Why Many Cities Have No Money

The article is saying that mostly-suburb cities are not sustainable. They cost more to build and maintain over the long term than the majority of cities can recoup in taxes. That has little to do with employees, they are mostly talking about straight-line capital costs to dig up the streets and install new sewer lines. Even worse is that many cities grew in a relatively small post-war boom so a lot of that infrastructure will need replacing at the same time.

Towns don't typically provide all of water, sewer, storm sewer, and other such services... they might provide water. They can also just dig up everyone's yard to replace what infrastructure they do have because things are more spread out (lost of "wasted" land between the house and road) and far fewer people are disrupted (that also means projects can be done at a slower pace). They also have a much sparser police and fire department, far fewer parks, etc.

That's very self-evident. What matters is that density means costs rise at a slower rate than income and because density tends to raise prices (the area is more desirable all else equal).

Most of the cost of installing water pipes is in digging up the street and paying people to lay the pipes. By comparison putting in a small pipe costs the same as a huge one. Suburbs need small pipes spread over a larger distance to reach X people. High-rises need large pipes over a much smaller distance to reach the same number of people. Even if you assume property values per person were identical and taxes identical the dense area has a massive cost advantage.

Surely, any intelligent child would factor in the rate of interest (additional treats earned per unit of time) and bond price (how many treats are sacrificed right now) before making their decision. Automatically saying yes to more treats later is analogous to not caring whether you earn 0.1% interest or 10%, and that's certainly not intelligent.

Promising more treats later in exchange for treats now is exactly what a bond is, and any wise investor would factor in rate of interest/coupon rate.

Would I be right in restating your argument like this? "A fiat currency allows the state to inflate away loans. That incentivizes taking very large loans, which in turn means the state builds infrastructure it cannot actually afford."

Assuming it is, I'd like to note at least a few things.

On fiat currency

This is implicitly, in my reading of it, arguing fiat currency is distinct from commodity currency vis-a-vis inflation: If we had the gold standard, the state would not be able to inflate loans away, and the issue would go away.

As I'm sure you're aware, this is not the case - every major state in existence have inflated their commodity currencies away to pay state debt. If you had tried to buy a pound (lb) sterling silver using a Pound (£) Sterling in 1913, you'd be sorely disappointed.

If you're not aware of this, Adam Smiths extensive exposition on policy and inflation through dilution of metal currency in Roman, French and British history is a fascinating part of Wealth of Nations, albeit dreadfully boring due to Adams use of prose instead of tables to present his data.

On inflation

Independent of this - the argument is nonsensical to me. Yes, the state can pay off loans through inflating currency. There is a crucial aspect missing to the argument: This would only be a problem if the state acted as if this were true, but it in fact was not.

The fact is that the state can pay off debt by inflating the currency. Hence, the argument must be restated as "1) The state can pay loans through inflation, 2) the state takes on loans, because it knows it can pay them off through (1), and 3) the state is then unable to pay these loans". This is obviously a logical error.

On loans

And finally - this is not about loans. The article is a simple calculation saying "here's how much this infrastructure costs to maintain, and here is now much the tax base around it can pay for". It's not about the cities inability to pay off the initial leverage it used to first build the infrastructure, it's about building and paying off infrastructure that is incorrectly dimensioned for it's tax base.

The fact that the initial construction can be discounted through inflation does not remove the cities incentive to build infrastructure it can then pay for in perpetuity.