I don't understand this argument. I live just outside a city, and all of these utilities are handled by entities that exist to serve outside of the city. What am I missing?

The sheer cost of maintaining all that stuff. If you don't keep up with maintenance cost, it wears out, but it can be 20 years before the deferred maintenance becomes obvious. Do you know where the leaks are in your water line? Do you know how bad they are? Until the line bursts, city hall can stay in denial about it. And they do.

There is no city hall, I live outside city limits.

The water where I live is supplied by a municipal utility district, and this particular one is involved in a lot of projects. They have regular meetings which are public and recorded, and everything is well maintained.

I've lived all my life (over 50 years) outside of big cities. I've never seen a small or mid-sized town go broke.

From what I hear, bigger cities do have financial problems, especially when the population decreases. (I think Detroit's had a pretty rough time of it.)

What do you mean?