You see these claims around all the time around urbanist discourse broadly, but they haven’t attracted as much academic engagement one way or the other.
I think this thesis is broadly misguided and does more harm than good: suburbs are not Ponzi schemes, they are not inherently fiscally unsustainable, and in fact cities are the ones host to a lot of cost bloat issues. It would be better for advocates to tone down the more inflammatory aspects of their rhetoric in favor of their more balanced policy agenda (which does not require the Ponzi language); or else do the data work to actually support these strong claims.
Steelmanning Strong Towns
There are a lot of things Strong Towns folks say which I agree with. They generally advocate for higher density; safer transportation patterns; and addressing housing shortages, all things I’m happy to support. Relative to other urbanist groups, they have a focus on municipal finance questions. That, too, seems broadly reasonable and appropriate.
I think they are also correct that legacy infrastructure — think sewers and bridges in particular — will face problems in the future as they reach the end of their effective life cycles and require maintenance and upgrading. The costs of doing all this have likely increased from just a few years ago, given higher inflation, labor costs, materials costs, etc. I can easily imagine these costs become quite burdensome for various municipalities, especially poor suburbs, which are often operating with tight budgets and without as much state capacity. So again I am happy to believe there are real issues here which require some coordinated policy responses.
The “Ponzi” Scheme
However, Strong Towns advocates typically go far beyond these claims. They assert, quite literally, that suburbs are a “Ponzi” scheme — and they seem to mean this. The argument is that suburban sprawl literally does not pay for itself when considered on a lifecycle basis: that the deferred maintenance and lifecycle costs of suburban developments are higher than the benefits, such that bankruptcy is inevitable. More development can generate short-term cash, but the long-term trajectory is the whole system collapsing.
The costs that Strong Towns advocates focus on relate to lower economies of scale with respect to suburban developments. Lower densities require sprawling road networks, and high repair costs. Service provision costs for things such as snow removal, police, fire, etc. all snowball, so the argument goes, as the service area expands.
These economies of scale imply, for Strong Towns advocates, that dense urban development is inherently sustainable, while suburban sprawl is inherently unsustainable and can only be propped up in the short-run.
Advocates Exaggerate Infrastructure Spending
The first basic reason this narrative overstates suburban gloom is the simple reality that government budgets — at federal, state, and local levels alike — are primarily about social spending, rather than infrastructure.
judge Glock and Tracy Loh pass along this Urban Institute report, which shows that all road and highway spending accounts for just 5.6% of state and local budgets. Per capita spending growth has been fairly low in this category so the budgetary share is actually down over time, even as the past infrastructure backlog has gotten somewhat addressed. Similarly, sanitation (3%) and sewerage (2%) are small items as well.
What do local governments spend money on instead? The main categories of expense you should be thinking about are social services like schools, police, and healthcare.
To be sure, this is still perfectly consistent with some municipalities facing concentrated shocks, and existing infrastructure systems facing higher costs down the road as they inevitably need to get maintained and refurbished. But it’s hard to tell a story about the inevitability of suburban doom when main drivers are just fundamentally pretty small potatoes in the overall budget.
Strong Towns advocates typically do not provide straightforward math here to back their claims — and there are important questions about the validity of the numbers they do provide — but you can multiply highway spending by 2 or 3x without eroding suburban budgets completely.
The other complication here is that many municipalities rely on capital budgets to cover their infrastructure backlog, not just their operational budgets. But here, too, cities also use capital budgeting to pay for other expenses, like school spending, and those capital budgets are often larger. Additionally, these capital plans are often collateralized or backed directly by, for instance, water fees. So again cities may need to raise some user fees down the road, but it’s not obvious how this inevitably turns into a Ponzi scheme.
Urban Costs Are Typically Higher Than Suburban Costs
The real crux of the issue however, is that infrastructure costs are typically higher in urban areas than suburban ones. A good and typical example here is suburban Roseville, MN (where I spent my elementary school days — a great place to grow up). As Ryan Radia helpfully suggests, the municipal per capita spending is about $2,000; the county is about $1500, mostly health and police, and the school district is about $2400). Enterprise operations and public works — the typical nuts and bolts of infrastructure spending — make up about $720 a year, or roughly 12% of this total spend.
By contrast, municipal spending in Minneapolis is about $4,200 per capita, of which public works and water make up about 30%. Minneapolis city schools have a budget closer to $20k/student, and Hennepin county is another $2k/person as well.
So whatever are the theoretical benefits of amortizing infrastructure spend over a more densely packed population; in general cities have greater diseconomies of scale which lead to both higher infrastructure spending as well as more spending in the main social service categories.
The sources of excess urban expenditures are varied. For things like sewers and water — a lot of the costs seem to stem from things like environmental review, permitting, and so forth — which are really regulatory barriers and not so much about the nuts and bolts of just building the infrastructure. Urban wages are higher, especially union wages which are going to be more binding in urban areas. And then finally you just have greater cost bloat and inefficiencies in urban governments in general, which face fewer competitive pressures relative to their suburban counterparts. Or in Philadelphia; you see that streets and sanitation are just $155m out of a budget of about $5 billion; with the largest item reflecting benefits and pensions.
Here in New York City for instance, we are on track to spend $39k per pupil in K-12 schools. This is not even counting the capital budget. Even though NYC has the best transportation system in the country, which handles 7/8ths of the students in public schools — the busing expenses for the 1/8 of other students takes up over $10k a student traveling on bus, exceeding the total education budget of many states. We also see all the time the costs of dealing with and maintaining legacy infrastructure.
Now, there may well be good reasons for cities to spend more than suburban areas. Perhaps cities take care of different populations or offer more in the way of public services. This point is debatable — there are good reasons to think social mobility and even social integration can be good in many suburban areas.
But if the question is one of pure fiscal sustainability, on average, the answer is pretty clear: cities are more costly to run than suburbs. The pro-urban bias of Strong Towns advocates leads them to obfuscate this basic fact in favor of a doomer narrative of suburbs which lacks a strong foundation.
Do Suburbs Exploit Cities?
I think a somewhat better argument concedes the greater cost structure of cities — but instead argues that suburbs are extractive through a different route; because suburbs are full of people who commute to the urban core yet do not pay local taxes.
This is a better argument because cities do bear many costs on behalf of suburban commuters — financial costs in terms of infrastructure and maintenance for items used primarily by those commuters.
However, cities also don’t bear a lot of the costs related to those residents — in particular, the education, services, etc. costs which dominate city budgets.
Additionally, the whole idea of a monocentric urban core, with all the jobs, does not fit as many jobs have left for suburban areas themselves. For instance, in Cook County, half the jobs are already outside Chicago city. Remote work has shifted the balance even further, with more suburban commuters staying at home all days.
I am more sympathetic to cities here, and obviously mechanisms like congestion pricing are one way to try to collect more tax revenues from suburban commuters to pay for associated expenses. But I still suspect the narrative is not as one-sided as you might think at first glance. The environmental and traffic death unsustainability of this whole arrangement — with suburban drivers commuting in all the time — is also more persuasive, though I suspect those costs do go down substantially as we shift towards autonomous and electric vehicles and a more renewable electric grid.
I think the best argument against suburbs is exclusionary zoning — minimum lot sizes and other instruments are used by suburbs to push out poorer residents into the urban core.
Towards Better Urban Governance
This is an admittedly cranky post, and I’m sure urban advocates who have read this far will find a lot to complain about. So I do want to emphasize again that I have no problem with the idea that infrastructure costs money, and that we probably face substantial deferred maintenance issues with our infrastructure stock (in both suburban and urban areas). I’m also actually on board with “urban doom loop” mechanisms which also impact small cities — through mechanisms that involve population declines and legacy pension and service obligations, which are again the real budgetary costs as well as the infrastructure.
But more broadly I’d like to ask the urbanist community to take more seriously the problems of urban governance, and see the role of suburbs through a slightly more sympathetic lens. Whether you like it or not, most Americans live in suburbs — they do so because they find it an attractive and low cost of living. Many people would rather live in cities instead, but are dissuaded by low housing inventory, high taxes, high costs of living, and other aspects of poor urban government. The competition between suburbs and cities is one of the main restraining forces keeping cities as functional as they are.
So rather than construct narratives about how the seemingly placid suburban existence is actually on the verge of disaster, and defending cities — I think urbanist efforts would be better spent on greater advocacy and monitoring of urban areas. Obviously YIMBY activity is helpful; but I think there is much more to be done in complaining about urban areas to improve them.