U.S. Cities Are Going Broke Credit Downgraded Only Paying Interest… Just Like The Middle Class | The Millionaire Morning Show w/ Anton Daniels
Summary
➡ The nonprofit Truth in Accounting claims that many cities owe more money than they publicly report, especially in underfunded pensions and retiree health benefits. This debt, which is often invested in the stock market, can lead to financial trouble if investments fail. For example, Detroit went bankrupt in 2013 partly due to retiree payment obligations. The group suggests that voters should choose leaders based on their financial management skills, not identity politics, to avoid such issues.
➡ This text talks about the importance of understanding city finances and making informed decisions about who manages them. It highlights the financial struggles of various cities, including budget cuts and reduced services, like fewer class offerings and library hours. The text also explains how property taxes fund many city services and how cities borrow money. Lastly, it emphasizes the need to pay attention to who’s in charge of city finances because it affects everyone’s daily life.
Transcript
Why us cities are failing. I got two more segments that I want to get to. The last one is probably going to be the most entertaining of the day. Contrary to popular belief, is going to be the most entertaining of the day. But the first thing that we want to tackle is why are us cities starting to go broke? This is something I believe that I seen on CNBC.
Yep, I’m correct. CNBC. And they did an entire segment on the fact that these cities are in debt. They’re going to be under a crisis and are basically in a doom loop. Make sure you hit a like for the algorithm. Subscribe to the channel and turn on your notifications. Let’s get it popping. Major cities across the US are in financial trouble. I think we can all agree on that.
We’re broke. We’re seeing sales tax come down. We’re seeing business tax come down and stays in our hotels come down. One study says that 53 of the largest cities in the United States haven’t generated enough revenue to cover their bills. Oh, wait a minute. I don’t see not one Michigan city on that map. I don’t see not one Michigan city. Let me give a round of applause for Detroit, Michigan.
Not one Michigan city is on that map. This is cities that did not have enough money to be able to pay their bills at the end of fiscal year 2022. Houston, $6 billion in a hole. Remember when we did that whole segment on Houston and Houston said, nah, I’m broke, I’m broke. Philadelphia, 11 billion. New York, $177 billion in the hole. Jesus. And you know what they do? They borrow money, which then cause more interest.
It’s the same thing that you do. Portland, $4. 4 billion. Chicago, $38 billion. Look at all of the cities over there in California. Jesus. Good googly moo. Good guy. Hey. True to myself. Just relax, bro. Just. Just chill out, big dog. It’s not that big of a deal, man. Clearly there are significant capital needs. You know, across the US, several cities spent years taking on debt to fund services.
And now some public officials are reining in spending. We’ve got to be careful because you don’t want to get into too much debt. Rising debt may lead to dirtier streets, fewer public services, and tough decisions from public officials that need to make ends meet. Oh, that’s New York. I see that. I see Latisha James. Leticia James. Tough decisions from public officials. Governor Hochul. The governor of New York, Eric Adams.
You know. You know what’s bad? You know you run in a bad city. When I do so much content on how bad you run in your city that I know everybody by first and last name, and I’m not even a part of their city. When we can say Governor Holco and Leticia James, the person that they was all in cahoots together in order to try to prosecute Trump.
And you got Eric Adams, who said that he dyslexic, and all of the legislators and all of the people that’s finessing y’all around them. You know, it’s bad when these people can’t even come together in order to balance their own budget. But they opening up the doors for migrants to come to they city. They spending more time, money and resources on going after Trump than they do on trying to balance the own budget of their city.
The need to make ends meet. The cities that are in trouble, they have a cash flow problem. They may be able to count on some revenue growth. Increasing taxes may be an option. Short of that, they’re going to have increase in taxes. Why is us cities going broke? And what will that mean for residents of our biggest and busiest places? Running a major city is expensive. For an example, New York City, with over 8 million residents spread across five counties, it has to pay for more than most.
It’s a dense, diverse place that requires reading that super chat shortly. Big dog. Brad Lander is comptroller of New York, the top accountant for the city. Comptrollers review every financial aspect of city government. In the case of New York, that includes over 1700 parks, over 200 library branches, eleven acute care public hospitals, 472 subway stations, and about 177,000 affordable housing units. Like many other parts of the US, New York City sells municipal bonds to fund many of these projects.
A city’s bonds are like your mortgage, you know, for long term expenditures, something that you’re going to use over generally 10, 20, 30 years. You borrow for it. Here’s how it works. Investors foot the bill for the city’s general obligations. The city promises to pay them back later on with interest. We pay the interest on our bonds, but then we can use those bonds to build schools and invest in our water and sewer infrastructure and subsidize affordable housing.
But then we’ve got to be careful because you don’t want to get into too much debt. Some experts. Oh, the way that they manage the cities is the exact same way that we manage our personal budgets. And so it’s important not only for us to have community advocates and people that stand for the community, but we also want to have people in office that understand fiscal responsibility and understands how to do things from a business perspective.
It’s not enough. It’s not enough for people to just be in office because they say the right thing. And so when y’all see these people come to y’all and they saying, oh, my God, we’re going to do so much good, and we’re going to fix the roles, and we’re going to do this and we’re going to do that. Okay. The first question that you should ask yourself is, well, how are you going to pay for it? How are you going to pay for these roles? How are you going to pay for these new schools? Y’all keep saying, oh, my God, they need to build new schools.
Okay, well, what’s going to support those new schools? Because it takes gas, infrastructure, administrators, books, clothing, all of this stuff. It takes a lot of money to continue to generate enough revenue that keep these schools supported. So it’s not just throwing money at the problem is actually asking the question of how you gonna pay for it. Well, usually what they do is they borrow from it, and then they kick the can down the road into whoever it is, the new person that’s gonna come into office and have to inherit the problem.
Similar to what’s going on in Houston right now, right. Because the current mayor in Houston is not the person that caused all of these problems. And so what they do is they do the same thing that they do to the credit card companies. Investors come in, they loan the city money in a form of bonds and all of this stuff, right? And that’s why cities themselves have a credit rating in the same way.
In the same way that you have a credit rating. Cities have a credit rating. Right? And so they borrow out the hilt. They can’t pay the interest back or they can’t pay for these bonds. And then ultimately what happens is the city go broke and they have to reorganize in bankruptcy, just like you, a regular person. You guys have to ask the important question, how are we going to pay for what is happening in these cities? And why are we going broke? That’s why I.
I’m forecasting the downfall of Chicago, New York, maybe not so much because they make too much money and it’s too many people in order for them to fail so they can recover from this. But what’s happening in Chicago, combined with the exodus and the rising of taxes in order to try to pay for what’s happening over there, including the migrant crisis, is going to be one of the biggest downfalls and the largest major city to ever file bankruptcy in the history of bankruptcy from cities in the United States of America.
It’s coming. It may not be next year, it may not be the year after that. It may not be the year after that. But I’m telling you that what is going to happen to places like Chicago if they keep going down this path? Ultimately they will not be able to generate enough revenue to keep their bills up. And they gonna try to tax all to death. And then ultimately is going to create a doom loop.
And they. They are supposed to be incentivizing businesses to come over there, create jobs, raise up property taxes that then put more money into the coffers, make sure that they balance in a budgets, don’t give money over to the migrants and then take care of business. But they’re not. And all y’all think that it matters is whether or not he’s an educator and he’s for the people. No, he’s taking y’all money and he’s throwing it down a drain.
Experts believe that cities and state governments in the US are selling bonds to spend more money than they can pay back. In our study, we gave the city of New York an f grade. Sheila Weinberg is the founder and CEO of Truth in Accounting, a nonprofit that says they promote transparency in public accounting. What we found is that the city has $177 billion of debt. This represents $61,800 per taxpayer.
New York City calculates a smaller debt than the estimate from truth in accounting. So right now, we’ve got about $96 billion of debt outstanding. Currently. The way the debt ceiling works, we could borrow up to about 125. So we have $25 to $30 billion of room. The group claims that many so called sinkhole cities have more bond debt obligations than they’re reporting publicly. They focus on underfunded pensions and retiree health benefits that are owed to public employees.
But backed by investments in the stock market, we see pension and retiree healthcare debt problems in most major cities. We also find that with the 50 states, as of 2024 US, pensions are underfunded by $1. 6 trillion. According. Did y’all know that these cities is on the hook for continuing to pay for the pensions of the people that’s been retired for a long time? Nope. You never even considered that because you think that your taxes is going to just what it is that you see on a day to day basis.
People cleaning up the street, picking up the trash, police officers, firefighters and the like. Right? Paying the salaries are the people that’s making the decisions that not best for you. That’s not true. A lot of what’s going on is they are paying for people that retire. So in order to get these police officers to join a police force, they have to give them much more, greater benefits because they don’t make as much money.
Right. Part of those benefits is a pension. What killed the auto industry? A lot of things. One of it was legacy operation costs. Meaning when they used to promise your grandfather and your father, oh, you get a pension, you get a pension. You get a pension, work here 30 years, retire, and we’ll take care of you for the rest of your life. That was at a time that they didn’t have any legacy costs, so now they got legacy costs.
And so when they filed for bankruptcy, what they did was they passed those legacy costs over to the UAW. They created a fund, they funded it, and they said to UAW, you guys make your own investments and try to multiply this money at a rate that’s greater than what it is that you got to pay as far as your payments for these legacy costs, which include the pensions, they pass them over to the UAW.
Right. UAW is trying to grow enrollment so they’ll have greater money in their coffers to cover their costs, which include retiree pension obligations that they have from yesteryear, which is one of the reasons why they got rid of pensions. And they start going towards 401 ks, because as they continue to compound and the payments to continue to go over it, they were less likely to be able to withstand the ebbs and the flows of what happens within the auto industry, the boom and the bus cycles.
Because regardless, whether you’re doing well or you’re doing bad, whether it’s 2008 or it’s 2016, you still have to pay that pension obligation. And it’s the same thing when it comes to cities. Cities are very much ran just like regular businesses. They are very much ran just like regular businesses. The only thing that they don’t have to do is provide a service, but they still collect tax revenue, which is the monies that’s supposed to be used to make your life better and easier.
But what they do is they get greedy and they over promise, and they say, oh, man, we gonna do more for this part of the city. We gonna do more for this part of the city. But they don’t have enough revenue coming in in order to be able to sustain it. And so then they borrow. They borrow. They say, well, we got enough money to pay our bills.
What’s now included in those bills is the interest payments. That go along with those bonds. And so what y’all have to do is start to vote people in based off a good policy and great management, not vote people in based off of identity politics. Identity politics have no place when it comes to running a business or running a city. Because when you get the wrong people in office, Brandon Johnson.
Tiffany Henyard. Eric Adams. Mike Johnston. Charles Dickens. Karen Bass. When you get all of these wrong people in office, Gavin Newsom. Eventually they’re going to be driving your city into bankruptcy, and it’s going to be bad for you. Y’all leave. True to myself by y’all, don’t go. Stop going off on true to myself. Let that man live. He chilling. Don’t bother. True to myself, just don’t even. Don’t even feed into it.
To researchers at Stanford, they point out that pension contributions are invested in the stock market, then paid back to employees for the rest of their lives. Our pension funds are fiscally sound. They’re 80% funded, and we have a path to get them to be 100% funded over the next decade or so. If public officials invest funds in stock markets and the bet goes the wrong way, it can make or break a city.
Did y’all know that some of these cities and some of these pensions and all of this stuff, they were invested with the Bernie Madoffs and, you know, some of these places and enrons and all of that? Did you all. Did y’all know that part of the reason why a lot of these cities are then complaining about what’s happening in their own budget is because they were dependent on that money and that return on investment that ultimately continue to keep themselves afloat.
That’s why it was so. It was such a big deal that they persecute or prosecute a lot of these people that was having these Ponzi schemes, because they invest their money in these funds, just like you. The same way that you got a. Same way you got fidelity, the same way that you got these investments, they are investing your money, hoping to get a return on that investment in order to keep themselves afloat, just like you.
And so when they then lose this money and you see people say, oh, my God, I lost all of my pension, that’s because whoever was managing that made the bad choices and the bad investments and whatever it is that you needed in order to sustain yourself for the rest of your life, and you the one that’s got to pay the price for it. That’s why they then go after these people and prosecute them, because it’s big money.
It’s big money. For example, retiree payment obligations are part of what sent Detroit into bankruptcy in 2013. In the fallout, Detroit temporarily revised its pension program to limit payouts to former employees. This decision let the city put more money into its reserves, even though that’s an expense that was incurred and they have that debt. It doesn’t have to be included in the balance budget requirement. If I don’t pay that invoice, I don’t have to include it in my balanced budget.
Truth in accounting points out that cities like Chicago, Philadelphia, Houston, Portland, and Miami all owed more money than they held in assets in fiscal year 2022. That year, stocks sank in the worst year since the great Recession for recovering. As a result, cities from coast to coast have had to tamp down on spending to balance their budgets. In New York, Mayor Eric Adams entered 2024 with a $7 billion budget gap, largely attributed to an increase in asylum seekers and migrants arriving in the city.
Now do you understand why it was such a big deal when we saying that these migrants is coming into these cities? These cities are saying that they sanctuary cities and they can’t even afford to pay their own bills before the migrants got there. Yet they offering these people debit cards. They offering them free healthcare. They paying for them to go to school. They giving them shelter. They let.
They paying these hotels the maximum rate that the hotel can charge them. And that’s all on your dime. That’s your dollar, dawg. That’s all on your dime. It was the dumbest decision and it is going to be the one that probably haunts them. I see these people in the chat a lot of times and they say, anton, I can’t believe you’re against migrants coming into this country. No, I’m against becoming a sanctuary city and you’re doing it illegally because you have no way to support yourself.
Then it becomes my obligation as a taxpayer to make sure that you support it. And you not even supposed to be here. You snuck in here, dog. You snuck in. That’s why it’s important for you all to vet y’all leaders. Oh, but voting doesn’t matter. It absolutely matters. It 100% matters. There’s nothing more important to you personally than your local elections. Yet we see local elections have the lowest voter turnout rate ever.
Ever. And you’re not going to get these type of talks unless you’re coming over here to the millionaire morning show. That’s why y’all got to make sure you all tapping into the Patreon link is in the description. You don’t get these type of talks on no other place. You don’t get this kind of conversation. You don’t get them breaking it down to you. From a C students perspective, you don’t get anybody helping you to understand why it’s important for you to participate in your legislative process.
You know why? Because they so busy keeping you entertained by stuff that don’t matter for your life. So it’s fun to talk about Tia Moore, but it’s better for me if I really give you some game and some understanding on how your city’s finances is working so that you can make more informed decisions on who you have as your legislators. This is important. We got to put the medicine in the candy.
I know we have fun, but we got to get to the money and we need to start breaking down exactly what happens. Who’s better suited to break it down than a person that actually understands finances and can break it down from a C students perspective? Shout out to my dog J. Woodfin. He proceeded with spending cuts dubbed peg, a program to eliminate the gap. These actions, along with an unexpectedly strong economy, helped balance fiscal year 25.
But we’re not out of the woods. What the mayor announced was a series of three 5% cuts that add up a little shy of 15%. A lot of those cuts that are being felt very true to myself. Nobody would even know that you lost your wrench if you had just been quiet. Nobody brought it up. You in here making a big deal about nothing. Stop whining and just relax, bro.
Just chill. Just be quiet. Nobody would know that you didn’t even have a wrench if they. If you wouldn’t even be whining and making it a big deal. You’re making it a big deal, bigger than it really is, bro. It’s not that big of a deal. Come on, man. For example, the city comptroller says funding cuts for public education will end some class offerings at the City University of New York while increasing class sizes.
Additionally, many libraries in the city are cutting their hours. There’s not one neighborhood library left that’s still open seven days a week. You know, obviously, if you work during the week and the weekend is when you can get there with your kids, that can be really devastating. The mayor’s budget also cut funding for programs that provide an alternative to incarceration, a policy that reduced strain on New York City’s jails.
So you have to make hard choices in budgeting, but it really is important not to be pennywise and pound foolish. The city governments of Portland, Oregon, Washington, DC and Los Angeles are all cutting back on spending too. You have upward pressure on wages and downward pressure on city revenues. That creates a gap that we are facing right now that we need to fill. So we’re paying for positions that are not filled and are delivering no services.
That’s a practice that we need to pull back on if we’re going to have a balanced budget. The Los Angeles county government sees stagnant revenue growth in 2024 and beyond which it says will sharply limit its ability to fund existing obligations, let alone new programs. Listen to this. Look at what it’s saying. Our, this is la, okay? This is out there west coast. Our locally generated revenues, which are mostly fueled by property taxes, are forecasted to grow at a much slower pace in 2024 and beyond.
When y’all pay for your homes and you pay your property taxes, that’s largely the way that they fund this government structure and whatever it is that they gonna be doing on a regular basis. Trash pickup, all of that stuff. It’s all property taxes, schools, property taxes, everything is property taxes. This will sharply limit our ability to fund existing obligations along with any new programs over next budget years.
You don’t just get stuff that just show up out of the blue. It’s got to come out of somebody’s pockets, and usually it’s yours. In Portland, leaders see a fiscal cliff ahead. As there are no funds left to address existing financial issues. The demand for resources continues to surpass availability within the city. Cities often use credit to raise money from investors in the bond market. Portland, for example, has AAAA credit rating, which could make it an enticing place to park cash interest earned by owners of municipal bonds is exempt from federal taxation, which helps to lower the overall cost of borrowing for state and local government issuers.
Three major agencies grade cities on their ability to repay their debts. So Fitch’s credit rating scale, it’s so, yeah, we already know about the credit ratings and all of that stuff. We already know what that contributed to as far as the housing crisis and everything. But I just wanted to kind of give you a general idea of why you guys need to be concerned over what is happening with who is managing the finances of the cities and the governments and the states that y’all live in.
All right. It’s really, really a big deal. It really is a big deal in real life. .
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