Do other big city balance sheets resemble Detroit’s?
With the federal bankruptcy judge’s ruling today that Detroit is, indeed, insolvent and can remain in bankruptcy, the media are again asking, what other cities may come under the kinds of fiscal pressures Detroit faces? Last month the Civic Federation of Chicago attempted to answer that question by comparing 12 American cities to Detroit on key issues of solvency. Boston and Chicago scored closest to the Motor City.
The federation’s study used a sophisticated method of calculating financial health which included measuring changes over five years in a series of metrics like cash solvency (a ratio of working capital to expenses), long-term solvency (the availability of future resources to pay for long-term obligations), service-level solvency (government’s ability to maintain basic services desired by citizens) and operating solvency (the ability to fund current expenditures with recurrent revenues).
Detroit, not surprisingly, scored lowest (the more points a city accumulated, the worse its performance). Boston was closest to the Motor City. Boston scored poorly on its ratio of debt service to expenditures, on working capital to expenditures, and on its ability to continue funding basic services with available resources.
Chicago ranked low in expenses per capita, liabilities per capita and taxes per capita.
Columbus, Ohio, led the pack in financial performance (it is both a state capital and the home of a major public university) followed by Pittsburgh.