Elected officials across the country are facing an impossible financial reality. Promises made decades ago are coming due, and there isn't enough cash on hand to address them all. Debt seems like the only way out of today’s problem, but everyone knows it’s just buying time. Meanwhile, the list of deferred projects that now need urgent attention grows longer, stretching beyond what any budget projection can handle.
This is how the Growth Ponzi Scheme we have described at Strong Towns plays out in real life. Purcellville, Virginia, offers a stark example of where this path leads.
Purcellville, a town of 9,000, is considering taking on $34 million in new debt to cover a long list of deferred utility infrastructure projects. Local leaders now find themselves with nothing but bad options. They can either take on massive debt — financing they can obtain but not afford — to fund critical projects or they can continue deferring maintenance, risking the failure of critical systems.
Budget Analyst Linda Jackson laid out some of the risks, as reported in a piece for Loudoun Now: “It’s notice of violations, it’s water quality, it’s water shortages. Or, if we have a temporary solution for any kind of breakage that comes up, there would be the need for generators and emergency pricing.”
This is the inevitable result of a development pattern that produces more liabilities than a town has the capacity to manage.
Purcellville can’t afford to invest in maintenance or improving residents’ quality of life because so much of its budget is consumed by past obligations and urgent repairs.
“General Fund projects are fully funded with external sources [largely debt]," Purcellville Director of Finance Liz Krens said. “Parks and Rec projects will not move forward unless grants are secured.”
When a community has to rely on grants for the kind of basic amenities that make it a great place to live, it’s a clear sign that this approach is not working.
So, how did Purcellville get here? By their own words, growth masked their insolvency problem for years: “When we were growing, we were bringing in a lot of availability [fee] dollars,” Krens said.
“A regular house is about $50,000 per new home that comes into town," she continued. "I’m not saying that’s a solution. I’m just saying the funds were there when the town was growing like crazy, that we were able to do some of these projects. They aren’t there anymore, which is placing a lot of pressure on the residents and the businesses, the users.”
This is the Growth Ponzi Scheme at work. During the boom years, towns and cities take on liabilities without concern because cash is flowing in. But those periods of growth are when the worst financial decisions are made. Purcellville’s struggles aren’t the result of local mismanagement today. They are the result of a national approach to growth and development that encourages local governments to take on obligations they can never hope to sustain.
If you’re an elected official, the first step to fixing this is understanding why your city is insolvent. The Strong Towns approach offers a way out. Take the Strong Towns 101 course, read "Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity," and start on the path to real financial resilience.