The Typical Municipal Budgeting Process Is Rigged Against Infrastructure Investments

Let’s begin with basic market economics for Dick or Jane: prices affect individual consumption behavior. Let’s next add to basic economics of building a city’s infrastructure for Dick and Jane: ribbon-cutting prices affect behavior. In the former case, Dick or Jane chooses to purchase or not purchase a good based on the price, its quality, and Dick or Jane’s preference to actually own the good. The good’s price is of course influenced by supply and demand and it’s also tied to the cost of production.

In the latter case, the price of the infrastructure good (let’s say a bridge) is the cost of constructing the bridge spread over, in many cases, the life of the bond that was sold to build the bridge. The cost of building the bridge includes labor and capital costs, but capital costs do not include the price of repair, maintenance, and reconstruction. Dick and Jane, then, pay an annual tax (unrelated to their use or demand for the bridge, unless a toll bridge was created) so that the bondholders are happy. And they can only wish that their city council will allocate a sufficient amount of additional funds for the bridge so that it can be adequately repaired, maintained and reconstructed over its useful life.