(guitar music) – Urbanization, more dense
human habitation of cities, is what I consider to be
a millennial challenge, particularly with the idea
that with urbanization, as we kind of bring
the urban population to probably 70% or 80%, we
haven’t really cracked the code on how to make urban habitation efficient and equitable for everyone. As central governments
devolve, responsibility now to local governments,
local governments do not have kind of a
well thought out structure for municipal finance. What are their revenue
sources, how are they gonna maintain their spending as
they take on responsibility for managing and delivering
goods and services to their public. This is a big deal, and,
as it turns out, when you do it wrong, where it
really starts to reflect is in the quality of your
infrastructure because if you can’t make ends meet
in your current account, the thing that you typically
do is defer maintenance on long-term projects like infrastructure. This is just kind of
detailing the infrastructure funding gap across a world, and it’s big. Bigger than most places
can really afford unless they think really differently
about raising money and finding ways to pay for this stuff. Very often the insolvency
today is a result of poor planning that was done 40 years ago, and that planning is done
at levels that are sometimes the responsibility of the
municipality, and sometimes they’re not. The federal transportation
agency that built the interstate highways
did a lot to immiserate many, many cities, and,
particularly, central cities. Not just by carving them
up, by putting big highways right through the heart
of the city and destroying neighborhoods, but in
actually facilitating the exodus of population from
the cities, we’re gonna evade taxation and go and
build where it’s cheaper in green space outside of the city. So the American development
model of kind of hollowing out the core
and kind of making all an investment in the
Levittowns and the other suburbs outside of the
city was, in many ways, facilitated by infrastructure and planning decisions made by the federal government. One of the things that
a lot of people don’t understand about Michigan
and the fiscal insolvency of at least the 12
cities in Michigan, which included Detroit, Flint,
Saginaw, and Benton Harbor, that was actually all
triggered by a change made at the state level in how
they’re gonna redistribute sales tax money. One act by the governor immediately put 12 jurisdictions into financial insolvency. As it turned out, there
was an equity issue there as well because the
majority of the people living in the places
that were under emergency financial management were minority. Tax receipts are very
cyclical because tax receipts, typically if you rely on like sales tax, sales tax is going to reflect perfectly economic cycles. Property tax receipts,
which are a little bit less cyclical, but still
cyclical, and income tax, those are the three
major sources of revenue for local governments, and
what are they gonna do, they can’t control the
cyclicity of those things, which of course requires you to do what, to manage around those things
if you know they’re coming.