Governmental credit quality is a byproduct of both the underlying economy and the cumulative decisions made by officials and citizens over time. The potential for severe strain tends to increase when both the economy and fiscal management break down, which can become even more likely if huge governmental liabilities loom in the backdrop.
The slow, grinding recovery from the 2008 credit crisis has helped most state and local governments restore their coffers through an uptick in revenues. On the other hand, a number of cities remain hampered and exposed to a host of significant liabilities, especially related to retirement benefits.
Using fiscal 2013 year data drawn primarily from city Comprehensive Annual Financial Reports (CAFR), Merritt Research Services, LLC examined a number of key ratios and statistics to ascertain the overall credit quality of America’s cities.
In this second part of our series, “Assessing the Credit Quality of America’s Cities,” we place the spotlight on the Achilles heel for many cities: public pensions. Future installments of this series will focus on liabilities encompassing other forms of debt, including other post-employment benefits and the average age of infrastructure, a liability whose time will eventually require funding. Wrapping up the fiscal assessment picture, we will examine overall condition measures such as deficits, financial cushions and net position.