Strong Towns | Why Cities Go Broke

Apr 7, 2024

Cities use cash accounting. They have literally hit the infrastructure iceberg and don’t know it because they have not accounted for any of it. Not even asked the question. They’ll talk about pensions and firefighter settlements because that hits their cash right now—that is the thing creating immediate pain—but it is their insolvent development pattern that is grinding them down, and it won’t show up anywhere.

Cities invest in infrastructure to attract new growth and development. Stated another way, they spend public money, and take on public obligations, to attract private investment. The private investment is supposed to create the payoff that not only sustains the public investment, but pays for an improved quality of life for everyone. If that payoff is not happening, why bother?

That payoff generally does happen, in the short term, in a cash accounting system. Long term, or with accrual accounting, it’s a financial disaster. If you understand that you will understand why cities frequently do ridiculous things, often despite overwhelming opposition.

Source: Here’s the Real Reason Houston Is Going Broke

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