Cops and Water Lines
As the comments here and here show, discussions of subsidies for suburban development often become entangled with discussions of the relative cost of city infrastructure and suburban infrastructure, and with density's impact on those costs.
I'd like to focus here solely on the dynamic of infrastructure costs. The distinctions between capital costs, long-term variable costs and short-term variable costs seem to get muddled in the discussion of infrastructure, so let me use police costs as an analogy. It will help to make some simplifying assumptions.
Imagine a city hiring its first police force. It has to pay an upfront cost for training the policemen. But after it makes that investment, its initial yearly labor expense is pretty low. Young policemen aren't paid much, their health expenses are low, and their pension payments aren't due for many years.
But as the police force ages, it gets more expensive. The city has to pay higher salaries. Older policemen need more medical care. And, eventually, everyone notices the looming, gigantic pension expenses. The mayor and city auditor and the local newspaper begin to moan about excessive health and pension benefits and shortsighted politics.
Suppose the city's population is constant. The residents pay the upfront cost of the police either through initial assessments incorporated into home prices or a tax levy. But the per capita annual cost of the police force is low at the beginning. As the police force ages, the per capita cost rises if, as we've assumed, the city maintains a stable population. If the city's residents are in fact sensitive to their tax burden, though, some will move away rather than pay the higher per capita fees. This will increase the per capita burden on the remaining citizens, which will encourage more to move, and so on in a vicious cycle. (Something like this has played out in many aging midwestern industrial cities.)
Allowing density to rise breaks this cycle, or at least slows it, as long as the police costs don't rise as fast as the population. And there's no reason they should -- there are a lot of fixed costs, and it won't take twice as many officers to patrol one square mile if the population of that square mile doubles.
The same cycle will play out in any other city, including a suburb. A young suburb in the early part of the cycle might seem to be in a better position -- and in a sense it is, since its day of reckoning is further away. But it eventually will face the same reckoning. Its police force, too, will become an ever-increasing burden, and its tax-sensitive citizens will move in increasing numbers -- unless the suburb attracts more residents over time.
Water and sewer infrastructure works almost the same way. There is a large upfront cost, low initial expenses because young lines don't require much maintenance, but rising costs as lines age and break and water treatment plants wear out. These culminate eventually in very large charges for digging up and replacing lines or replacing other infrastructure, which lead to a lot of hand-wringing by the mayor and the city auditor and the local newspaper.
A growing population helps with water infrastructure just like it helps with the cost of an aging police force. A city cannot simply decree that people move within the city limits. Most central cities don't enjoy a growing population. But if there are people clamoring to move into the central city, the incumbent residents ought to realize that as a good opportunity to spread spread long-term costs among a larger population.