Financial watchdog finds big debt in Dallas, Houston, Fort Worth

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Dallas, Houston, and Fort Worth fared poorly in a watchdog group’s annual report examining the financial state of the country’s 75 most populous cities.

The 2020 Financial State of the Cities report is an analysis of fiscal health based on comprehensive annual financial reports filed by each city, In it, Chicago-based Truth in Accounting ranked Dallas, Houston and Fort Worth 54th, 60th and 61st respectively among the 75 cities examined. The study used information from fiscal year 2018.

TIA calculates taxpayer burden or surplus by subtracting bills from assets and dividing that debt total by the number of residents in each city. Irvine, California, fared best with a surplus of $4,100 per taxpayer while New York City was worst with a burden of $63,100 per taxpayer. In all, the 75 examined cities racked up $323 billion in debt.

Nationally, only 12 cities showed a surplus in the 2020 report, including two in Texas – Plano ($2,800 per taxpayer) and Arlington ($2,100). Nine Texas cities were covered by the report.

Bill Bergman, director for research for TIA, told The Texas Monitor that Plano and Arlington “deserve a pat on the back” for living up to their commitments to taxpayers to balance their budgets.

“Anyone who wants to learn from good examples should study those cities,” he said.

Other Texas cities, not so much. The problems that Dallas, Houston and Fort Worth face are the same issues experienced by other cities deeply in debt: huge liabilities for promises to current and future retirees, including for pensions and health care.

In Fort Worth, for example, unfunded pensions for city workers represent more than 60 percent of the city’s nearly $5 billion in bills. Dallas’ unfunded pensions are $3.18 billion of its $6.17 billion in bills; Houston’s pensions make up $4 billion of its $12.4 billion in bills.

The net debt in these cities, according to TIA’s research, is $3.2 billion in Fort Worth, $3.7 billion in Dallas and $7.9 billion in Houston. This results in a per-taxpayer burden of $9,400 in Dallas, $11,600 in Houston and $12,300 in Fort Worth.

The Dallas controller’s office declined The Texas Monitor’s request for comment on the report. Houston didn’t respond to the request for comment. 

Janice Thompson-Burgess, a spokesperson for Fort Worth, said the city formulated a plan in 2019 “to adjust pension benefits and increase employer and employee pension contributions. This was done to mitigate future pension liability.”

She said the other post-employment benefits are funded on an annual basis and that Fort Worth maintains a dedicated trust fund to offset future such liabilities.

Generally accepted accounting principles established by the Governmental Accounting Standards Board now require governments to disclose pension and other post-employment benefits on their balance sheets, giving observers a clearer picture of the true financial picture. Governments used to defer the debt for pensions and essentially hide them from annual financial reports.

“It makes it look worse,” Bergman pointed out. “Did it actually get worse? No.”

Texas lawmakers have tried to alleviate some of that pension pressure. A 2019 law requires Texas public pension funds that have assets greater than $30 million to hire outside firms to examine their books and suggest to the Texas Pension Review Board ways to boost the efficacy of those investments. This follows a 2017 law that prevents members of the Dallas Police and Fire Pension from collecting benefits in a lump sum while placing more restrictions on that fund.

TIA noted that Dallas’s debt position improved by $4.1 billion, largely because of a $3.9 billion improvement in the liability of the Dallas Police and Fire Pension fund due to a reduction in benefits and an increase in contributions.

 Bergman said that laws designed to help reduce pension debt can be a hard sell across the country due to push-back from special interests and those affected.

“We’re seeing some efforts, but we’re seeing a lot of resistance,” he said.

Other Texas cities in the TIA report (and their per-resident taxpayer burdens) included Corpus Christi ($300), San Antonio ($1,100), Austin ($3,300) and El Paso ($3,900).   

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