That’s absolutely untrue. The only reason companies track depreciation as they do is because it allows them to defer taxation. Public works projects are not paid out of current cash.
Strong Towns makes good arguments about certain things and are critical in a reasonable way of how civil engineering organizations rate the need for more civil engineering works. But the budget discussion makes zero sense.
The biggest expenses for county, city, town, village government are: schools, police & fire, Medicaid share in states that do that, and employee retirement and health. A small/midsize city spends 60% of its budget on police.
Capital projects are capitalized with bonds. Governments have the lowest bond expenses due to tax exemptions. Roadwork is not done in a cash basis. It’s bonded for 10-30 years depending on the job.
Yes, the problem is that our cities are already leveraged up to their eyeballs. At some point, the actual humans buying those bonds start becoming skeptical of the city’s ability to pay them back.
LA currently has about a billion dollars of outstanding general obligation bonds (edit: but that does not include all their future liabilities). They're still rated AA, but I presume that is because the credit writing agencies understand how many untapped revenue streams LA has, but again, those will require unpalatable political change. You can’t keep refinancing forever.
Philadelphia, Miami, and Chicago are getting close to junk bond status, and when that happens, the option to refinance starts evaporating very quickly.
Wikipedia says the GDP of the LA metro is ~1.5T. I think they could handle 1B in bonds. If they choose not to, it's not because it's some impossibility. Certainly not because roads are impossibly expensive.
I said general obligation bonds, not general liabilities. These technically are what makes this discussion so difficult.
My point is that much of what the city can tax has little to do with the city's GDP. Either the landscape of the city will have to change or the current taxation paradigm will have to change.
What they can tax does have to do with the GDP though. If they have a 1B deficit, they need to somehow tax <0.1% of activity (or cut services), whether through property tax, income tax, sales tax, corporate tax, or some other scheme. What they don't need to do is radically increase density, and since almost all of the costs scale with population, not area, density wouldn't even help that much (or might hurt if it leads to a lower percentage of net contributors).
Again, putting $1B in some perspective, the LA Unified School District budget (which is county-level, so not directly comparable to the city, but anyway) is just under $19B. Maybe someone else can ballpark how much of that is associated to the city. Or look the other things that scale with population: police, medical, waste, social programs, etc.
LA County has a bigger economy than many European countries, and would displace Illinois by GDP if it were a state.
LA is fine.
I also think LA will be fine in the long run, I just think that their tax structure will force significant changes. The tax base is able to cover the cities liabilities, it's just that the residents don't want to pay those extra taxes, and don't want to change in ways that let other people pay them.
The city has a billion dollar deficit right now. Trivial for residents to afford ($83 per person), but difficult to actually implement politically.