VIEWPOINT | ‘Growth Ponzi scheme’ undermines long-term financial strength

Guest column by Boyd McPeek, Strong Towns

Sioux Falls, like most cities in the United States, is running a growth Ponzi scheme. A classic Ponzi scheme involves someone who promises investors a high return on their investment. But, if the investment is not generating revenue, they turn to signing up new investors and using that money to pay the original investors. This may work for awhile but eventually the scheme collapses and investors lose their money.

A city gets into a growth Ponzi scheme when their prior developments do not generate enough tax income to pay for the maintenance and eventual replacement of the associated infrastructure — streets, water, sewer. The city has to keep adding new developments — new investors — for the one-time fees and new taxes that help balance the budget. The new developments won’t have maintenance expense for a few years and by then it will be another administration’s problem.

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