5
Recommendations for Research and Policy Choices

This report has focused on the serious inequalities of opportunity in the nation's metropolitan areas and on the disparities in well-being among residents that result. It identifies multiple causes for these disparities, some of which involve national processes that are not the product of metropolitan phenomena and are unrelated to the system of metropolitan governance. However, the system of metropolitan governance, broadly construed as the committee has defined it, has contributed to unequal opportunity and resulting disparities.

In particular, metropolitan areas are currently characterized by unequal opportunity structures. A key component of these are unequal spatial opportunity structures: where one lives greatly constrains (or enhances) one's life chances and affects the notion of equality of opportunity. As the research cited and discussed in this report indicates, unequal spatial opportunity structures are an important contributor to the disparities in outcomes in metropolitan areas between blacks and whites and between city and suburban residents.

Unequal spatial opportunity structures in U.S. metropolitan areas are not solely the inevitable products of markets and technology. They result also from choices about the nature of public institutions and public policies that structure the operations of markets. They result, at least in part, from the existing system of metropolitan governance, a system characterized by fragmented local governments, each of which is largely dependent on its own tax base for financing and delivering public services for its residents and many of which, for those with general-purpose powers, have control over land use regulation within their boundaries. Efforts to bridge this fragmented system through regional mechanisms have been successful in many cases for common-purpose or system-maintenance



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5 Recommendations for Research and Policy Choices This report has focused on the serious inequalities of opportunity in the nation's metropolitan areas and on the disparities in well-being among residents that result. It identifies multiple causes for these disparities, some of which involve national processes that are not the product of metropolitan phenomena and are unrelated to the system of metropolitan governance. However, the system of metropolitan governance, broadly construed as the committee has defined it, has contributed to unequal opportunity and resulting disparities. In particular, metropolitan areas are currently characterized by unequal opportunity structures. A key component of these are unequal spatial opportunity structures: where one lives greatly constrains (or enhances) one's life chances and affects the notion of equality of opportunity. As the research cited and discussed in this report indicates, unequal spatial opportunity structures are an important contributor to the disparities in outcomes in metropolitan areas between blacks and whites and between city and suburban residents. Unequal spatial opportunity structures in U.S. metropolitan areas are not solely the inevitable products of markets and technology. They result also from choices about the nature of public institutions and public policies that structure the operations of markets. They result, at least in part, from the existing system of metropolitan governance, a system characterized by fragmented local governments, each of which is largely dependent on its own tax base for financing and delivering public services for its residents and many of which, for those with general-purpose powers, have control over land use regulation within their boundaries. Efforts to bridge this fragmented system through regional mechanisms have been successful in many cases for common-purpose or system-maintenance

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functions but rarely for purposes that are overtly redistributive or that affect lifestyle issues. Recommendations for Research The committee is impressed by both the importance of the task it undertook and by how much remains to be known about it. It is very clear that additional research is needed, both with respect to causal processes and, even more so, with respect to the effects of policies that have been proposed and undertaken to deal with unequal spatial opportunity structures and unequal opportunity in metropolitan areas. The ability to conduct such research depends on the availability of relevant data, many of which can be gathered only by the federal government acting as a provider of public goods. We strongly urge that the Census Bureau and other related agencies continue to perform their vital role in collecting and providing data on metropolitan areas and their residents and governments. Indeed, such efforts should be expanded. Our recommendations for this research are presented in the sections that follow. Spatial Distribution of Population and Its Determinants Social and Geographic Mobility We have described the spatial distribution of population between central city and suburbs and between poverty and nonpoverty neighborhoods and the extent to which metropolitan-area population is stratified by race and income. We need to know more, however, about both the social and geographic mobility of population, particularly with respect to areas of concentrated poverty and areas of racial concentration. The question of social and economic mobility is of critical importance to opportunity structures in general and spatial opportunity structures in particular. High research priority should therefore be given to examining the degree of income, occupational, and status mobility for low-income people in metropolitan areas, particularly for those growing up in areas of concentrated poverty, over their lifetimes and from generation to generation. Geographic mobility is an additional area of concern. How much geographic mobility is there from areas of concentrated poverty? What types of households move into and out of poverty areas and why? Do the same people live in such areas over time, or is there "churning," with people constantly moving into and out of these areas? What proportion of those who move out move to other neighborhoods of concentrated poverty and what proportion to other types of neighborhoods? How would such churning affect the research literature on neighborhood effects? What is the relationship between how much time a child spends in an area of concentrated poverty and the power of the neighborhood effect? To what extent are areas of concentrated poverty "staging areas" for

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households moving to better areas and circumstances, and to what extent are they permanent ghettos for those who live there? Is it possible to identify and separate out the staging areas from the ghettos? Suburbanization and Racial and Economic Stratification Research has indicated that, although suburbanization is to some extent the product of the forces of markets and technology, the degree of racial and economic stratification that has characterized the suburbanization process has been highly affected by public policy. Another set of research questions builds on the evidence. Research on the causes of suburbanization has been concerned with the extent to which suburbanization has resulted from natural processes, "push" factors related to the condition or characteristics of the central city that movers wish to avoid, and federal policies that have encouraged movement to the suburbs. Additional research is needed to sort out these factors and particularly to identify the nature of these "push" factors and their relative importance. How important to the suburbanization process are factors such as crime, poor schools, and racial avoidance, and what is their relative importance? Cross-national studies of the pace and extent of suburbanization and its causes would be particularly useful. Such studies would allow examination of the impact of factors frequently cited as causes of suburbanization in the United States, such as racial avoidance and the impact of federal housing and highway programs, since these factors are not present, or are present to a lesser extent, in many other countries. The highest-priority research, since it relates to ongoing processes that can presumably be affected by public policy, has to do with the stratification of metropolitan areas by race and income. There has been considerably more research conducted on the determinants of racial segregation than on economic segregation. Given the committee's interests, the broad question is why households are sorted (or sort themselves) in a manner that results in highly stratified areas. There is debate about the extent to which stratification by neighborhood is inevitable. Recent research (Ellen, 1996) suggests that neighborhoods that are racially integrated over relatively long periods of time are not uncommon. Research is needed on the extent to which neighborhood racial and economic integration exists in the United States, its causes, and why it varies (if it does) across metropolitan areas. What do we know about the neighborhoods that are able to remain racially or economically diverse over time? What factors help to maintain this diversity? Are the racially integrated neighborhoods stable or transient? To what extent has the rapid increase in residential community associations and "gated communities" affected racial and economic stratification? Cross-national research would also be useful here: What can be learned from studies of metropolitan area spatial and residential patterns, comparing and

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contrasting U.S. metropolitan areas to those of other countries? How much variation is there among countries in spatial segregation by income and race and in the location of the poor within metropolitan areas? What are the factors that account for differences in settlement patterns and for variation in the extent of spatial integration by income? Public Policy Efforts to Affect Spatial Distribution There have been a scattering of public efforts to attempt to consciously affect the spatial distribution of population through various devices to limit local land use controls. These include state or metropolitan-area review of local land use decisions (as in Portland and the Twin Cities), urban growth boundaries (Portland), state land use guidelines (Florida, New Jersey, and Oregon) and inclusionary zoning policies (New Jersey, California, and Oregon). Since these are possible countereffects to the current system of sorting and stratification, research to assess the effects of each of these approaches on the spatial distribution of population, and particularly on the location of low-income and minority households, is clearly of very high priority. Outcome Disparities Available data and research permit us to make relatively easy comparisons with respect to many important outcomes among whites and blacks, Hispanics and non-Hispanic whites (although there is difficulty in comparisons over time), and poverty and nonpoverty neighborhoods. The data are less useful in permitting comparisons among places, forcing us into central-city/suburban comparisons that may not be relevant for many purposes. Inadequate descriptive data prevent us from gaining a clear understanding of the nature of disparities in metropolitan areas and force us into crude and often unhelpful central-city/suburb dichotomies. Efforts are urgently needed to classify jurisdictions within metropolitan areas on more sensitive dimensions, such as condition or function, and to use these classifications both for descriptive and for research purposes. We need to move beyond simple comparisons of central city and suburb so as to compare jurisdictions by income (poor, middle-income, wealthy), by fiscal capacity (high, medium, low), and by function (residential, commercial, industrial, mixed). This will require not only research on how to classify jurisdictions within metropolitan areas, but also a reaggregation of data into the relevant classification categories. Fiscal Capacity Disparities There is substantial research on tax/service disparities among major cities across metropolitan areas, but only scattered research on variation in tax/service capacity among local governments within metropolitan areas. A basic task is to

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compile data on variation in fiscal capacity among local governments in each (or a substantial sample of) metropolitan areas, as well as changes over time. If a summary measure of the extent of variation in fiscal capacity could be derived for each metropolitan area, the measure could then be used as a variable in research. Two such obvious research questions are what kinds of metropolitan areas have substantial variation in local fiscal capacity, and does variation in fiscal capacity contribute to variation in other disparities and outcomes? Research is also needed on the nature of fiscal flows within metropolitan areas (and particularly whether central cities are "exploited" by their suburbs). Outcome Disparities Across Metropolitan Areas Disparities in outcomes such as per capita income between central cities and suburbs and between minorities and whites vary, often dramatically, across metropolitan areas. These variations are particularly obvious with respect to regions: the ratio of central-city to suburban per capita income, for example, is much lower in the Northeast and the Midwest than in the South and the West; the ratio of black to non-Hispanic white per capita income is higher in the metropolitan areas of the West than elsewhere, but the ratio of Hispanic to non-white Hispanic income is lower in western metropolitan areas than elsewhere. One thesis holds that these variations reflect the degree to which the central cities of metropolitan areas are "elastic," that is, the extent to which central cities capture a high share of the metropolitan population (Rusk, 1993), but others have contested this explanation (Blair et al., 1996). Research is needed to test this hypothesis in a multivariate context that controls for region, economic structure and performance, and other possibly confounding variables. Similarly, research is needed to examine the relationship of metropolitan-area density to disparities in outcomes. Although there is now a substantial amount of interest and research on the effect of density ("sprawl") on urban form, behavior, and costs, there has been virtually no research on the contribution, if any, of density to disparities in outcomes among jurisdictions or among groups. Does higher density, controlling for other factors, lead to a more equal income distribution, or to lower disparities between minorities and whites within metropolitan areas? Research on the effects of density on disparities is of particular importance, since density is potentially controllable through traditional land use policies. Finally, and of critical importance to the mandate of the committee, to what extent does government structure and particularly "fragmentation" contribute to differences in outcomes? There has been some, but inadequate, research on the effect of fragmentation on disparities among jurisdictions, but virtually no research on how fragmentation affects disparities among individuals or groups: Are disparities between blacks and whites, for example, lower, controlling for other relevant factors, in less fragmented metropolitan areas (see Cutler and

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Glaeser, 1997, for a preliminary view)? A first step in additional research efforts in this area is to create improved operational definitions of fragmented local government, so that the research results can correspond more directly to the underlying theoretical concern. Spatial Opportunity Structure The fundamental question with which this report has been concerned is the extent to which where one lives in a metropolitan area affects the life chances and well-being of individuals and groups. Another way of framing this question is to ask why the disparities among groups exist. The bridging research need is to sort out the portion of inequality of outcomes that is metropolitan in nature from the part that is due to broader causes—differences in human capital, changes in the demand for less-skilled labor, racial discrimination in employment—and is simply manifested in metropolitan areas because that is where most people live. Metropolitan Place-Related Causes of Outcome Disparities The broad question that we have asked is what is it that accounts for differences in important outcomes—outcomes such as income, employment, earnings, etc.—among residents of metropolitan areas and particularly between black and white residents and what part of that is due to metropolitan-related explanatory factors and the role of place and location. At present, research knowledge is partial, fragmented, and often conflicting. It is evident, however, that there is a growing belief that the spatial dimension of job accessibility does contribute to outcome differences, and that neighborhood effects—the adverse consequences of living in a high-poverty neighborhood—do so as well. However, there have been few efforts to try to sort out the relative effects of job accessibility and neighborhood effects on outcomes. Recent research strongly suggests that racial segregation plays a very important role in contributing to black/white differentials. Additional research on the effects of racial segregation on differences in outcomes between minorities and whites as well as research on the effects of economic stratification on these differences is clearly a very high priority. Research on whites living in conditions of varying economic segregation could effectively isolate the effect of economic segregation from that of racial segregation, which would be a finding of major importance. There has also been little or no research on the effects of factors such as density, population size, or elasticity on outcomes. There is clearly a need to place all of the various factors in a more comprehensive model in order to assess the relative importance of each in accounting for differences in outcomes among groups in metropolitan areas.

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Neighborhood Effects Several recent reviews of the burgeoning literature on neighborhood effects indicate that the negative effects of living in neighborhoods of highly concentrated poverty do matter. Individuals residing in such areas are worse off than are similarly situated individuals living in other neighborhoods. Yet we know little about the causal mechanisms by which neighborhood effects operate. In particular, what are the mechanisms by which adverse peer group effects—such as identifying doing well in school with being "white"—operate and are transmitted, particularly among teenagers? Are neighborhood effects nonlinear, in that they begin to operate at some threshold level? If so, what is that threshold and how does it vary for different outcomes and population subgroups? Effect of Fiscal Disparities and Jurisdictional Spending Differences on Disparities Where one lives determines both the local taxes one pays and the level of spending on public services one receives. Do metropolitan areas with greater fiscal disparities among local governments also have greater disparities in outcomes among individuals and groups and, if so, what is the mechanism through which this occurs? We know that fiscal disparities lead to some combination of higher tax burdens and lower expenditures for residents of jurisdictions with low fiscal capacity, but empirically, what is the actual nature of the trade-off made, and how and why does it vary among low fiscal capacity jurisdictions? The question of whether unequal spending on services among jurisdictions in metropolitan areas contributes to outcome disparities has been the subject of a very substantial amount of research with respect to education. Although the area is contentious, most research appears to find little or no relationship between spending and educational achievement as measured by test scores; however, a parallel body of research does find a positive relationship between educational spending and future labor market outcomes, leading to improved employment and income for those students who received the higher spending. How to relate these findings to each other is an obvious question for research. There has been considerably less research on the relationship between unequal spending and outcome disparities in noneducational services, and additional research is needed to examine these services. In all cases, we need to know more about the production function or basic processes that are at work by which input resources are transformed into outcomes. What, for example, is the process through which dollars spent on education, or on public health, are transformed into educational achievement, or healthy individuals? In what ways do the resources purchased combine to produce outcomes? How can changes in resources, either in amount or in their organization, improve outcomes? An under-

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standing of these processes is fundamental for directing policy toward changes to improve outcomes and reduce outcome disparities. Policies to Reduce Disparities This report discusses a range of strategies that may serve to reduce inequalities in spatial opportunity structures. In many cases, policies have been implemented in at least some places, and, although frequently anecdotal evidence is available, rigorous empirical work evaluating these initiatives with respect to their effects on reducing disparities is urgently needed. Research already exists or is under way in many areas, but the results are frequently partial and contested. Research is particularly needed on the effects of place-based initiatives, such as empowerment zones and community development corporations; on worker mobility and reverse commuting programs, such as Bridges to Work and community-based job development programs; on Gautreaux-type residential dispersion strategies; on the effect of providing housing vouchers on a regional basis; and on the impact of efforts to equalize educational expenditures. Because of the importance of education and skill development to outcomes, particularly high priority should be given to continuing research on the effect of school organization and governance on educational and labor market outcomes. What are the effects, for example, of school choice programs, charter schools, and standards-based reform, on the educational outcomes of low-income students and students from low-income neighborhoods? How can these programs be structured to protect the interests of these students? Regarding the equalization of educational expenditures, research is needed on both the extent to which various equalization efforts have actually reduced variations in spending among school districts and also on the effect of these efforts on overall spending. Has equalization been achieved, but at the expense of a reduction of overall spending, including spending on poor and minority students? What has been the effect of equalization efforts on educational outcomes and on disparities in outcomes among students? To what extent have these equalization efforts affected the locational choices of households and reduced their propensity to engage in fiscal sorting? Research is also needed with respect to the effects on outcome disparities of tax policies to address fiscal disparities. Imposing a commuter tax on wages earned by suburban residents who work in the central city is frequently suggested as a means of increasing the fiscal capacity of the central city. Indeed, several states already permit cities to levy such a tax. Little is known, however, about their effects, particularly on business location decisions. Do such taxes place central cities at a disadvantage as a location for business and end up disadvantaging further city residents?

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Metropolitan Governance and Its Effects We examined the impact of the institutional structure of government on the spatial opportunity structure that produces differences in outcomes among individuals and groups in metropolitan areas. This is an area in which substantial research is needed, both on causal relationships and on policy options. Fragmentation We have argued that fragmentation of metropolitan areas into large numbers of local governments with land use and taxing powers results in sorting by race and economic status in metropolitan areas, and that this sorting underpins the unequal spatial opportunity structure we have detailed. Fragmentation, in this argument, plays a critical role in the production of inequalities. Although the argument seems theoretically compelling, it urgently needs to be subjected to the test of additional empirical research. We have already noted the need for a better operational measure for the concept of governmental fragmentation. With such a measure, research on the following two subjects would be of the very high priority: Does the extent of governmental fragmentation in metropolitan areas affect the degree of inequality of income or other important outcomes among individuals or groups in those areas? Does the extent of fragmentation affect the degree of racial and economic segregation in metropolitan areas? Regionalism To some extent, the above questions can be approached by an examination of the effects of existing regionalism in metropolitan areas. Metropolitan areas currently vary in the extent to which they can be characterized as consolidated or fragmented, and thus provide the opportunity for research on the effects of fragmentation. Areas in which the central city is highly elastic—that is, comprises a high proportion of metropolitan area population—can be considered to be examples in some sense of a regional government. Single-county metropolitan areas with strong county governments can also be considered highly regionalized. Nearly all metropolitan areas have some single-purpose authorities that are regional in scope. And in some cases, multipurpose regional government exists through explicit city-county consolidation or through other means. The broad question is the effect of regionalism on outcomes. Within this framework, there are several important questions for further research:

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To what extent is there greater equalization of service delivery in more consolidated metropolitan areas, or in metropolitan areas with more ''elastic'' cities, than in more fragmented areas? Are the poor and central-city residents better off in metropolitan areas with more consolidated governmental systems? What are the redistributive effects of interlocal agreements and regional special purpose districts? In addition to formal government structure, metropolitan governance encompasses informal efforts to engage in regional decision making through coalitions, alliances, or interaction across the public and private sectors and frequently involving business, nonprofit groups, churches, community groups, and other stakeholders in the metropolitan area. There is now a substantial amount of anecdotal evidence and case studies on these third-wave efforts at regional governance. However, this is another area in which more systematic empirical research is necessary. How widespread is the third wave of regional governance? What determines whether some areas are successful at undertaking regional governance collaborations and others are not? What are the objectives of these efforts and, in particular, to what extent are they concerned with systems maintenance activities, and to what extent at changes involving redistribution and life-style? What are the effects of these public-private sector regional collaborations on the spatial opportunity structure? Regional approaches, whether through formal restructuring or more informal efforts, have the potential for broadly redistributing resources and power. The fear that such a redistribution will disadvantage various stakeholders has been a major deterrent to efforts to bring about more regional approaches. Research is needed on the extent to which such redistribution will occur and who will be the likely winners and losers. To what extent have central cities and their residents been advantaged or disadvantaged with respect to resource distribution, influence and political control as a result of the existence of metropolitan-area-wide institutions such as councils of governments, metropolitan planning organizations, and region-wide special districts, or as a result of more informal third-wave efforts? Have minorities been adversely affected? The Role and Function of Cities Existing knowledge on the continued economic viability and function of the central city and on the relationship of cities to suburbs seems particularly tentative. Research suggests that agglomeration economies continue to exist, but it is less clear that the downtowns of central cities are the necessary repositories of them. Is there still an economic rationale for central cities? Are agglomeration

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economies still important? To the extent that they are, have they decentralized so that economic activity located anywhere in the metropolitan area can take advantage of them? Or are there some important agglomeration economies (e.g., those that require frequent face-to-face interaction) that can only be taken advantage of through a central-city location? The relationship between cities and their suburbs is an area of particularly contested research. It is clear that cities and suburbs are interdependent, in that they are part of the same regional economy. But to what extent does the condition and performance of the central city affect that of the suburbs and the metropolitan area as a whole? Initial research relying on simple bivariate correlations with implied causality is not sufficient. More recent research in a multivariate framework needs to be extended. If the performance of the entire metropolitan area is affected by that of the central city, what are the mechanisms through which this occurs? It is frequently argued that business location decisions throughout the metropolitan area are affected by the image of the central city, but there is little empirical research to back this up. Similar arguments are made for the impact of the condition of central-city infrastructure on regional productivity with similarly scant evidence. Research to test these propositions would be desirable. Many central cities as jurisdictions suffer from low fiscal capacity, for reasons that have been discussed. However, even within the fiscal constraints they face, it is widely believed that cities are inefficient. The perception that cities are inefficient and wasteful contributes to the belief among many that cities no longer provide a useful function. There is dispute on the extent to which high city costs in fact reflect higher needs as opposed to greater inefficiency. Research on the extent to which city services are efficiently provided after taking into account their higher needs would be useful in resolving this debate. Many cities have attempted to reduce costs and improve efficiency through adopting new approaches to management and service delivery. These approaches, focusing on competition, performance-based budgeting, and accountability also should be the subject of additional research. Finally, there is the question of whether effective political coalitions exist for change favorable to the central city and its residents. What are effective political coalitions at the state legislative level on behalf of city interests? Where policy changes favorable to cities have been enacted, what have been the legislative coalitions that have brought these about? How frequently and under what circumstances does a coalition of central city, inner suburbs, and developing middle-income suburbs emerge? What other kinds of (nonplace-based) coalitions of interests have emerged (e.g., civil rights advocates, environmentalists, housing developers), and under what circumstances, that support city interests?

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Costs Perhaps the most important research question of all has to do with the costs imposed by these problems, for the answer determines why, and whether, we consider unequal spatial opportunity structures and declining cities matters worthy of public concern. Throughout this report we have attempted to address this question, but it is clear that research is urgently needed. What are the costs imposed on suburbs and their residents—indeed on the entire metropolitan area and on the nation—of the decline of central cities? What are the costs imposed on the entire metropolitan area—and on the nation—of the disparities in outcomes brought about by unequal opportunity structures and thus unequal opportunity in metropolitan areas? Research should address a wide spectrum of possible costs involving, not only economic costs through lost productivity and lower purchasing power, but also social costs, such as crime and fear of crime, the diminution of individuals' quality of life through reduced enjoyment of amenities foregone, and the cost in terms of social disruption and political disintegration. Thinking Through the Policy Choices The committee examined the range of available policy options with a full recognition of some important constraints. First, as set forth throughout this document, there are limits to the knowledge base about the causes of the problems we address and the likely effects of many of the solutions that have been suggested. The conclusions we draw regarding policy options are based on the existing state of knowledge, with the recognition that it is partial in many important areas. We also recognize that all levels of government operate under fiscal constraints. Our proposals do not envision vast new expenditures of public funds. Nonetheless, there are areas in which additional spending may be necessary and appropriate, and there are certainly areas in which a reallocation of spending may be desirable. Finally, we recognize that public attitudes and opinions about the appropriate role and scope of government, although perhaps changeable in the long run, limit the kind of action that is possible. It is an era in which government—and particularly the federal government—is not trusted, devolution is viewed as the most appropriate ordering of political power and authority, and public action is more acceptable at the state and local levels. The committee's key concern is with reducing severe inequalities in metropolitan areas. We recognize that these inequalities and the disparities that result are not solely the product of metropolitan-level processes. Nonetheless, our primary focus has been on reshaping spatial opportunity structures in metropolitan areas so that life chances are not determined by where people live and so that

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choice and access to opportunities are maximized. To this end, we discuss the following policy choices as worthy of serious consideration. Metropolitan Government and Governance The committee considered two alternatives to the existing system of governance in metropolitan areas. Both are counterfactuals, in the sense that they require us to consider how their implementation would result in differences from the current system and to shape our discussion with these in mind. The first is a change in government structure that would reduce reliance on small-scale local governments and move to a system of more consolidated metropolitan government. The second would largely retain the existing system of nested local governments but would increase the role of the state government in reducing barriers to equal access and opportunity in metropolitan areas. Metropolitan Consolidation The committee is skeptical about what reformers typically have in mind by metropolitan government, because, in our judgment, it is both politically unfeasible and not wholly desirable. Instead, we are attracted by the merits of the kind of nested arrangement described in Chapter 4. Such an arrangement would retain the existing set of local governments, but within a changed structure of land use and fiscal powers. The benefits of the existing system of local government in metropolitan areas are substantial in terms of efficiency, choice, accountability, and broad public support. What is often ignored, however, is that small-scale local governments function best when nested within larger, layered systems of government. This enables them to concentrate on the functions suitable to their scale, enabling the system as a whole to address effectively functions requiring larger scale, such as pollution control, water supply, the construction and operation of major airports, and the like. Nested Government The system of government in metropolitan areas in fact displays a highly functional nesting pattern, which has enabled it to respond adaptively to many new challenges. City governments in metropolitan areas are usually nested within county governments that provide many services to city residents, in such areas as public welfare, social services, parks, and environmental control. Counties in many areas have assumed functions previously performed by municipal governments, taking responsibility for such things as public hospitals and aspects of criminal justice administration. State governments, which provide the legal and constitutional framework for the existence of local government (see below), also

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overlay city governments. States have taken on greater responsibilities for highway provision, income support and social service provision, educational funding and equalization, and power plant siting. Special districts, many of them regional or multicounty in scope, have been created in great numbers to finance and operate airports, transit systems, water supply and sewage disposal systems, and air and water pollution control. And many problems are addressed cooperatively by formal and informal agreements among individual units of local government and other entitites in metropolitan areas. As this suggests, when a supra local approach is desirable, existing overlaying units of governments can provide services, or special districts can be created to do so. When a regional approach or perspective is more appropriate, creation of such entities as the Portland Metropolitan Service District and the Minneapolis-St. Paul Metropolitan Council is desirable, if locally supported and politically feasible. If such entities are not likely to emerge (i.e., in most metropolitan areas), then we find most appropriate the use and expansion of existing metropolitan forums and agencies, such as councils of governments, metropolitan planning organizations, regional special-purpose authorities, and public-private alliances on the metropolitan level. It is possible that, over time, one or more of these will organically emerge into an institution that has the ability to make decisions for the entire region in several functional areas. The existing system of nested government in metropolitan areas has proven adaptable and flexible for many purposes, particularly those related to common-purpose concerns and efficiency objectives. It has not, however, been able to address effectively the life-style and redistributional concerns associated with the problem of severe inequality of opportunity on which the committee has focused. Restructuring the existing system of local government to create a consolidated or comprehensive metropolitan government would risk reducing the very real benefits produced by the existing system. In addition, it would not, in itself, lead to substantial changes in the metropolitan opportunity structure or to a reduction in unequal opportunity or disparities. Moreover, it clearly is not a solution favored by metropolitan-area residents. Instead, it is the role of the state government that is fundamental to addressing effectively the problem of an unequal spatial opportunity structure. Restructuring Metropolitan Governance: The Critical Role of the State Local governments operate within a framework of state laws and regulations. Their very existence is a product of state action; the state is, after all, the locus of constitutional authority with respect to local governments. State laws regulating the behavior and authority of local government and state grants to help finance local government condition every aspect of local government behavior. State governments thus have the power and authority to bring about change in the

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metropolitan governance system by changing the legal framework within which local governments operate and the set of incentives they respond to. We support changes in state regulatory frameworks and policies that will, in our judgment, lead to a reduction of severe inequality in metropolitan areas. Much of the discussion that follows involves state action, including state action to inhibit the ability of local governments to exclude low- and moderate-income and minority residents from living within their boundaries and to reduce disparities in fiscal capacity and need among local governments. Eliminating Barriers to Equal Access and Opportunity At present, high housing costs prevent low- and moderate-income households from gaining access to many suburban communities. The primary constraints are the exclusionary zoning practices made possible by local government control of land use regulation. These practices drive up the cost of housing beyond the means of low- and moderate-income households. States have the legal authority to regulate the framework of local land use decisions to prevent exclusionary behavior by local governments; moreover, it is in their self-interest to do so. The state has a crucial interest in promoting metropolitan economies, since it is these economies that largely determine state economic performance. Exclusionary practices in metropolitan areas, to the extent that they reduce the access of workers to jobs, also reduce the state's economic potential and are surely an appropriate object of state concern. We recognize that local governments are and will continue to be land use regulators. However, in our view, local land use powers should be exercised within the framework of explicit and actively enforced state guidelines and objectives. At a minimum, the state governments should stop being an agent for discriminatory action and a barrier to equal opportunity by failing to exercise oversight over the constitutional authority they have devolved to local government with respect to local land use controls. Beyond that, state oversight of local zoning is necessary to ensure that the exercise of local land use powers does not result in the exclusion of lower-income and minority households. The committee urges strong consideration of the exercise of local land use control in a state government context so that such exclusionary practices are prevented or highly discouraged. State land use standards and state review of local government land use decisions to ensure compliance with these standards would accomplish this end, as would creation of a metropolitan land use agency operating under state standards and with either land use powers of its own or the ability to review local land use decisions. Other techniques might also serve to lower housing costs and thus reduce in practice the exclusion of low- and moderate-income households and minorities from suburban areas. These include land use techniques (for example, upzoning, which should serve to lower the land cost of housing) and regulatory reform of

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housing and building codes. Eliminating these barriers to low- and moderate-income housing throughout metropolitan areas would free the private market and housing developers to meet the housing needs of the entire range of American households. Within this context, expansion of metropolitan-area-wide housing voucher programs (such as Section 8 certificates) would provide low- and moderate-income households with the effective demand to obtain housing in suburban areas, should they choose to do so. The committee recognizes that reducing the ability of jurisdictions to exclude low- and moderate-income households through exclusionary zoning devices may result in some loss of allocative efficiency, by reducing the homogeneity of preferences among local residents as income segregation is reduced (Mills and Oates, 1975). If so, that would be a cost that we consider worth incurring as a means of reducing inequality of opportunity in metropolitan areas. Reduce Housing Market Discrimination and Racial Segregation The research reviewed in Chapter 3 provides strong evidence of the deleterious effects of segregation on outcomes for blacks. More vigorous efforts are required to enforce housing antidiscrimination laws in metropolitan areas and to ensure that access to housing credit is available on an nondiscriminatory basis. Matched-pair housing audits on a random basis, but with enough visibility so that realtors are aware of the possibility that they may be tested, are a particularly good means of both detecting discriminatory behavior and, more importantly, of deterring it through increasing the fear of being caught. In matched-pair audits, a minority and a white with similar credentials use the same realtor or visit the same apartment to determine whether they receive similar treatment. Positive Action to Reduce Spatial Inequalities and Expand Opportunity Breaking the Link Between Place of Residence and Access to Opportunity Widespread movement of people to open up the suburbs to low- and moderate-income and minority households is likely to take a very long time and, in any case, some poor neighborhoods and pockets of poverty are likely to remain. There are two ways to break the link between place and outcome that are of particular importance: educational opportunity and access to suburban jobs. Expanding the availability of high-quality educational opportunity will help to break the link between place of residence and quality of education. There are three main approaches to achieving significant improvement in educational opportunity, all controversial in some respect. One approach is the drive for within-state equalization of educational financial resources. A second approach emphasizes other means to increase educational quality, including the use of standards. A third approach champions choice, for some limited to the public schools and

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for others inclusive of private choices. None of these three is mutually exclusive; all three need to be carefully evaluated. With respect to standards and school choice, the committee finds value in a wide range of intense experimentation and careful evaluation. We support continued experimentation with a wide range of school choice schemes, including charter schools, programs to increase the access of central-city children to suburban schools, and various types of voucher programs, including vouchers for private school attendance. Such efforts should be structured to bring about, as much as possible, the access of students currently living in areas with poor public schools to high-quality schools throughout the metropolitan area. This means that choice efforts should be targeted particularly to low-income and minority neighborhoods; special services (such as transportation) should be provided to improve the access of children in these neighborhoods to higher-quality schools; whenever possible, schools that are oversubscribed should admit students on a random basis (thus permitting meaningful evaluations of these programs and also ensuring that minority students are not underrepresented at the better schools). In the longer run, of course, the goal is to enable everyone to have access to quality educational opportunities. Providing central-city residents with access to suburban jobs means efforts to provide them with reliable transportation, but transportation alone is not likely to suffice. Neighborhood-based job development efforts that include provision of job information and link city residents to job networks, provide employment counseling, and make direct contacts with employers are worth supporting at greater levels. Placement efforts that link suburban employers with inner-city workers and provide at least some screens for worker skills appear particularly promising when suburban labor markets are extremely tight. In such an environment, employers are often willing to hire workers whom they might otherwise not consider and whom they may not even know how to recruit. Finally, access to some jobs in the suburbs is clearly denied because of discrimination. Antidiscrimination in employment legislation needs to be vigorously enforced and matched-pair employment audits on a random basis need to be undertaken. Reducing the Disadvantages Faced by Cities and City Residents An emphasis on opening up the suburbs to low- and moderate-income households and ending racial segregation should not be seen as "writing off" the cities or older suburbs. The main disadvantage for cities and city residents with respect to the spatial inequality structure under the current system of metropolitan governance is the problem of tax/service disparities. Residents of the central city, and of suburbs with low tax capacity and high expenditure needs, are faced with the dilemma of shouldering a high tax burden in order to finance an adequate level of public services or accepting poor public services at an average tax burden. City

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governments, as a consequence, experience chronic fiscal pressure; they are not able to provide adequate levels of service at reasonable tax rates. Efforts to improve services by increasing taxes run up against the openness of city borders: residents and businesses on whom taxes fall most heavily can avoid them by moving from the city to the suburbs. Local governments should continue to have the responsibility for raising much of their own revenue and for providing public services. They should also be encouraged to continue to engage in new approaches, such as privatization and performance contracting, designed to make their government more efficient. However, greater efficiency, although highly desirable, does not address the problem of disparities in fiscal capacity and need among local governments. To achieve more equal spatial opportunity structures, we support efforts to reduce these tax/service disparities. There are a variety of potential means for accomplishing this. The most direct is state fiscal equalization grants to local governments, similar to those that exist in most developed nations for their subnational governments. These grants would be for general support purposes and would provide cities and other similarly situated local governments with funds sufficient to support an adequate level of services, if they taxed themselves at some standard level of taxation. The grants would take into account the fact that cities not only provide services for suburban communities but also bear the burden of supporting a disproportionate share of people in extreme need, including, in some instances, immigrant groups. Such a system of fiscal equalization grants does not envision that each local government would spend the same amount per capita or that they would all impose the same local tax rate, or that local governments could not raise additional revenues for expenditure by taxing themselves above the standard rate. It is designed, however, so that every local government has the same ability, if it so chooses, to finance an adequate level of public services. There are also regional mechanisms for dealing with the problem of fiscal disparities. The justification for these is that, since the central city both provides services for suburban commuters and is the source of amenities that benefit the entire region, it is reasonable to ask the entire region to participate in funding some portion of city services. Regional mechanisms as a possible means of reducing fiscal disparities include metropolitan tax base sharing, county assumption of selected city government service functions, and state permission for cities to levy a local income tax, including a tax on the income earned within the city by employees who reside outside the city. Improving Human Capital The committee's charge, as we interpret it, is relatively narrow in scope, focusing on the contribution of spatial opportunity structures in metropolitan areas to unequal opportunity. We therefore did not range widely over the full set

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of problems, issues, and policies affecting metropolitan areas and their residents. However, we cannot avoid touching on the concern of human capital development. Differences in human capital account for a substantial portion of the disparities in outcomes between minorities and whites and between city and suburban residents. Some of these differences are, in themselves, related to unequal spatial opportunity structures. Our broad conclusion is that increased emphasis is needed on human capital development—early childhood education, elementary and secondary education, increasing the rate of high school graduation and college attendance, and preparing potential workers for employment. Such efforts are particularly important for individuals who are adversely affected by where they live, given the present spatial opportunity structure.