a Taxpayer Burden and varied along the grading system, with 23 cities earning C’s, 34 earning D’s and seven earning an F grade.

Mesa:

Mesa’s Taxpayer Burden™ is -$5,900, and it received a “D” from TIA.
Mesa is a Sinkhole City without enough assets to cover its debt.
Decisions by elected officials have led to a Taxpayer Burden™, which is each taxpayer’s share of city bills after its available assets have been tapped.
TIA’s Taxpayer Burden™ measurement accounts for all assets and liabilities, including pension and retiree healthcare debt.
Mesa only has $903.1 million of assets available to pay bills totaling $1.7 billion.
Because Mesa doesn’t have enough money to pay its bills, it has a $784.6 million financial hole. To erase this shortfall, each Mesa taxpayer would have to send $5,900 to the city.
Thanks to an accounting rule implemented in the 2015 fiscal year, Mesa must report its pension debt on its balance sheet. However, the city still excludes $170.3 million of retirement obligations, which consist mostly of retiree healthcare liabilities. A new accounting standard will be implemented in the 2018 fiscal year that will require governments to report these liabilities on the balance sheet.
The city’s financial report was released 168 days after its fiscal year end, which is considered timely according to the 180 day standard.

Phoenix:

Phoenix’s Taxpayer Burden™ is -$5,300, and it received a “D” from TIA.
Phoenix is a Sinkhole City without enough assets to cover its debt.
Decisions by elected officials have led to a Taxpayer Burden™, which is each taxpayer’s share of city bills after its available assets have been tapped.
TIA’s Taxpayer Burden™ measurement accounts for all assets and liabilities, including pension and retiree healthcare debt.
Phoenix only has $3.7 billion of assets available to pay bills totaling $6 billion.
Because Phoenix doesn’t have enough money to pay its bills, it has a $2.3 billion financial hole. To erase this shortfall, each Phoenix taxpayer would have to send $5,300 to the city.
Thanks to an accounting rule implemented in the 2015 fiscal year, Phoenix must report its pension debt on its balance sheet. However, the city still excludes $276.8 million of retirement obligations, which consist entirely of retiree healthcare liabilities. A new accounting standard will be implemented in the 2018 fiscal year that will require governments to report these liabilities on the balance sheet as well.
The city’s financial report was released 172 days after its fiscal year end, which is considered timely according to the 180 day standard.

Tucson:

Tucson’s Taxpayer Burden™ is -$8,700, and it received a “D” from TIA.
Tucson is a Sinkhole City without enough assets to cover its debt.
Decisions by elected officials have led to a Taxpayer Burden™, which is each taxpayer’s share of city bills after its available assets have been tapped.
TIA’s Taxpayer Burden™ measurement accounts for all assets and liabilities, including pension and retiree healthcare debt.
Tucson only has $500.4 million of assets available to pay bills totaling $1.8 billion.
Because Tucson doesn’t have enough money to pay its bills, it has a $1.3 billion financial hole. To erase this shortfall, each Tucson taxpayer would have to send $8,700 to the city.
Thanks to an accounting rule implemented in the 2015 fiscal year, Tucson must report its pension debt on its balance sheet. However, the city still excludes $213.3 million of retirement obligations, which consist mostly of retiree healthcare liabilities. A new accounting standard will be implemented in the 2018 fiscal year that will require governments to report these liabilities on the balance sheet.
The city’s financial report was released 211 days after its fiscal year end, which is considered untimely according to the 180 day standard.

A and B grades are given to governments that have met their balanced budget requirements and have a Taxpayer Surplus. D and F grades apply to governments that have not balanced their budgets and have significant Taxpayer Burdens. Based on our grading system, here are the numbers ofcities for each grade:

A grade: Taxpayer Surplus greater than $10,000 (0 cities).
B grade: Taxpayer Surplus between $100 and $10,000 (11 cities).
C grade: Taxpayer Burden between $0 and $4,900 (23 cities).
D grade: Taxpayer Burden between $5,000 and $20,000 (34 cities).
F grade: Taxpayer Burden greater than $20,000 (7 cities).

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