Declining cities and vicious circles
There’s been a lot of talk lately — indeed it’s renewed talk as we slide into hard times and deal with the foreclosure crisis — about the decline of American rust belt cities. I’ve long held the view that we truly exacerbate our urban ills with bad public policy choices — or at least bad public policies born out of accidents of history.
It’s clear to me that, in America at least, local governance — and especially the way local governance is financed — contributes to the sort of longer-term, truly pernicious urban decline apparent in places like Detroit and Cleveland, or in some of the smaller cities in my own backyard such as Lawrence or Brockton. I would argue it is bad policy to require a municipality to raise the bulk of its revenue from its own local economy. It would be wiser for all revenues to be raised at the state level; the economy of an entire state is larger than that of a municipality, after all, and therefore subject to less volatility. Raising all local governance money in a centralized fashion at the state level — and then distributing funds back to municipalities on a per capita basis — would help deteriorating cities resist decline. Under status quo arrangements (which typically require municipalities to rely heavily on the property values within their borders to finance local services), once economic decline sets in, it is often next to impossible to reverse, as a vicious circle is set off: A flagging economy and declining population reduce property values, which in turn decimates tax collections, which in turn makes it difficult to pay for adequate schools, infrastructure and public safety, which in turn exacerbates the economic decline and population exodus…
Centralized, state-level funding of local governance isn’t a magic bullet. But it is a concept that ought to seriously be considered as a means of arresting the seemingly inexorable decline of America’s hardest-pressed cities