Why do Municipalities Borrow?

Mississauga has, apparently, not needed to borrow money for ages. Now it thinks it should start doing so. I must have missed something in the logic of this.

The municipality has been a sort of Ponzi scheme, whereby development fees were used to fund things, neglecting to put aside maintenance money for those new developments when they become old developments with decrepit infrastructure. This works as long as the new development is going ahead faster enough (sic!) to keep ahead of ongoing costs from old development.

Now that that era is coming to an end, Mississauga is finding itself short of cash. What I don’t understand is, how borrowing can fix this.

Borrowing assumes on can pay back, with interest, money that one cannot find today. Municipalities that continually borrow more to fund old debt are also in a Ponzi scheme; eventually the future will arrive in which the debt can’t be refinanced. We’ve seen this in countries, states, provinces, and cities.

So, the question must have a good answer, but I don’t know what it is. I think it is dumb for municipalities to borrow, unless they are guaranteed to find new revenue streams in the future that they cannot access in the present.

Anyone who understands this differently from me, please comment.


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