Tuesday, March 23rd, 2010
[ Many of you undoubtedly already know Richard Longworth, who wrote Caught in the Middle, the most important book out there on the Midwest. What you may not know is that he has started his own blog, The Midwesterner about the Midwest in the global age. This blog is a must-read for anyone who cares about the future of the Midwest. Add it to your newsreader now. As an added incentive to check it out, Longworth was gracious enough to supply us with a sample of the type of piece you'll find there. - Aaron ]
The way we finance our cities is broken and must be fixed. A lot of people know this but, so far, most of the fixing amounts to minor measures, a splint here and a band-aid there, a finger in the financial dike, while the big problems grows and grows.
There could be a big new field of academic study out there called Urban Financing, but it’s pretty sparsely inhabited. A few scholars around the Midwest are probing the issue. But no overall picture has emerged, no real attempt to close the gap between the resources now available and the needs of the future.
I hereby offer the use of an oblong table here at the Chicago Council on Global Affairs for Midwestern scholars who want to come together to imagine the urban future. I will throw in a few stuffed pizzas to fuel their thinking and, at the end of the day, some beers to fortify them as they sally forth into the gales of public debate.
But don’t look to me for any solutions – just a statement of the problem. I can’t sing, but I know when the soprano is off key. I can’t balance a civic budget but I know when something isn’t working, and isn’t going to work.
The problem is this:
Midwestern cities have always counted on state governments for big chunks of their funding, especially in infrastructure and education. In return, states have exercised control over much of what cities can do. This includes the power to define units of local government, set the powers of local government, including taxation rights and zoning, dictate how schools are run, and decide what infrastructure will be built, and where.
But many cities are suffering because (1) all states are in a financial jam and the money for cities just isn’t there and (2) state control over cities is keeping cities from doing what is necessary to reinvent themselves. In other words, both sides of this bargain hurt cities.
So the key to urban financing lies in redefining the relationship between cities and states. This is not something that’s going to happen overnight.
There are two big issues here:
1. Restructuring urban finance to enable cities to pay for themselves much more than they do now.
2. Doing this in such a way that it doesn’t price low- and medium-income residents out of the cities themselves.
The Northwest Ordinance of 1787 dictated where Midwestern state lines would be, even before there were cities or states here. The region’s cities and states grew up together. Indeed, they made each other possible. The states funneled food, raw materials and people into the cities. The great manufacturing cities generated the economic vitality that energized the states. Most Midwestern states looked to their major cities – the biggest city, like Chicago or Cleveland, or the state capital, like Madison – for leadership. In that era, cities and their states needed each other.
That relationship has broken down. Food goes into global markets. So do raw materials, and so do people. For the most part, Midwestern cities no longer project enough economic vitality to enliven themselves, let along their states. Most of the big manufacturing cities are rusted derelicts. Some big cities, like Minneapolis-St. Paul – remain powerful but their states share little of this potency: the Twin Cities generate 64 percent of Minnesota’s economy and 75 percent of its personal income, but much of rural Minnesota is dying nonetheless.
Most of these big cities, having been built on rivers or lakes, lie at the edge of states: think Chicago, St. Louis, Cleveland, Cincinnati, Detroit, Milwaukee. But state capitals, sited in days of poor roads and hard travel, usually lie in the center of states. Some state capitals – Columbus, Indianapolis, Des Moines – were never industrial centers but thrive now. But non-capitals, by and large, are suffering. No surprise: the capitals and non-capitals are where they are for totally different reasons – one political, the other economic – and never really had much to do with each other.
This worked, more of less, in the industrial era, when the Midwest boomed, when not only cities but smaller towns boasted factories and good wages, when there were still enough farmers to keep rural areas strong. State governments had the money then and shared it.
That day is gone. Even before the recession began, state governments were stiffing their cities, cutting funding for infrastructure, schooling, policing, health. This budget-slashing has now gone into overdrive. Illinois has just announced that the state’s municipalities will be getting 7 percent of the state’s income tax revenue, instead of the usual 10 percent, a difference of about $300 million. Mayor Daley, irate, says the state government must go on a diet. The state no doubt will say that Chicago needs to go on a diet. So it goes.
Illinois’ state government may be notorious but, in its attitude toward cities and in its response to the current economic squeeze, it’s no different from other Midwestern states.
All this was going on before the recession started and it will continue after the recession ends. All Midwestern states face the same double whammy – an eroding economy , meaning less tax income, plus the demands that spring from economic decline, such as the costs of welfare, retraining, rural collapse, imploding infrastructure and widespread poverty.
Each state is so consumed by the burdens of the past that it hasn’t the time, focus or money to deal with the needs of the present and the future, like education or the problems of its big cities.
The recession will end. This disconnect between cities and states won’t. This is why cities must realize that their future lies in their own hands. States won’t help, because they can’t help. If the future is to be bought, cities must pay for it themselves.
Few cities have even begun to think about this. It means a revolution in urban financing, and a new relationship not only with states but with citizens.
Some components of this debate are obvious. One is higher taxes – city income taxes, sales taxes, property taxes. Another is user fees, including higher parking meters rates, higher fares on public transportation, higher dockage fees at marinas, even tolls on highways into town. Another is increased taxes on businesses. Another is privatization of public services, such as bus lines, airports, possibly even schools and some policing. Another is special fees, like the tolls that London charges for motorists who want to drive into the center of the city.
Other possibilities present themselves. One is the consolidation of city and suburban governments, to share tax revenue and achieve economies of scale on public services. Other is the reduction of civic costs, especially cuts in government personnel.
All these possibilities, and many more, will be on the table. Needless to say, not all will become policy. Each gores some well-connected oxen. Business hates the higher business taxes. Homeowners hate higher property taxes. Unions hate civic staffing cuts. Commuters hate higher fares.
But almost all of these solutions exist somewhere in the world, and if American cities are to survive, some of them must be adopted here. None of them will mean the collapse of civilization.
Everyone knows that city governments and other public facilities are grotesquely over-staffed. Businesses may hate to pay higher taxes but will do so to be where the action is. There is no social benefit in clogged highways: if commuters insist on driving, they should pay more for the privilege.
The fact is that cities don’t want to be cheap places to live and work: low-cost places draw bare-bones businesses paying minimum wages, guaranteeing that the cities themselves stay poor. The cities of the future will be those that draw people—both residents and businesses — who are willing to pay for the privilege of being there.
In other words, they need to draw the wealthy, those who can afford to pay the higher costs. Which raises the crucial question – what about everybody else? At what point does economic necessity – the need to pay for the city – bump up against social equity – the need to be affordable to the non-wealthy?
Already, the poor are being squeezed out of cities like Paris, New York – and Chicago. At some point, the middle class could be squeezed out, too. At that time, cities become gated communities, golden ghettoes.
This is not a solution that anyone wants. But neither are cities so cash-strapped that they can’t afford to pay for the amenities of civilization.
This is the terms of the debate to come. How do we pay for our cities, not that the old sources of money are no longer there? But how do we do it without undermining the vibrant economic diversity that has always been the soul of cities?
Richard C. Longworth is a Senior Fellow at the Chicago Council on Global Affairs, author of the book Caught in the Middle: America’s Heartland in the Age of Globalism, and host of www.globalmidwest.org.