Tuesday, February 20, 2024

Nashville gets a "C" in Truth in Accounting's State of the Cities Report

by Rod Williams, Feb. 20, 2024- Annually, Truth in Accounting analyzes the country's 75 largest cities finances and ranks and grades the cities.  It should be noted that this is not a value judgement as to whether or not a city is overtaxed or undertaxed, if the city has the right priorities, or the quality of life in the city, but a measure of the fiscal soundness of the city. It asks the question if the city has enough money to pay its bills. 

Most cities are required by law to balance their budgets, however, often governments do not include the actual costs of the government in their budget calculations and push costs onto future taxpayers. Municipalities balance budgets by using accounting tricks such inflating revenue assumptions, counting borrowed money as income, delaying the payment of current bills until the start of the next fiscal year so they aren’t included in the budget calculations and other devices. One of the most common ways governments understate the cost of government is by inadequately funding their pension obligations and health care obligations of future retirees. 

TIA says governments can accumulate debt while claiming balanced budgets because most budgets are prepared on a cash basis. This antiquated accounting method includes cash inflows, including loan proceeds as revenue, and outflows—in other words, only checks written.

In analyzing a city's financial status, if the city is insufficiently counting its obligations or inflating its income or doing both, the actual deficit is divided by the number of citizens and that is called a taxpayer's burden. If the city has more income that obligations, that excess income is divided by the number of citizens and is called the taxpayer surplus.

You may view the full report at this link. Below is the report on the city of Nashville. 

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