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As is true about so much in life, how governments acquire and spend money is a major issue in the development of cities. When urban policy was set in the 1940s and ’50s it was assumed that, given the robust growth assumptions of the time, suburban expansion could be financed by borrowing huge sums to build new infrastructure (streets, sewer, water, storm drainage, etc.) and paying for it through taxes and fees collected on the new development. While it had been done on a small-scale, individual project basis before, this was a major departure from the norm. Using this financing mechanism to build the extensive amount of infrastructure needed to accommodate the creation of auto-oriented suburbs was in fact a big experiment.

The more traditional pay-as-you-go model used for previous urban expansion had relied on the fact that many taxpayers would be paying for each new foot of infrastructure. This was a proven fiscal model based on the long history of the growth and development of cities. And it seemed to work for the suburbs at first. Revenue was pouring in and cities kept expanding, assuming they would keep up with the costs. But over time it became apparent that when used to finance the extensive networks required for this new form of development, with relatively few taxpayers supporting each new foot of infrastructure, revenues were not matching long-term expenses. That is especially true now when the maintenance, repair and replacement costs are factored in.

In other words, it was something of a Ponzi scheme. This burden has now become untenable for many cities. Their suburban areas cannot pay for themselves with existing sources of revenue. While it’s not the only reason cities are going broke, it’s a major contributing factor.