This ‘Ponzi scheme’ surrounding development leaves most cities and towns functionally insolvent


Nov 16, 2018
For a community, rapid growth is easy. Bolstered by state and federal funding, municipal bond debt financing as well as tax incentives and deferrals, cities and towns that want to induce new development have many means of doing so. With each transaction, they receive immediate fees and tax revenue, but also take on the long-term responsibility to provide ongoing service, maintenance, and—in the case of infrastructure—replacement.

And while that new big box store, strip mall, or drive-thru restaurant may last only a couple of decades, the maintenance obligations from all that asphalt and those new sewer lines are eternal. Too often, though, we haven’t ever bothered to quantify those obligations. When you begin to do the math on our development pattern, what you find is alarming.

Most cities and towns in North America are functionally insolvent. This is not hyperbole. It comes down to a simple question: Is new development producing enough wealth to fund the long-term maintenance of its own infrastructure—let alone public safety and all the other services that we expect government to provide? When we examine these costs and revenue streams, we often find the answer is no.

This is true in Lafayette, La., where simply maintaining everything—the streets, pipes, pumps, drainage systems, and so on—that has already been built would require a staggering 513% increase in local taxes. This is true in central Minnesota, where I calculated it would take 79 years for the taxes paid by the homes on one cul-de-sac to pay off the cul-de-sac’s construction costs.