Why Financial Solvency Must Be Every City’s Top Priority

Cities across North America are facing a mounting and often invisible crisis: they are going broke. Streets are crumbling, water systems are outdated, and budgets are stretched. Yet many communities continue to approve new developments and infrastructure projects without addressing the fundamental question: Can we afford this in the long run?

The Strong Towns movement, a nonpartisan, nonprofit advocacy group, insists that financial solvency should be the cornerstone of local governance. Their philosophy challenges conventional models of growth that emphasize expansion, urging instead a return to financial discipline, bottom-up investment, and truly productive development patterns. Without financial solvency, all other priorities—social equity, safety, environmental stewardship—become unsustainable.

The Illusion of Prosperity

For decades, North American cities have chased growth as the holy grail of economic success. Highways, subdivisions, industrial parks—these were seen as signs of a city on the rise. Local leaders counted on the short-term financial infusion of development fees and new tax revenue to fund operations, but neglected to fully account for the long-term maintenance liabilities created by the new infrastructure.

This created what Strong Towns calls the “Growth Ponzi Scheme”: cities take on long-term obligations (like roads, sewer lines, and water systems) in exchange for short-term gains. Eventually, the bill for infrastructure maintenance comes due—usually 20 to 30 years later—and the tax base created by low-density, car-centric development isn’t nearly enough to cover the cost. To paper over the financial gap, cities often approve even more development, further inflating their future liabilities.

It’s a cycle that ends in insolvency, even if everything looks fine on the surface.

What Is Financial Solvency in a Municipal Context?

To be financially solvent, a city must be able to meet its obligations—not just today, but decades into the future. That means being able to pay for the maintenance of infrastructure, the delivery of essential services, and the continued well-being of its population without relying on external bailouts or unsustainable growth.

In contrast to many private organizations, cities can’t simply declare bankruptcy and start over. Their responsibilities—public safety, clean water, roads, waste management—are ongoing. Financial insolvency at the municipal level isn’t just a fiscal problem; it’s a social and economic one that impacts the quality of life for everyone.

Strong Towns defines financial solvency in four core ways:

1. Understanding long-term obligations: Cities must stop approving projects that do not cover their future cost.

2. Measuring return on investment: Each block, street, or neighborhood should be financially productive—bringing in more in revenue than it costs to maintain.

3. Operating within means: Cities should fund basic infrastructure repair before building new infrastructure.

4. Avoiding dependence on external funding: Financial resilience depends on local revenue—not speculative grants or subsidies.

The Fiscal Trap of Low-Density Development

The math behind suburban sprawl simply doesn’t work. Low-density neighborhoods feature vast areas of pavement, long stretches of pipe, and expansive service areas—all of which need to be maintained. Yet these neighborhoods don’t produce enough tax revenue per acre to cover their infrastructure’s lifecycle costs.

Strong Towns’ data show that traditional downtown blocks, even those considered “blighted” or in need of investment, tend to be more fiscally productive than brand-new subdivisions. That’s because they use land more efficiently, generate more tax revenue per square foot, and require less infrastructure per resident.

In other words, the very places cities often ignore—older neighborhoods, mixed-use corridors, commercial strips ripe for small-scale infill—are their financial lifelines.

Infrastructure Maintenance: The Unseen Debt

One of the biggest contributors to municipal insolvency is the backlog of infrastructure maintenance. Many cities face billions of dollars in unfunded liabilities, particularly for road resurfacing, bridge repair, and underground utilities. Because maintenance is politically invisible—it doesn’t come with ribbon-cuttings or splashy press releases—it is often deferred in favor of more visible new projects.

Strong Towns argues that cities must flip this script: prioritize maintenance and repair before building anything new. This doesn’t just make financial sense—it builds public trust and ensures long-term resilience.

Local Wealth Creation Over Outside Investment

Many city leaders spend considerable energy courting outside investors—corporations, developers, or state/federal agencies—in hopes of jumpstarting economic growth. While external investment can be beneficial, it often comes with strings attached, including tax breaks and zoning exemptions that further destabilize a city’s financial base.

Strong Towns promotes a different strategy: nurture local wealth creation. This means supporting incremental development by residents and local entrepreneurs, enabling small-scale housing and business projects, and removing regulatory barriers that prevent ordinary people from improving their neighborhoods.

When people have the opportunity to build wealth in their own communities—by renovating a duplex, starting a storefront business, or converting an unused lot—they create lasting value. This value translates into property tax revenue, vibrant neighborhoods, and a culture of stewardship.

Building Financially Strong Cities: Where to Start

So how can a city begin the journey toward financial solvency? Here are key steps based on Strong Towns principles:

• Conduct a full financial audit of infrastructure liabilities. Know exactly what’s owed, when it will come due, and what funding is available.

• Evaluate the return on investment (ROI) of all development patterns. Which neighborhoods pay for themselves? Which drain the budget?

• Stop subsidizing unproductive growth. If a development project doesn’t cover its long-term costs, it should not be approved.

• Encourage incremental development. Allow small changes—like adding an accessory dwelling unit or retrofitting a shopfront—that add value without massive infrastructure costs.

• Reform zoning codes. Legalize the kinds of development that built strong towns in the past: walkable, mixed-use, and people-scaled.

• Engage the public. Financial solvency must be a shared civic goal. Residents should understand why certain investments are made and others are not.

A Path Toward Stability

Municipal financial solvency isn’t about austerity. It’s about responsibility. It’s about making sure cities are not over-promising and under-delivering, not mortgaging their futures to sustain illusions of prosperity. By realigning city budgets with reality, municipalities can stop the financial bleeding and lay the groundwork for equitable, sustainable, and resilient communities.

Strong Towns isn’t just advocating for fiscal prudence—it’s advocating for cities where future generations aren’t burdened with debts they didn’t choose and where the wealth of a place grows from the ground up, not the top down.