Many U.S. cities function without regular problems. They have well‐kept roads, sewers that never overflow, and public parks with swing sets and restrooms. Others struggle to maintain balanced budgets, fail to adequately equip or staff their police forces, and offer little assistance to residents of limited means. What explains these differences? I argue that segregation along racial lines contributes to public goods inequalities. Racially segregated cities are also politically polarized cities, making collective investment more challenging and public goods expenditures lower. I provide evidence for this argument using election data from 25 large cities and demographic data matched to city finances in more than 2,600 places. To handle the problem of endogeneity, I instrument for segregation using the number of waterways in a city. I find that segregated municipalities are more politically polarized and spend less on a wide range of public goods.