Strong Towns

3An Infinite Game

Should cities seek to run a profit?

I routinely ask audiences this question, and the feedback I get generally falls somewhere between contempt and disgust. People say, of course, local governments should not run a profit. The very suggestion is offensive for many who believe that local government is about serving people. It is the way we work together to do things – services that a marketplace focusing on profit just can’t accomplish.

Even though it is wrong, I understand this reaction. When the term profit is used, it is not difficult to envision the corporate CEO whose supposed duty to shareholders is to maximize profit, particularly near-term profit, regardless of the costs to others. That doesn’t seem like the kind of mentality we want directing the actions of local government.

Yet, profit is merely an accounting term that describes a condition where revenues exceed expenses. On a year-to-year basis, an orphanage must run a profit. A shelter for abandoned pets must run a profit. A palliative care clinic must have revenues that exceed expenses or, regardless of the public good that they perform in their mission, they will cease to exist.

Cities are not exempted from having to run a profit. Although a city can sometimes run a deficit year-to-year, over the long term, a local government must have revenues that exceed expenses. The only difference in this regard between a local government and a business, orphanage, or pet shelter is that, if the city fails ...