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The Costs and Benefits of Fragmented Metropolitan Governance and the New Regionalist Policies (1)

by
Alex Anas
Professor of Economics
University at Buffalo, SUNY
alexanas@anassun2.eco.buffalo.edu


ABSTRACT

The proponents of the new regionalism observe that central city blight is spreading to the inner suburbs and that population and employment continue to disperse and decentralize. Many ills ranging from traffic congestion to cultural deterioration are blamed on this process. The proponents believe that various forms of metropolitan governance are needed to control this process from unfolding further. I argue that fragmented governance, as we know it today, entails substantial benefits. Local governments are more competitive when there is a multitude of them, and a wider variety of local public services is offered. Also, with a multitude of local governments there is more localized power to include/exclude undesirable land uses from one's own community. I then explain the high economic costs induced by Portland's growth boundary as an older but still much applauded example of the new regionalist policies. The proposed SGECA legislation for New York State, which I also explain and analyze, should have milder effects by comparison, but it could entail substantial costs to the taxpayer.


 

I. INTRODUCTION

In recent years there has been an outpouring of literature, what I call the new regionalism, supporting the notion that we need new forms of effective regional governance to combat a variety of problems plaguing U.S. metropolitan areas.

The new regionalists lament the consequences of urban sprawl and metropolitan decentralization. (2) See, for example, Downs (1994), Moe and Wilkie (1997), American Planning Assoc. (1997), Ewing (1997), Preston (1998). Some observers have claimed that sprawl causes rising vehicle miles traveled, increasing traffic congestion (Dunphy, 1997), excessive spending on roads and on traffic management (Kunstler, 1996), deteriorating air quality, depletion of resource-lands, declining inner cities, segregated minorities, rising public service duplication and costs (Orfield, 1997; Rusk, 1993), and cultural deterioration (Judd and Swanstrom, 1994). Others have disputed these stylized beliefs and have argued that policies aimed to control sprawl -- e.g. urban growth boundaries, density zoning, adequate facilities ordinances and impact fees -- can create problems of housing affordability, increased traffic congestion, economic stagnation and diminished consumer choice (see National Association of Home Builders, 1997; Gordon and Richardson, 1997). Still others (e.g. Garreau, 1991) have pointed to the economic vitality of employment sub-centers and edge cities located within sprawling metropolitan areas.

The new regionalism's answer to these problems (preceived or real) is a new form of metropolitan governance designed at the state or federal levels and supported by appropriate regulations and subsidies. What the new regionalists mean by such regional governance is a form of intergovernmental compact among local governments in the same metropolitan region and possibly also encompassing its adjoining rural areas. Such a compact would be supported as necessary by incentives and policies at the state or federal levels and it is considered desirable that it would either emulate or approximate regional government. The compacts would also make it easier to employ revenue sharing among jurisdictions at the regional and metropolitan levels.

Most of the problems the new regionalists are concerned about are not new. They have been with us for decades. For example, central cities have been declining in economic vitality since the 1920s and the blight now observed in the central cities has been accumulating gradually. Concurrently, population and employment has been decentralizing within and beyond metropolitan areas increasing the dispersion of economic activity. However, only recently have observers become concerned (see, for example, Orfield, 1997; Rusk, 1993) that central city blight may be spreading to the inner suburbs which border central cities. This "contamination" of the inner suburbs has apparently heightened the concern and lent added rigour to the cause of the new regionalists.

Any attempt to counter sprawl and decentralization should start with an understanding of why decentralization and dispersion happen. The problems of decentralization and dispersion are not uniquely American. They are observed all over the world. There are four long-standing trends which have operated to support decentralization and dispersion internationally. These are:

1) Increases in real incomes which cause households to demand larger houses and to move out where the unit price of land is lower;

2) Advances in transport technology and the expansion of roads and freeways into the suburbs and the rural hinterland of a metropolitan area, which reduces the money and time cost of travel per mile and encourages peripheral location for businesses and households;

3) Changes in production technology which favor the utilization of one-story plants and one or two-story office buildings with large parking lots, which are cheaper to locate in the suburbs;

4) Advances in information technology have reduced the needs of businesses to be concentrated in the downtowns and central cities where they sought to minimize the costs of communicating and exchanging ideas with each other.

The expansion of U.S. metropolitan areas is also shaped by additional economic and governance factors which are unique to the U.S. These are:

1) Low agricultural land values in the United States (see, for example, Mayo, 1997) means that - other things being equal - a U.S. metropolitan area of a given population will be more dispersed than its European or Japanese counterparts;

2) Tax policies permitting the deductibility of nominal mortgage costs (and policies of the Federal Housing Administration) encourage(d) suburban home buying by the middle and higher income classes. The mortgage policies especially favor richer households and more so in times of rapid inflation (such as the decade of the 1970s);

3) The under-pricing or subsidization of infrastructure systems such as roads and freeways causes households to demand low densities and municipalities to build too much infrastructure (to the extent that state and federal agencies subsidize part of the bill);

4) Suburban low density zoning exists either for economic or for fiscal reasons or because of prejudicial preferences which exclude low income residents (and, hence, also high density residential developments) from the suburbs. As a result of such zoning, more land area is needed to accommodate a given number of residents.

5) Racial prejudice has caused wealthier white residents - and, more recently, wealthier minority residents - to flee to suburban and ex-urban areas from central cities where minority poor are concentrated (see Mills and Lubuele, 1997). This, together with the other reasons for decentralization, causes blighted conditions to emerge in inner cities and their tax bases to shrink, economic conditions to decline and crime rates to rise, causing increases in the tax rate and more flight from blight and crime by wealthier households, especially whites. This problem, together with exclusionary land use controls in the suburbs and residential discrimination against minorities (see Yinger,1995), has given rise to the mismatch problem (Kain,1968, 1994) whereby inner city blacks and other minorities have poor access to suburban jobs.

6) The fragmented nature of metropolitan governance causes suburban municipalities to compete with each other in the provision of infrastructure and the differentiation of their public services in order to attract residents and businesses as revenue sources. Such competition - known in economics as strategic competition - may create duplication of some services and too much underutilized local infrastructure capacity, which can cause more suburbanization.

The last factor in the above list, the fragmented nature of metropolitan governance, is what we wish to address next, since that is the new regionalism's favored approach to managing the consequences of sprawl and decentralization.

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