The Ponzi Scheme in Action

Necessary repairs to roads and streets often get put off for a later time despite the fact that we see them decline before our eyes. This is an even bigger problem for underground infrastructure where the problem is out of sight, out of mind.

In this post from Jennifer Smith of CITYSMITHS, we’re given a clear example from Rockford, IL where the city is proposing an insufficient rate increase to make overdue repairs to their water mains. Here’s her breakdown of the problem using figures provided by the city:

Pipe that is 70+ years should be replaced, and we've got 120 miles of that. We'd need $200M to do it, but currently we're spending only $1.5M a year. At this rate it will take 133 years to replace the pipe that right now, today, is already 70+ years old.  And you're only asking for $1M more each year for the next 5 years? Holy Sh*t we've got a problem on our hands.

Vicious cycle

Of course, the problem will only get worse with time. As the system ages, more pipes break and need to be repaired. In Rockford, city staff report a 30% increase in repairs to maintain the system since 2010.

Slide from Water Division presentation, graph shows number of repairs to water system. -CITYSMITHS

Slide from Water Division presentation, graph shows number of repairs to water system. -CITYSMITHS

It’s not an accident that Chuck uses the term “Ponzi scheme” when describing the trouble with the post World War II development pattern. Smith breaks it down perfectly.

For over a century the people of Rockford have been investing in a system that was flawed, faulty, doomed from the start. A system that promised little to no risk and depended totally on the expansion of users to fund not reinvestment in the original system but growth, growth, growth. Sound familiar?

Check out the entire post from CITYSMITHS and bookmark our Member Blogroll for more great local conversations by our members.

UPDATE: Smith has posted an excellent follow-up to this piece!