> Municipalities are too small a unit to be able to effectively take on the long term obligations that come along with infrastructure like this, or cross subsidize from richer residents to poorer ones.
I don't understand the first point. Do water systems have some great economies of scale beyond the municipal level? The cost of the water system and the ability to take on debt are both directly proportional to the population size. If you have twice as many people in a unit then you can borrow twice as much money but have to pay twice as much to cover them.
And as to the second point, it's not clear that the cities in such dire straits that they can't even pay for their own infrastructure are worth saving. Concentrated poverty is poisonous in general. It may make more sense to relocate the people in failed cities to other places than to spend billions of dollars bailing them out every year until the end of time.
> The cost of the water system ... [is] proportional to the population size...
Absolutely not - unless you assume every municipal area has equal population density.
You figure water pipe installation costs per mile. There are a lot more miles to get to people's houses in Podunk Nebraska. Overall - trivially disprovable.
> The ... ability to take on debt [is] directly proportional to the population size.
Absolutely not. Trivially disprovable. Compare tax revenue per-capita between Podunk Nebraska and New York City and see what you come up with. And then figure that out over the actual cost to deploy services to that population. Density of tax revenue per square mile is orders of magnitude lower.
Pro tip here: Podunk Nebraska doesn't have water service. They don't have sewer service. They have a well and a septic field, buddy. Because there isn't revenue to provide real services.
I lived in that growing up - and you don't have an accurate picture of what rural life is like at all. We had well water and septic, just like anyone who lived within 5 miles of us.
Podunk, Nebraska isn't supposed to have city water and sewer. It isn't a city. You only need those things in areas where there is too much population density for wells and septic fields.
And then you're just arguing that sustainable cities should pay for unsustainable ones again.
> If you have twice as many people in a unit then you can borrow twice as much money but have to pay twice as much to cover them.
Right, but you can spread out the repayment risk. Michigan as a whole is struggling, but as recently as 2000 it's per-capita GSP was at the national average, compared to places like Detroit and Flint where the bottom dropped out decades ago.
> Right, but you can spread out the repayment risk.
The lenders can already do that. Instead of buying $1000 in Michigan State bonds they can buy $100 in bonds from each city, limiting the exposure to any one.
The effect you're really after is that at the state level the interest rates are lower because one city failing doesn't cause any of the state-level bonds to default. But that's just the second point again -- sustainable cities bail out the unsustainable ones. Instead of cities paying more interest they have to pay the same money to cover the bondholders against another city's default. If the bond market is efficient in evaluating risk and pricing it into interest rates then it's exactly the same average amount. But more of the money comes from the cities that already would have paid lower interest rates, to prop up the failing ones.
It's basically the state acting as an insurance company for the bondholders against the risk of default, without reinsurance. So the government suffers unexpected large one-time expenses rather than predictable small expenses over time, and if too many municipalities get into trouble at once it could take down the whole state. Look at what Greece nearly did to the EU at an even higher level.
Buoyed by Ann Arbor, Grand Rapids, Lansing, and Bloomfield Hills.
As with every state - the urban areas by and large provide the tax revenue.
With Michigan, the Detroit City Center is mostly a trainwreck. There are still strong metro areas, and in particular there is a buttload of money flowing into the U of M area from overseas.
I don't understand the first point. Do water systems have some great economies of scale beyond the municipal level? The cost of the water system and the ability to take on debt are both directly proportional to the population size. If you have twice as many people in a unit then you can borrow twice as much money but have to pay twice as much to cover them.
And as to the second point, it's not clear that the cities in such dire straits that they can't even pay for their own infrastructure are worth saving. Concentrated poverty is poisonous in general. It may make more sense to relocate the people in failed cities to other places than to spend billions of dollars bailing them out every year until the end of time.