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Governance and Opportunity in Metropolitan America (1999)

Chapter: Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy

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Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

Metropolitan Limits: Intrametropoliton Disparities and Governance in U.S. Laboratories of Democracy

Michael A. Pagano

Miami University, Oxford, Ohio

Background

Defended by its architects as the best defense against tyranny and as the institutional protector of liberties (Hamilton et al., 1961), the federal system of governance in the United States also promises diversity in local government structures and services, revenue access and limits, tax rates and burdens, and outputs and outcomes. By characterizing the role of states in the U.S. federal system as ''laboratories of democracy,'' Justice Louis Brandeis implied that state and local governments, unfettered by central-government rules and regulations, would experiment with a host of public policies—some failing and some achieving desired results. This characterization also implies spatial variations in tax policies, burdens, and services not only across states but also within and between metropolitan areas. The resulting variation in many metropolitan areas has been fragmentation in service delivery and revenue collection and disparities in tax burdens and service quality.

Studies on municipalities in the post-depression era focused on suburban-city (or central city/outside central city) disparities and attendant problems in metropolitan governance (Jones, 1942). White flight and middle-class exodus from the central cities often translated into poorer services in the central cities, higher tax burdens, and inequities resulting from central-city residents covering suburban residents' service costs during the work day. While suburban residents matched their collective preferences (especially for education, safety, and transportation) with an acceptable tax level, central-city residents shouldered the service delivery costs of suburban commuters to the central city (especially police,

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

fire, and transportation services) in addition to the costs of their own collective preferences. More recent studies show that, as the poor are increasingly concentrated in central cities relative to their surrounding suburbs, more own-source revenues are being spent for poverty and social programs by these cities than by smaller suburban cities.1

In the past decade, studies have resurrected earlier calls of metropolitan governance as a mechanism for reducing intrametropolitan disparities and have raised questions about the health and vitality of the entire metropolitan region (Wallis, 1994; see also Ledebur and Barnes, 1993; Barnes and Ledebur, 1994; Savitch et al., 1993).2 One of the more visible advocates of metropolitan government former Albuquerque mayor David Rusk, contends that "elastic" cities (or cities that are likely to capture surrounding growth that otherwise might have become incorporated suburbs) are more likely to survive economically and politically than are "inelastic" cities (Rusk, 1993). Others argue that the economic and political survival of central cities has a profound effect on the economic and political survival of surrounding communities in the metropolitan region (see, in addition to the references above, Orfield, 1997; Pierce with Johnson and Hall, 1993; Schaefer and Schaefer, 1996; Barnes and Ledebur, 1997).

Recent commentaries on metropolitan regions, central-city poverty surrounded by wealthy suburbs, and efficient service delivery arrangements in extramunicipality regions have created a resurgence of interest in metropolitan governance and regional affairs. The purpose of this paper is to review policies and strategies that have been experimented with and whose goals include mitigating intrametropolitan disparities and enhancing metropolitan governance more generally.

Revenue and Expenditure Variations

Before undertaking a review of those strategies, it is important to sketch briefly the diversity of local governments in the U.S. federal system. Local governments vary both in the composition of their revenue structures and in their service delivery responsibilities. Local governments in a federal system also decide on the appropriate balance between meeting the collective and individual preferences of their citizens. In some local governments, policies are decided that garner a greater share of the community's wealth to meet a comparatively higher level of collective or public needs, and in others the decision is to collect a smaller share of the community's wealth to meet more individual or private needs and demands. The tax burden in the former areas, then, is usually greater than in the latter area, other things being equal (e.g., productivity of public services).3 As a consequence of this diversity both in access to fiscal powers and in collective needs (both of which create idiosyncratic local government fiscal policies), attempts to compare differential tax burden and services across more than 19,000 U.S. cities and more than 83,000 local governments are, if not impos-

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

sible, certainly difficult. For example, a property tax rate of 10 mills in one city may generate more revenue than 10 mills in a neighboring city if the assessed value of property in the first city is its fair market value and in the second city only a fraction of fair market value, if the demand for land is greater in the first city than in the second, if the second city is a retirement center that has a circuit breaker for senior citizens, if the first city also includes personal property in the property tax base, and so on.

Moreover, local governments have increasingly turned to user charges and fees to fund their services. Between 1966-1967 and 1991-1992, local government fees and charges have increased from 23.6 percent of general own-source revenues to 36.4 percent (Table 1). At the same time, the composition of general tax revenue has also shifted substantially from little reliance on the sales tax (6.7 percent of general tax revenues) to substantially more (18.2 percent). But it is the user charge that is particularly noteworthy. It has hardly dented school district revenues (Table 2), hovering around 17 percent of own-source revenues for the past quarter-century. Beginning in the late 1970s and early 1980s, user fees and charges have surged in importance for counties from 25-30 to 40 percent of ownsource revenues (Table 3), and for cities from 30 to almost 40 percent (Table 4).

Whereas virtually all city governments and most local governments are granted access to a property tax,4 some states allow their general-purpose municipal governments access to an income tax or a sales tax. Table 5 lists local option taxing authority. According to the latest available data (1994), 4,111 local governments are authorized to levy an income tax, or nearly 25 percent more than in 1976. Yet if one excludes the 2,830 local governments in Pennsylvania, the 615 cities and school districts in Ohio, the 379 school districts in Iowa, and the 140 local governments in Kentucky that are permitted access to a local-option income or wage tax, the remaining 7 states allow only 157 of their local governments the authority to levy an income tax. Few local governments outside those four states, then, have their states' authorization to tax income or earnings. Yet 31 states allowed 6,579 local governments throughout the country access to a sales tax in 1994, up more than one-third from 1976 levels. Whereas local-option income taxes are fairly concentrated, the local-option sales tax is much more pervasive.

Furthermore, some cities and other local governments may not be permitted to increase tax rates or expenditure levels or tax levies because of state- or locally imposed tax and expenditure limitations, such as California's Proposition 13 (approved in 1978) and Proposition 218 (approved in 1996). Thus, given the enormous diversity in potential revenue structures by type of local government, by state, by local ordinances, and by citizen preferences, an unambiguous measure of revenue or tax equity within and between metropolitan areas is clearly difficult to create. Municipalities, for example, are much less dependent on property tax revenues than are school districts; counties are more dependent on

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

TABLE 1

Local Revenue Sources (in millions)

A. Nonconstant Dollars

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

Total General Revenue

58,235

105,243

179,045

281,045

410,347

573,255

General Revenue Own sources

38,045

65,549

102,214

164,426

254,062

357,268

—Taxes

29,074

49,739

74,852

103,783

158,216

227,099

 

76.4%

75.9%

73.2%

63.1%

62.3%

63.6%

—Property tax

25,186

41,620

60,267

78,952

116,618

171,723

 

86.8%

83.7%

80.5%

76.1%

73.7%

75.6%

—Individual income tax

926

2,241

3,752

5,078

7,716

11,106a

 

3.2%

4.5%

5.0%

4.9%

4.9%

4.92%

—Sales and gross receipts

1,956

4,268

8,278

14,824

24,455

41,263

 

6.7%

8.6%

11.1%

14.3%

14.3%

18.2%

—Charges and miscellaneous

8,971

15,890

27,362

60,643

95,846

130,169

 

23.6%

24.2%

26.8%

36.9%

37.7%

36.4%

B. Constant Dollars

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

Total General Revenue

277,441

368,756

439,482

450,392

523,002

573,255

General Revenue Own sources

181,253

229,674

250,893

263,503

323,811

357,268

—Taxes

138,514

174,278

183,731

166,319

201,652

227,099

—Property tax

119,990

145,830

147,931

126,526

148,634

171,723

—Individual income tax

4,412

7,852

9,210

8,138

9,834

11,106a

—Sales and gross receipts

9,319

14,954

20,319

23,756

31.169

41,263

—Charges and miscellaneous

42,739

55,676

67,162

97,184

122,159

130,169

a 1992-1993

Note: Deflated by state and local implicit price deflator.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

TABLE 2

School District Revenues (in millions)

A. Nonconstant Dollars

1983-84

1985-86

1987-88

1989-90

1991-92

Total General Revenue

109,645

129,132

149,200

175,570

199,182

General Revenue Own sources

50,492

57,997

67,963

80,970

91,720

—Taxes

41,633

48,040

56,065

65,923

76,619

 

82.5%

82.8%

82.5%

81.4%

83.5%

—Property tax

40,341

46,777

54,611

64,285

74,630

 

96.9%

97.4%

97.4%

97.5%

97.4%

—Charges and miscellaneous

8,859

9,957

11,898

15,048

15,101

 

17.5%

17.2%

17.5%

18.6%

16.5%

B. Constant Dollars

1983-84

1985-86

1987-88

1989-90

1991-92

Total General Revenue

156,279

170,990

181,597

193,125

199,182

General Revenue Own sources

71,997

76,797

82,720

89,066

91,720

—Taxes

53,940

63,612

68,239

72,515

76,619

—Property tax

57,499

61,940

66,469

70,713

74,630

—Charges and miscellaneous

12,627

13,185

14,485

16,553

15,101

Note: Deflated by state and local implicit price deflator.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

TABLE 3

County Revenue Sources (in millions)

A. Nonconstant Dollars

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

Total General Revenue

12,472

23,652

41,441

66,272

101,229

146,495

General Revenue Own sources

7,451

13,697

22,654

38,350

63,989

92,098

—Taxes

5,702

10,076

15,865

22,917

37,240

54,926

 

76.5%

73.6%

70.0%

59.8%

58.2%

59.6%

—Property tax

5,253

8,625

12,888

17,711

27,362

40,808

 

92.1%

85.6%

81.2%

77.3%

73.5%

74.3%

—Sales and gross receipts

a

a

a

3,660

7,005

10,155

 

 

 

 

16.0%

18.8%

18.5%

—Other

449

1,452

2,976

886

1,872

2,422

 

7.9%

14.3%

18.8%

3.9%

5.0%

4.4%

—Charges and miscellaneous

1,749

3,619

6,789

15,434

26,748

37,171

 

23.5%

26.4%

30.0%

40.2%

41.8%

40.4%

B. Constant Dollars

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

Total General Revenue

59,419

82,873

101,720

106,205

129,020

146,495

General Revenue Own sources

35,498

47,992

55,606

61,458

81,556

92,098

—Taxes

27,165

35,305

38,942

36,726

47,464

54,926

—Property tax

25,026

30,221

31,635

28,383

34,874

40,808

—Sales and gross receipts

a

a

a

5,865

8,928

10,155

—Other

2,139

5,088

7,305

1,420

2,386

2,422

—Charges and miscellaneous

8,333

12,680

16,664

24,734

34,091

37,171

a Included in "Other."

Note: Deflated by state and local implicit price deflator.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

TABLE 4

City Revenue Sources (in millions)

A. Nonconstant Dollars

1962-63

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

Total General Revenue

13,127

19,204

34,937

60,921

91,459

130,217

171,618

General Revenue Own sources

10,459

14,121

23,502

36,746

59,823

92,476

123,466

—Taxes

7,934

10,445

17,058

26,067

37,077

55,366

75,486

 

75.9%

74.0%

72.6%

70.9%

62.0%

59.9%

61.1%

—Property tax

5,807

7,629

10,988

15,657

19,502

27,163

39,706

 

73.2%

73.0%

64.4%

60.1%

52.6%

49.1%

52.6%

—Sales and gross receipts

1,303

1,673

3,185

5,805

10,195

15,598

20,190

 

16.4%

16.0%

18.7%

22.3%

27.5%

28.2%

26.7%

—Charges and miscellaneous

2,519

3,676

6,445

10,678

22,745

37,110

47,980

 

24.1%

26.0%

27.4%

29.1%

38.0%

40.1%

38.9%

B. Constant Dollars

1962-63

1966-67

1971-72

1976-77

1981-82

1986-87

1991-92

Total General Revenue

71,420

91,491

122,414

149,536

146,569

165,966

171,618

General Revenue Own sources

56,904

67,275

82,348

90,196

95,870

117,864

123,466

—Taxes

43,166

49,762

59,769

63,984

59,418

70,566

75,486

—Property tax

31,594

36,346

38,500

38,432

31,253

34,620

39,706

—Sales and gross receipts

7,089

7,970

11,160

14,249

16,338

19,880

20,190

—Charges and miscellaneous

13,705

17,513

22,582

26,210

36,450

47,298

47,980

Note: Deflated by state and local implicit price deflator.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

TABLE 5

States with Local Option Tax Authority for Income and Sales, Selected Years 1976-1994

A. Local Income Taxes: Number and Type of Jurisdiction

State a

1976

1979

1981

1984

1985

1986

Alabama

 

 

 

 

 

 

Cities

6

5

5

8

10

10

Arkansas

 

 

 

 

 

 

Cities

No cities levy income taxes

Delaware

 

 

 

 

 

 

Cities (Wilmington)

1

1

1

1

1

1

Georgia

 

 

 

 

 

 

Cities and Counties

No cities or counties levy income taxes

Indiana

 

 

 

 

 

 

Counties

38

37

38

43

44

45

Iowa

 

 

 

 

 

 

School Districts

3

21

26

57

57

61

Kentucky

 

 

 

 

 

 

Cities

59

59

59

61

67

78

Counties

8

8

9

11

14

School Districts

 

 

 

 

 

 

Maryland

 

 

 

 

 

 

Counties (and Baltimore City)

24

24

24

24

24

24

Michigan

 

 

 

 

 

 

Cities

16

16

16

16

16

17

Missouri

 

 

 

 

 

 

Cities (Kansas City and St. Louis)

2

2

2

2

2

2

New York

 

 

 

 

 

 

Cities (New York City and Yonkers)

1

1

1

2

2

2

Ohio

 

 

 

 

 

 

Cities

385

417

n.a.

460

467

480

School Districts

0

0

n.a.

6

6

6

Pennsylvania

 

 

 

 

 

 

Cities, Boroughs,

 

 

 

 

 

 

Towns, Townships, and School Districts

2,553b

2,585b

n.a.

2,644b

2,755b

2,777b

Virginia

 

 

 

 

 

 

Cities and Counties

No cities or counties levy income taxes

Total

 

 

 

 

 

 

(excludes Pennsylvania)

535

597

n.a.

688

707

740

Total

 

 

 

 

 

 

(includes Pennsylvania)

3,088b

3,182b

n.a.

3,332b

3,465b

3,517b

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

State

1987

1988

1989

1990

1991

1992

1994

Alabama

 

 

 

 

 

 

 

Cities

10

10

11

11

11

11

18

Arkansas

 

 

 

 

 

 

 

Cities

No cities levy income taxes

Delaware

 

 

 

 

 

 

 

Cities

 

 

 

 

 

 

 

(Wilmington)

1

1

1

1

1

1

1

Georgia

 

 

 

 

 

 

 

Cities and Counties

No cities or counties levy income taxes

Indiana

 

 

 

 

 

 

 

Counties

51

68

79

79

76

80

80

Iowa

 

 

 

 

 

 

 

School Districts

57

60

52

59

144

178

379

Kentucky

 

 

 

 

 

 

 

Cities

85

81

84

83

87

86

94

Counties

25

27

26

27

27

29

39

School Districts

 

 

 

 

 

 

7

Maryland

 

 

 

 

 

 

 

Counties

 

 

 

 

 

 

 

(and Baltimore City)

24

24

24

24

24

24

24

Michigan

 

 

 

 

 

 

 

Cities

17

18

19

19

20

20

20

Missouri

 

 

 

 

 

 

 

Cities

 

 

 

 

 

 

 

(Kansas City and St. Louis)

2

2

2

2

2

2

2

New York

 

 

 

 

 

 

 

(New York City and Yonkers)

2

2

2

2

2

2

2

Ohio

 

 

 

 

 

 

 

Cities

482

481

492

506

512

512

523

School Districts

6

5

5

22

52

76

92

Pennsylvania

 

 

 

 

 

 

 

Cities, Boroughs, Towns, Townships, and School Districts

2,782b

2,788

2,795

2,809

2,824

2,830

2,830

Virginia

 

 

 

 

 

 

 

Cities and Counties

No cities or counties levy income taxes

Total

 

 

 

 

 

 

 

(excludes Pennsylvania)

763

779

797

837

873

1,021

1,281

Total

 

 

 

 

 

 

 

(Includes Pennsylvania)

3,545b

3,567

3,592

3,646

3,697

3,853

4,111

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

B. Local Sales Taxes: Number and Type of Jurisdiction

State

1976

1979

1981

1984

1986

1987

Alabama - Total

265

301

321

353

374

382

Municipalities

 

270

281

310

323

326

Cities

 

31

40

43

51

56

Alaska - Total

86

93

92

99

97

93

Municipalities

 

86

85

92

91

87

Boroughs

 

7

7

7

6

6

Arizona - Total

38

39

59

70

75

77

Municipalities

38

39

59

70

74

75

Counties

-

-

-

-

1

2

Arkansas - Total

1

1

2

60

78

111

Municipalities

1

1

2

44

59

76

Counties

 

-

-

16

19

35

California - Total c

438

441

441

443

444

445

Municipalities

 

380

380

380

380

380

Counties

 

58

58

58

58

58

Special Districts

 

3

3

5

6

7

Colorado - Total

121

165

183

205

222

225

Municipalities

 

144

159

175

191

193

Counties

 

20

23

29

30

31

Transit District

 

1

1

1

1

1

Special District

 

-

-

-

-

-

Florida - Total d

 

 

 

 

 

 

Counties

 

-

-

-

0

0

Transit District

 

 

 

 

 

 

Georgia - Total e

16

84

104

133

143

144

Municipalities

 

3

0

0

0

0

Counties

 

80

103

132

142

143

Transit District

 

1

1

1

1

1

Illinois - Total

1,342

1,359

1,359

1,353

1,376

1,375

Municipalities

 

1,256

1,256

1,249

1,272

1,271

Counties

 

102

102

102

102

102

Transit Districts

 

1

1

2

2

2

Water District

 

-

-

-

-

-

Iowa

 

 

 

 

 

 

Counties

 

 

 

 

 

 

Kansas - Total

7

20

40

139

168

168

Municipalities

 

15

35

87

108

108

Counties

 

5

5

52

60

60

Louisiana - Total

183

217

251

253

287

302

Municipalities

 

136

152

158

177

192

Parishes

 

21

30

30

63

63

School Districts

 

60

66

65

47

47

Special Districts

 

7

12

18

23

23

Minnesota

 

 

 

 

 

 

Municipalities

1

1

1

2

1

3

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

State

1988

1989

1990

1991

1993

1994

Alabama - Total

389

398

403

405

415

421

Municipalities

334

343

344

345

355

359

Cities

55

55

59

60

60

62

Alaska - Total

101

101

101

101

101

98

Municipalities

95

95

95

95

95

93

Boroughs

6

6

6

6

6

5

Arizona - Total

81

83

85

92

95

100

Municipalities

79

81

82

81

83

86

Counties

2

2

3

11

12

14

Arkansas - Total

142

175

185

192

244

261

Municipalities

100

120

131

136

181

192

Counties

42

55

54

56

63

69

California - Total c

446

450

460

460

461

465

Municipalities

380

380

380

380

380

380

Counties

58

58

58

58

58

58

Special Districts

8

12

22

22

23

27

Colorado - Total

235

235

236

238

242

250

Municipalities

200

200

198

198

200

201

Counties

34

34

37

39

41

42

Transit District

1

1

1

1

1

1

Special District

-

-

-

-

-

6

Florida - Total d

 

11

23

26

39

45

Counties

10

10

21

25

38

44

Transit District

 

1

2

1

1

1

Georgia - Total e

155

154

165

158

160

160

Municipalities

0

0

0

0

0

0

Counties

154

153

164

157

159

159

Transit District

1

1

1

1

1

1

Illinois - Total

1,383

1,348

34

53

74

81

Municipalities

1,279

1,278

31

42

70

70

Counties

102

68

0

8

1

8

Transit Districts

2

2

2

2

2

2

Water District

-

-

1

1

1

1

Iowa

 

 

 

 

 

 

Counties

5

9

12

15

19

27

Kansas - Total

175

178

180

185

198

211

Municipalities

112

116

119

124

135

142

Counties

62

62

61

61

63

69

Louisiana - Total

302

325

325

327

339

340

Municipalities

193

189

193

195

203

203

Parishes

63

64

63

63

63

63

School Districts

46

47

48

48

48

50

Special Districts

23

25

21

21

25

24

Minnesota

 

 

 

 

 

 

Municipalities

3

3

3

3

5

5

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

B. Local Sales Taxes: Number and Type of Jurisdiction

State

1976

1979

1981

1984

1986

1987

Missouri - Total

152

215

333

487

556

657

Municipalities

151

214

332

406

458

474

Counties

1

1

 

81

98

114

Nebraska

 

 

 

 

 

 

Municipalities

-

4

7

12

16

22

Nevada - Total

12

13

1

1

5

7

Municipalities

1

-

-

-

-

-

Counties

11

12

1

1

5

7

New Mexico - Total

32

99

84

120

134

128

Municipalities

 

93

76

98

101

100

Counties

 

6

8

22

33

28

New York - Total

68

70

74

87

81

85

Municipalities

 

25

29

29

27

26

Counties

 

45

45

57

53

58

Transit District

-

-

-

1

1

1

North Carolina

 

 

 

 

 

 

Counties

96

99

99

100

100

100

North Dakota

 

 

 

 

 

 

Municipalities

-

-

-

-

3

3

Ohio - Total

33

51

55

65

76

81

Municipalities

 

50

52

62

74

79

Counties

 

1

3

3

2

2

Oklahoma - Total

356

398

398

447

466

473

Municipalities

356

398

398

44 1

452

457

Counties

-

-

-

6

14

16

South Carolina

 

 

 

 

 

 

Counties

-

-

-

-

-

-

South Dakota - Total

18

46

61

82

107

111

Municipalities

18

46

61

82

107

111

Indian Reservations

-

-

-

-

-

-

Tennessee

115

104

105

102

105

105

Municipalities

 

12

11

8

10

10

Counties

 

92

94

94

95

95

Texas - Total

854

946

949

1,120

1,032

1,029

Municipalities

 

921

921

1,117

1,026

1,023

Counties

 

-

-

-

-

-

Transit Districts

 

25

28

3

6

6

Special Districts

 

 

 

 

 

 

Utah - Total

204

230

n.a.

248

248

248

Municipalities

 

201

n.a.

219

219

219

Counties

 

29

29

29

29

29

Transit Districts

 

 

 

 

 

 

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

State

1988

1989

1990

1991

1993

1994

Missouri - Total

674

698

725

780

682

687

Municipalities

479

490

508

563

573

580

Counties

120

126

126

126

109

107

Nebraska

 

 

 

 

 

 

Municipalities

25

30

41

44

57

64

Nevada - Total

7

7

7

7

17

9

Municipalities

-

-

-

-

-

-

Counties

7

7

7

7

17

9

New Mexico - Total

132

134

135

134

136

139

Municipalities

101

101

102

101

103

106

Counties

31

33

33

33

33

33

New York - Total

83

85

87

89

84

79

Municipalities

28

30

25

27

27

22

Counties

54

54

61

61

56

56

Transit District

1

1

1

1

1

1

North Carolina

 

 

 

 

 

 

Counties

100

100

100

100

100

100

North Dakota

 

 

 

 

 

 

Municipalities

4

5

5

10

24

35

Ohio - Total

88

90

89

95

95

92

Municipalities

83

85

83

86

86

88

Counties

3

3

4

7

9

4

Oklahoma - Total

479

492

494

495

521

530

Municipalities

458

468

470

470

476

481

Counties

24

24

24

25

45

49

South Carolina

 

 

 

 

 

 

Counties

-

-

-

6

15

16

South Dakota - Total

120

135

139

144

161

169

Municipalities

117

132

136

141

158

166

Indian Reservations

3

3

3

3

3

3

Tennessee

106

106

104

103

103

104

Municipalities

11

11

9

8

8

9

Counties

95

95

95

95

95

95

Texas - Total

1,107

2,610

1,276

1,291

1,276

1,318

Municipalities

1,023

2,521

1,164

1,176

1,157

1,193

Counties

78

82

105

105

105

110

Transit Districts

6

7

7

7

7

8

Special Districts

 

 

 

3

7

7

Utah - Total

258

260

251

255

260

259

Municipalities

222

225

222

226

228

227

Counties

29

29

29

29

29

29

Transit Districts

7

6

n.a.

n.a.

3

3

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

B. Local Sales Taxes: Number and Type of Jurisdiction

State

1976

1979

1981

1984

1986

1987

Virginia - Total

133

136

136

136

136

136

Municipalities

 

41

41

41

41

41

Counties

 

95

95

95

95

95

Washington - Total

300

302

302

306

305

307

Municipalities

 

264

264

267

266

268

Counties

 

38

38

39

39

39

Wisconsin

 

 

 

 

 

 

Counties

-

-

-

-

2

12

Wyoming

 

 

 

 

 

 

Counties

5

13

15

15

14

15

U.S. Total

4,893

5,448

5,702

6,492

6,705

6,892

- = not authorized

n.a. = not applicable

a Employer payroll taxes are levied in California, New Jersey, and Oregon.

b Estimate.

c Los Angeles and San Francisco impose a special gross receipts tax.

sales taxes than cities; and municipalities, in general, are diversifying their revenue structures with more income tax revenue than counties.

Ladd and Yinger (1989) propose a measure of cities' fiscal health that is premised on the diversity of city functions and their costs as well as on the variation in city taxes and tax burdens.5 In order to facilitate comparisons across cities, they develop standardized measures of a city's revenue-raising capacity (measured as the ''amount of revenue a city could raise from broad-based taxes at a selected tax burden on its residents''—p. 7) and its expenditure need (measured as the "amount [a city] must spend per capita to provide public services of average quality"—p. 8). The difference between a city's standardized revenue-raising capacity and its standardized expenditure need is a city's standardized fiscal health, which is a comparative measure of a city's fiscal health relative to the average revenue-raising capacity and average expenditure need of all cities. But, because cities operate under both differential service responsibilities and state-restricted access to own-source revenues (as well as differential policies governing state aid to local governments), Ladd and Yinger adjust their standardized measures to create realistic measures of a city's fiscal health. Their "actual fiscal health" measure, then, is the difference between the "restricted" revenue-generating capacity of a city and its "actual" expenditure need.

A city's restricted revenue-raising capacity, then, must account for not only the broad-based tax the city is allowed to levy, but also its ability to export taxes to nonresident users of the city's services in addition to the value of state grants.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

State

1988

1989

1990

1991

1993

1994

Virginia - Total

136

136

136

136

136

136

Municipalities

41

41

41

41

41

41

Counties

95

95

95

95

95

95

Washington - Total

307

305

307

307

307

308

Municipalities

267

266

268

268

268

269

Counties

40

39

39

39

39

39

Wisconsin

 

 

 

 

 

 

Counties

18

24

28

40

45

47

Wyoming

 

 

 

 

 

 

Counties

16

19

19

23

20

23

U.S. Total

6,955

8,814

6,155

6,438

6,431

6,579

d Counties may impose a tourist development or impact tax on rentals or leases of living quarters for a term of six months or less.

e Local school tax-specified counties are authorized to impose a local sales and use tax for educational purposes.

Source: U.S. Advisory Commission on Intergovernmental Relations, Significant Features of Fiscal Federalism, 1995, Volume 1 (Washington, DC: U.S. ACIR, 1996).

For example, a city that is prohibited access to an earnings or income tax that can be imposed on nonresident employees who work in the city and receives little state aid will find itself in a poorer revenue-generating position than a city that is permitted access to the exportable income tax and receives generous state assistance. Without acknowledging the state-imposed revenue-generating restriction on the former city, the erroneous conclusion might be reached that both cities have the same revenue-generating capacity if measured in terms of personal income or property value.

Just as cities' (and other local governments') taxing authorities and portfolios vary, so do service delivery costs and responsibilities. States establish the service delivery responsibilities of cities through statutory or constitutional means, requiring local governments to perform certain functional activities (such as public safety) and establishing greater or lesser administrative and reporting flexibility. Provision of these activities is not uniform across the U.S. metropolitan landscape. Only a few city governments, for example, provide education, sanitation, and welfare; in contrast, police, fire, and highway functions are quite common (see, e.g., Liebert, 1976). Ladd and Yinger note the variation in costs of providing services by central cities in creating a measure of expenditure need. Arguing that, even if the outcomes of any function, such as protection, are comparable across cities, they contend that the costs of meeting those outcomes will not be identical because cities' environments differ. A given level of public

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

safety, for example, may cost more in high-poverty cities than in low-poverty cities.

The reach of local government authority, then, is circumscribed first by state constitutional or statutory restrictions (functions and financing) and by territorial jurisdiction (space). The efficacy of city (and other local) governments in redistributive programs is mitigated by residential and firm mobility, although they can influence the growth of cities' underlying economic bases through economic development activities; that is, the effective reach of city governments is circumscribed as primarily a developmental reach (Peterson, 1981; see also Peterson, 1995; Peterson and Rom, 1990). Theory notwithstanding, cities have engaged in redistributive activities and continue to engage in such activities (for a recent study of city redistributive costs, see Summers and Jakubowski, 1996), Consequently, in the U.S. federal system, there is a veritable cornucopia of bundles of services provided by municipal and other local governments, ranging from basic safety functions of police and fire protection to complex arrays of services, including education, welfare, water and sewer, and much more.6

Policy Experimentation and Effectiveness

Cities, other local governments, and states have experimented with a host of legal or incorporation statutes and revenue-related projects with the intent of minimizing intrametropolitan disparities in services and tax burdens and of enhancing metropolitan governance (U.S. Advisory Commission on Intergovernmental Relations, 1973; see also Bahl, 1980). The principal objective behind these approaches is either to stretch the political (corporation) boundaries of the city or to stretch the financial reach of the city to encompass the growing metropolitan area. Either way, these policies have the effect of capturing urban flight from the center of the metropolitan area and of expanding the economic tax base of the metropolitan area. Some of the more prominent legal or statutory mechanisms include city-county consolidation, annexation, two-tier governments, special-purpose governments, and tax-base-sharing arrangements.7 Fiscal tools include equalization grants from the state government, state or county assumption of municipal functions, and cost-shifting to nonresident users and beneficiaries of city (or metropolitan) services. These experiments, the attendant impacts, and their political feasibility for other metropolitan areas are discussed in this section.

Political "Stretching" Policies

Proposals designed to alter the political reach of municipalities address issues of managerial efficiency and metropolitan disparities, but also raise important questions about space. As Charles Haar, one of the more outspoken advocates of metropolitanization, so eloquently put it a quarter-century ago (1972:1): "Perhaps the most intractable cause of political strife and misgovernment is the

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

division of the surface of the earth into political jurisdictions. While every new boundary drawn represents the solution to a political problem, once drawn it tends to become as fixed as the constellations in the night sky. The inertia of political boundaries is evident in the enormous energies necessary to alter them and the glacial pace of changes in the jurisdictions of settled political institutions. Social and economic conditions on the other hand can change very rapidly."

In the minds of many reformers, then, metropolitan disparities in addressing social problems could be traced at their core to the artificial and oftentimes arbitrary nature of political-spatial boundaries. Reforms are also of an efficiency and good government nature. Metropolitanization and other proposals have taken aim at the corruption, inefficiency, and service redundancy of fragmented governments (see Jones, 1942; Maxey, 1922; Merriam et al., 1933).

Even if political boundaries could circumscribe metropolitan areas, unless and until those metropolitan areas remain forever static in size, the question of drawing the "best" boundaries will never be answered (see Sharpe, 1995). Only through adjusting these political boundaries at more-than-glacial speed could metropolitan areas ever hope to address the overwhelming local policy problems of transportation, education, health, and safety. Yet Harrigan (1993:358) notes that metropolitan governments are "uniformly much more successful in dealing with the physical questions such as sewers, water supply, or parks and recreation than they are in dealing with social issues" (italics added). In general, the most popular "political stretching'' mechanism is creation of special districts with specific infrastructural responsibilities, which promise efficient, cost-effective service delivery. Several of these policies are examined below.

Consolidation/Fragmentation

As the "wealth" of a metropolitan area escapes the political control of the central city, cities with liberal annexation laws often capture the fleeing tax base. In Texas the designation of land surrounding an incorporated municipality as the city's "extraterritorial jurisdiction" has been instrumental in the growth of the state's municipalities in area and in fiscal capacity.8 By way of illustration, the physical boundaries of the city of Houston, an "elastic" city according to Rusk, have grown from 328.1 square miles in 1960 to 539.9 square miles in 1990, and the city's per capita own-source revenues have increased 128 percent from $377 (in 1992 dollars) in 1960 to $861 in 1990 whereas Detroit's physical size declined slightly from 139.6 square miles in 1960 to 138.7 square miles in 1990, and its per capita own-source revenues increased 64 percent. Many older central cities are hemmed in by suburban municipalities that incorporated long ago. The political boundaries of Cleveland, Chicago, Pittsburgh, Boston, St. Louis, San Francisco, and other large, older cities have hardly changed in the past half-century, even as out-migration in some of those "inelastic'' cities reached double-digit rates between postwar decennial censuses.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

Consolidation proposals of the nineteenth and early twentieth century were meant to curb the excesses of corrupt, inefficient, and incompetent city administrations. Hence, consolidation advocates, like reformed city advocates, were the good government reformers who promoted professionalizing governmental administration and removing political considerations from administrators (see, e.g., Studenski, 1930). Efficiency was their calling card, and consolidating services over a broad area was expected to reap economies of scale. The good government concerns of the early reformers gave way to broader concerns in the suburbanization boom of the postwar years. Taxable wealth was fleeing the central cities, and advocates of consolidation fought to extend the noose of the cities' fiscal powers over the growth areas.

City-county consolidation gained considerable academic attention and support until the past three decades, when it was challenged in academic circles and by a nonsympathetic public; only recently has it become a viable option again. It is premised principally not only on capturing externalities of economic growth and ensuring that central-city residents are not burdened by the costs of supporting suburban commuters, but also on achieving economies of scale. Larger production units, according to this theory, can produce a unit of a public good at a lower marginal cost than smaller production units. Consequently, metropolitan-wide service delivery areas are often more efficient, and consolidation of local general-purpose governments or specific services is encouraged. In addition to the efficiency arguments, consolidation is also considered more equitable as cost-shifting to central-city residents is unlikely under uniform, county-wide tax systems. Residents in the far reaches of the county are taxed for city services, just as their central-city counterparts are. And services are to be provided equitably and fairly. Suburban county commuters, then, are to contribute to the cost of the services they consume.

Regardless of the powerful efficiency and equity arguments proffered in defense of consolidation, political acceptance of such arguments as recorded through the ballot box demonstrates a different reality. Willing to sacrifice neither their (local governments') autonomy, nor their tax dollars for perceived inner-city problems, suburban and county dwellers have routinely rejected consolidation proposals for the past four decades. In a 1972 study, Marando and Whitley report that, although there seemed to be very high interest in investigating city-county consolidations (nearly three-quarters of the electorate approved creation of consolidation charter commissions), average voter support fell to under half, and only one-third of the post-World War H proposals were approved (Marando and Whitley, 1972). According to the most recent data compiled by the National Association of Counties and updated by Durning (1995), only 22 city-county consolidations have been approved since 1921, for an approval rate of 17.6 percent. Prior to 1960, 3 of 14 proposals were approved, for an approval rate of 27.2 percent; in the 1960s, 6 of 20 were approved (30 percent); in the

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

1970s, 8 of 40 (16.7 percent); in the 1980s, 2 of 26 (8.3 percent); and, thus far, in the 1990s, 3 of 17 (17.6 percent).9

Even though central-city residents are often persuaded to vote for consolidation, the non-central-city dwellers usually reject it. In addition to the suburban antipathy for central-city problems, defeat of consolidation proposals also has carried a racial and ethnic dimension, a dimension that is a double-edged sword. Whereas noncity opponents are often discontent over providing more tax support for consolidation than central-city residents, it is also the case that predominantly white county voters dilute minority votes in the central city and their access to city-county government. Diluting minority voters' strength is forbidden under the 1965 Voting Rights Act, which forbids political redistricting that would deny or abridge voting rights on account of race or ethnicity. Consolidation proposals in states for which preclearance is required might contradict the Voting Rights Act if minority voting strength is diluted. For example, in 1988, the proposed consolidation of Augusta and Richmond County, Georgia, was blocked by the U.S. Department of Justice because "the dilution of Black voting strength through consolidation in Richmond County was discriminatory" (State of Texas, Senate Intergovernmental Relations Committee, 1996). In 1995, another consolidation charter for Augusta and Richmond County was precleared and became operational in 1996.

Even though anticonsolidation forces have been chided in the past few decades for the racist or class overtones to the negative suburban and county vote, arguments have been advanced in defense of fragmented metropolitan governments, and in opposition to consolidated governments (see, e.g., Kenyon and Kincaid, 1991; U.S. Advisory Commission on Intergovernmental Relations, 1992; Schneider, 1989). Fragmentation proponents have rested their defense principally on an efficiency argument, that is to say, on the same argument put forward by the proconsolidation forces. The intellectual guiding light behind the fragmented metropolitan government perspective is Charles Tiebout, who in a 1956 article argued that local governments in federal politics have incentives to behave according to market-like principles, an idea that was applied in support of fragmented metropolitan governments by Ostrom, Tiebout, and Warren in 1961 (Ostrom et al., 1961). Because citizens can migrate from jurisdiction to jurisdiction, municipalities (and other local governments) offer competitive bundles of services for a certain price (or tax). These offerings by a number of local governments, then, simulate a market in that the supply or bundle of goods must be provided and produced efficiently or demand (and the threat of migration) will move elsewhere for a more "competitive" bundle of services for a more acceptable tax price.

Empirical studies of consolidation and fragmentation efforts, which measure service delivery effectiveness and equity, are not conclusive (for a rebuttal to the study concerning Allegheny County's fragmentation by the U.S. Advisory Commission on Intergovernmental Relations, see Miller et al., 1995). Consolidation

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

may eliminate duplicate services and improve scale economies, but often at the expense of creating a larger, less-responsive bureaucratic organization. Citizens in fragmented metropolitan areas may be no better informed to make efficient decisions than their counterparts in consolidated counties (Lyons and Lowery, 1989). In a survey of consolidation and fragmentation studies, a recent report concludes, "In all, this skimpy, mixed bag of evidence is inadequate to lead to any firm conclusions about the effect of consolidation on the quality of services provided by local government" (Carl Vinson Institute of Government, 1989:21). A recent test of the fragmentation thesis concluded that "Overall, it is found that the impact of the alternative forms of metropolitan government on the distribution of income are modest, and that the redistribution of metropolitan resources among jurisdictions resulting from fiscal fragmentation is haphazard and bears little relation to a municipality's median income" (Sacher, 1993:1225).

The dissonance between the fragmentation and consolidation forces reached an ironic point when, almost simultaneously with the publication of a study from the U.S. Advisory Commission on Intergovernmental Relations, which documented the efficiency effects of fragmented local governments in Allegheny County and St. Louis County (U.S. Advisory Commission on Intergovernmental Relations, 1993), a report was released by the St. Louis Freeholders urging more integration of the county's local governments (Phares and Louishomme, 1996). And although the evidence on "fairness" or equity of service delivery in consolidated governments tends to be anecdotal, comprehensive studies on intrametropolitan disparities in tax burden and services are nonexistent, focusing instead on residents' satisfaction with services.

Even though results of consolidation studies appear to be contradictory, most have been undertaken in large counties. Durning notes that scale economies and administrative efficiency are more likely to accrue to fragmented local governments in large counties (> 250,000) and that efficiency gains are more likely in consolidated counties that are small (< 250,000) (Durning, 1995). In recent years consolidation proposals have become important on the political agenda of smaller metropolitan areas. During the 1960s, the average-size county voting on consolidation was 221,995; in the 1970s, it was 193,781; and during the 1980s, it was 132,234 (Durning, 1995:295). In testimony before the Texas Senate Committee on Intergovernmental Relations, Blodgett observed that there is more activity around the country in city-county consolidation in the 1990s than in previous decades and that the motivations behind those consolidation efforts, which tend to be advanced in smaller counties, are primarily for efficiency reasons.10

Two-Tier and Special-Purpose Governments

The checkered political success of consolidation strategies, however, does not imply that efficiency arguments have not taken hold. Indeed, the fragmentation studies note that many local governments engage in interlocal agreements for

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

the purpose of efficiency gains from economies of scale of jointly funding and providing certain services, such as garbage collection, policing, and fire protection. Numerous examples of special-purpose governments exist in which interlocal agreements between and among governmental units legitimize their activities. These agreements are negotiated periodically and, as a consequence of continuous oversight by participating governments, are expected to result in their becoming more efficient providers of services.

Rather than wholesale consolidation of a county's local governments, some advocates argue two advantages of a selective consolidation approach. First, the consolidated service can be provided at a more efficient level and a reduced cost than if each local government provided the service independently. And second, consolidating a single function rather than all functions is responsive to citizens' desires to maintain a separate political identity.

Suburban opposition to many of the regional proposals (e.g., city-county consolidations) is partly responsible for leading reformers to consider two-tier governments, consolidating some activities and not others, and to other proposals. Transportation improvement districts, sewer districts, utility districts, and other consolidated services have supplanted wholesale general government consolidations as politically viable regional solutions to service delivery needs (Burns, 1994). One of the most visible two-tier governments is Indiana's consolidation of a few Marion County services with those of the city of Indianapolis. Unigov, as it is called, did not require voter approval by the county's residents; rather, it was created by an act of the state legislature, controlled at the time by the Republican Party. The Democratic Party, which held leadership positions in the "old" Indianapolis council, now became a minority under Unigov. Their political base thus became diluted by suburban Republicans. Yet efficiency of service delivery, the principal reason for Unigov's creation in 1969, was proclaimed its major feat even as school districts and townships (which have relief and fire protection responsibilities) remained unconsolidated, as were the four cities with populations greater than 5,000 that were statutorily excluded from the consolidation. A total of 58 agencies were consolidated into 6 departments and, according to a former director of the Department of Metropolitan Development, "more services now are being delivered per dollar than before Unigov." Further, Unigov streamlined governmental structures and reduced the number of offices developers were required to visit before permits were issued, resulting in more economic development activity (Gorton, 1978).

Nearly a quarter-century after Unigov' s creation, Blomquist and Parks (1995) found that, since 1969, the wealthier suburbs have dominated the political landscape of the city-county government and that Unigov "gave suburban leaders access to the central-city base with which to pursue development projects chosen by them, not by city residents" (1995:53). Moreover, they contend that provision and production of "most local services" were unchanged. Their study, however, notes that residents of the "old" city, which still retains education and police

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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functions, are much less satisfied with education services compared with their noncity counterparts in the county; they reach the conclusion that "residents of the pre-Unigov city could be better served by a decentralization of their police and public schools than by any merger with surrounding departments and districts" (1995:46).11

Special-purpose regional governments generate greater public support than general-purpose regional (consolidated) governments. Special-purpose governments are usually single-purpose districts with their own governing boards, providing a variety of region-wide services, such as water and sewer services, mass transportation, utilities, and education. The proliferation of special districts and authorities in recent decades can be attributed to both the divisible nature of the services provided and the severity of fiscal controls. With regard to the former, special districts and authorities are often formed to provide a single service, such as water services, that is financed from user charges and not with general tax revenues. These services, it is argued, ought to be self-supporting and not subsidized from the tax revenues of a general-purpose government. They can be operated much like a private business and must be responsive to shifts in consumer demands. With respect to the latter, the creation of special-purpose governments for certain service responsibilities may also be promoted for the simple purpose of removing certain responsibilities from tax and expenditure controls (Sbragia, 1996). The general-purpose government now has more fiscal capacity for the remaining functions because the newly jettisoned service no longer competes with other government functions for scarce resources.

The latest form of special district is the newly invigorated transportation regional district, metropolitan planning organizations (MPO), which were given fiscal powers under the 1991 reauthorization of the federal highway act, the Intermodal Surface Transportation Efficiency Act. Under the act, metropolitan planning organizations are given transportation funds to be disbursed on projects of regional importance. Although the jury is still out on their effectiveness and on the equity of providing transportation services throughout the region, questions have been raised about their autonomy and about the composition of their governing boards. Because representatives are not elected regionally, there still exists the distinct possibility of influencing projects with a clear suburban or anticentral-city flavor. The question, then, is whether or not metropolitan planning organizations are designed and operate with an eye toward reducing intrametropolitan disparities in service delivery and in fiscal burden (see, e.g., Gage and McDowell, 1995; Pagano, 1996; U.S. General Accounting Office, 1993).

Tax Base Sharing

Concerns that local governments within a region outbid each other in offering public subsidies to attract firms and developers, resulting in a destructive

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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competition among municipalities, have prompted proposals that require metropolitan governments to share in the region's tax base growth or in the region's revenue growth. In this way, cities' logic to offer developer incentives is mitigated because other local governments in the region stand to benefit from one city's tax offer. The beggar-thy-neighbor approach to development, it is argued, becomes unimportant in attracting industry and development under tax base sharing.

Probably the most celebrated case of tax base sharing was initiated in 1968 by the Citizens League in the Twin Cities (Minnesota) area and voted into law by the legislature in 1971. According to the Metropolitan Fiscal Disparities Act, each year local governments in a seven-county area calculate changes in the assessed value of industrial-commercial property and contribute 40 percent of the growth to an area-wide pool. Each government receives funds from this pool, according to a formula that takes into consideration the community's population and is inversely related to its fiscal capacity, defined as per capita market value of all real property (i.e., larger cities with lower fiscal capacity receive more funds). In an early study of the Twin Cities' tax base sharing program, Reschovsky (1980) found that "in every year [between 1974 and 1979] tax base sharing has been effective in reducing fiscal disparities" (1980:63). A 1991 study by a state legislative committee concluded that, as a result of the program, fiscal disparity was "reduced to a 4-to-1 ratio of highest to lowest per capita tax base; without the program it would be 22-to-1" (as cited in Nunn and Rosentraub, 1996). Specifically, the study found that "by 1992 tax base sharing had reduced intrametropolitan inequalities in tax base by 28 percent" (cited in Chernick and Reschovsky, 1995:42).

The logic undergirding a tax base sharing approach to metropolitan governance is essentially twofold.12 First, because communities do not reap the full fiscal benefits of economic development and expansion under tax base sharing, the fiscal imperatives to local governments offering economic incentives (e.g., property tax abatement) are mitigated. Communities within the tax base sharing region, then, do not compete with each other in giving away tax incentives. Second, tax base sharing is expected to benefit the central city of the metropolitan region due, in most cases, to the poorer economic position of the city. A simulation of the efficiency and equity gains of property tax base sharing resulted in "quite small" efficiency gains but a "major redistribution from suburban landowners to city landowners" (Zodrow, 1984:224). Whether or not this equity impact would benefit nonlandowning central-city residents, however, was not examined. But McHone contends that sharing a portion of the industrial property tax base of metropolitan regions could be redistributed without affecting the efficiency of markets for business location (McHone, 1990).

The central principle of tax base sharing is to reduce counterproductive interjurisdictional tax competition and fiscal disparity. In Montgomery County, Ohio, a voluntary tax sharing program was created in 1989 for the purpose of

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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pooling resources for economic development programs and for promoting government equity. The program, the Economic Development/Government Equity program or ED/GE, requires a 10-year commitment from each participating municipal, village, and township government, which is then eligible to apply for economic development funds. The government equity part of the program is funded from tax base sharing. The economic development funds come from a half-cent county sales tax. The complex and politically contentious formula for the tax base sharing pool limits any one local government's contribution to 13 percent of its tax revenues, and the distribution of the pool is based on population (Pammer and Dustin, 1993; see also Nunn and Rosentraub, 1996). Because the GE portion is not distributed according to need, it is questionable whether redistributive impacts were obtained. Nunn and Rosentraub note, "in 1992, the city of Dayton [in Montgomery County] contributed more than it received, yet it had a higher poverty level than many other participating jurisdictions" (1996:96).

Indeed, the question of whether or not intrametropolitan disparities can be reduced through tax base sharing is premised on the distribution formula. In the Twin Cities ease, the city of Minneapolis has been a net contributor to the pool since 1984 due to a commercial real estate boom because, like the GE formula in Montgomery County, the Twin Cities' "distribution formula does not at all reflect the higher costs of providing public services in central cities" (Chernick and Reschovsky, 1995:31). Nevertheless, as a mechanism for reducing intrametropolitan disparities between the wealthiest and the poorest communities in the region, and not just for redistributing wealth to the central city, the Twin Cities program has been an unqualified success.

Political Feasibility

Consolidation and annexation tools may enhance regional governance, diminish intrametropolitan disparities, and improve efficient service delivery, but they may also marginalize minority voters in the central city. Cities in states that must submit any alterations in existing political boundaries to the U.S. Department of Justice for preclearance know the importance of not diluting minority voter strength. Eisinger (1980) noted that the first attempt at consolidation in Nashville-Davidson County in 1952 (which eventually was successful in 1962, prior to passage of the Voting Rights Act) was marked by white proponents' claims that black political power in Nashville would be diluted (the same race argument was used by whites in Newport News, Virginia, and the consolidation proposal was overwhelmingly rejected by African Americans a few years later). For minority voters in central cities, there must be a perception that their voice will not be muted by an overwhelmingly nonminority majority council. Suburban voters, especially in states where the U.S. Department of Justice is looking over their shoulders, will need a sufficient incentive to consolidate their tax base with the central city's.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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There appears to be a resurgence in interest in consolidation (and in reformed county governments, discussed below) in the 1990s, a resurgence that Wikstrom attributes to the popular reception of Rusk's work (Wikstrom, 1997). The imperative behind these consolidations, especially in smaller counties, does not appear to be a concern for reducing intrametropolitan disparities—except that residents of the consolidated government still expect a "fair" level of services. Rather, the political imperative is to increase efficient and effective service delivery. Augusta-Richmond County and Lafayette City-Parish mergers have recently been implemented, and Florence-Boone County (KY), Durham-Durham County (NC), Las Vegas-Clark County (NV), Gainesville-Hall County (FL), San Antonio-Bexar County (TX) are considering consolidation.

Yet, except for these notable cases, there is greater interest throughout the nation to consolidate specific services, rather than all services, through interlocal agreements that are negotiated periodically or through the process of legally creating special districts. Interlocal agreements and special districts, encompassing areas larger than the central city and often nearly as large as the metropolitan area, appear to be the political action of choice. From 21,264 in 1967, the number of special districts has climbed to 29,532 in 1992. Most of these functions are either "household" functions, such as garbage collection, fire protection, policing, tax collection activities, payroll, cemeteries, drainage and flood control, and planning, or infrastructure activities, such as transportation improvement districts, water supply, municipal utility districts, metropolitan planning organizations, and the like. They tend not to be social services. Whether or not regional governance will ever reduce social disparities within metropolitan areas, Grigsby contends that "as long as [regional governments'] primary function is to provide infrastructure capacity and implement federal or state regulatory mandates, it will receive tacit support from local municipalities and contribute little to the growing problem of regional inequalities" (Grigsby, 1996:57).

Tax base sharing, as another political stretching device, may seem more politically palatable in regions that experience acute interregional competition. Yet Mikesell counters that tax base sharing implies a surrender of fiscal independence: "if city identity and autonomy of choice are critical elements of city futures, it is no surprise that regional base sharing has not spread beyond its few implementations" (Mikesell, 1993:44). In order to avoid the popular conception of giving away the store to developers and others, the logic of tax base sharing may become persuasive, so long as the political obstacles can be overcome. If the suburbanites' cynicism that they can and should help the cities does not wane, nor does the central-city residents' fears of diminution in their political power, it is unlikely that regional governance will make much headway in the future (although a few successes are noteworthy, precisely because they have been created in smaller counties). And state intervention requiring consolidation without local voter approval, say, in the manner that Unigov was created in Marion County, would certainly be politically contentious. Coordination and cooperation in more

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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circumscribed service delivery arenas of regional governance might be more successful politically than wholesale consolidation.

Fiscal "Stretching" Policies

Although experiments in regional governance have not been attempted uniformly throughout the federal landscape, all states have to a greater or lesser extent engaged in financial support of their local governments for the express purpose of supporting low-income or low-capacity jurisdictions. In 1992, state expenditures to local governments amounted to $197.7 billion, or $777 per capita, ranging from a low of $108 per capita for Hawaii (or 0.5 percent of personal income) to a high of $1,398 per capita for Wyoming (or 7.5 percent of personal income) (U.S. Advisory Commission on Intergovernmental Relations, 1995). States have also assigned a dissimilar set of service delivery responsibilities to their local governments, ranging from, in the case of public education, Hawaii's single statewide school system to the 1,053 school districts in Texas. And local governments, as legal creatures of their respective states, are limited constitutionally and statutorily in the composition of their revenue structures.

In this section, state grants to local government jurisdictions are examined, followed by a brief discussion of state assumption of local services. Finally, an extensive assessment of a regional fiscal policy tool, an earnings or commuter tax, is presented.

Grants-in-Aid, Fiscal Equalization

States provide a substantial portion of local government funding, amounting to $206.1 billion in 1992-1993, or 34.2 percent of total local government general revenues (Bureau of the Census, 1995). Although states often distribute funds without concern for disparities in local government need, variation in revenue generating among a state's local governments has prompted creation of state aid programs, some of which are distributed on the basis of need. Attempts to address fiscal disparities and service delivery inequities are widespread (see Liebschutz, 1989; Bradbury et al., 1984). Disparities in revenue-generating potential derive not only from variations in a local government's underlying economic well-being, but also from its legal access to revenue structures. States establish the constitutional or statutory parameters around tax and fee structures. Some revenue sources are simply unavailable (e.g., local governments in most states do not have access to an income or earnings tax) or constrained (e.g., local governments frequently have their ability to issue debt limited by a dollar amount on debt outstanding or by the tax rate for debt retirement or by a fixed percentage of assessment value). For example, only 13 states do not set limits on local government property taxes; 31 establish rate limits, 14 require revenue rollbacks, and 8 put limits on assessment (Mackey, 1997:Table 7).

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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Aid to local governments in many states is premised on their expenditure need or resource need and is designed to reduce fiscal disparities among local governments (Gold and Erickson, 1988). In theory, then, a state grant might be based on how much a city or other local government would spend for a given output or workload if it spent at the average level for all cities or local governments. Local governments with a low residential base but a high employee base, then, might be compensated at a higher rate than other governments. Most equalization-like state grants for local governments are designed to target those areas in most ''need'' as a means to offset fiscal disparities across local governments. These needs are operationalized in a variety of ways, ranging from fiscal definitions of need (e.g., fiscal effort and debt burden) to social definitions of need (e.g., percentage in poverty) (for various definitions of need, see, e.g., Pelissero, 1984; U.S. Advisory Commission on Intergovernmental Relations, 1985).

Oakland, who generally opposes equalization grants, concedes that equity might be addressed through equalization grants but argues that efficiency would be worse (Oakland, 1994a). One reason is that equalization grants and other grants based on need ignore economies of scale (see Ladd, 1994:45). Furthermore, an equalization grant based on revenue or expenditure need sets all points of comparison at the mean, negating the prospects that cities choose to provide a locally distinct bundle of services at a locally determined tax (due to tax and service heterogeneity across cities). And the formulae for disbursing equalization grants ignore the quality of local public services, focusing instead on the costs (Oakland, 1994b).

Most studies on the efficiency and equity impacts of equalization or needs-based grants analyze a single government function, schools. In 1971, the year of the Serrano decision in California, 10 states used flat grants to finance public education; today only 1 does. Two-thirds of all states now have adopted public school equalization formulae (or "foundation" grants) for the express purpose of increasing per-pupil state aid to school districts with poor revenue-raising capacity (Evans et al, 1997). The taxable wealth of the school district and the number of recipients (students) rather than the property tax rate determines the state's aid to school districts. Equalization grants are designed explicitly as redistributive grants by linking the value of the grant to the taxable base of the district and to the district's tax effort. Increasing the state's matching rate as a school district's taxable base declines ensures that poorer districts receive higher per pupil grants given a similar tax effort. Reschovsky argues that, although fiscal equalization for school districts via this method achieves taxpayer equity, it does not guarantee adequate spending (Reschovsky, 1994). Differences in the composition of school-age children in a district, such as a higher than average proportion of disadvantaged or disabled students, may require funds to be shifted to meet those needs, rendering less than adequate the total spending levels for students without special needs.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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Regardless of the equity merits that underlie equalization grants, even the advocates are skeptical that states will be successful in creating and implementing these redistributive programs for at least two reasons: (1) political obstacles and (2) perverse incentives in some equalization formulae. Ladd argues that any equalization strategy that penalizes wealthy communities (and reduces their aid) lacks political viability (Ladd, 1994). And equalization grants that are designed to supplement locally generated revenues for local government functions may engender a local backlash. Higher-income voters may become less supportive of tax levies for the aided function and may shift their preferences to private services (e.g., higher demand for private education), thereby potentially increasing inequity.13 Reschovsky likewise concludes that attempts to equalize per pupil spending will fail for political reasons (revolt of the "haves") and that full state funding will lead to equality of spending but will come at the price of the loss of local discretion. The "perverse incentive" reason, especially in equalization grants for education, is that states that reward special needs students may be inefficient because there are no incentives to operate efficiently. If such programs were efficient, it would result in a decline in state funding. In other words, schools receive more per pupil funding for special needs students, encouraging schools not to improve their educational attainment (Reschovsky, 1994).

State/County Assumption

As creatures of their states, local governments' operations can be influenced by state directives but can be controlled by state assumption. Historically, states intervened in the affairs of their local governments when the state concluded that corruption and ineptitude were rampant, especially with municipal police forces, and also when the local governments were experiencing fiscal difficulties. Contemporary state assumption of local government operations is motivated usually by either ineffective administration or poor fiscal capacity (Berman, 1995).

State assumption of local government authority can take the form of direct operation or oversight. Although invoked infrequently in this century, most state takeovers in recent years have been directed at local school districts. As a mechanism for alleviating onerous fiscal demands, especially for cities and school districts with high concentrations of impoverished and low-income populations and with unattractive business sites, some argue that the state ought to assume some local government functions. O'Cleireacain proposed that one mechanism for helping cities in poor fiscal condition is a state takeover of certain responsibilities (welfare, especially) and that a policy modeled on a logical sorting out of government responsibilities be pursued (O'Cleireacain, 1993; for support of the state takeover position, see Ladd and Yinger, 1989). This proposal is premised on Musgrave's and Peterson's framework (Musgrave, 1959; Peterson, 1981), noting that the spillover benefits and costs of redistributive functions ought to be absorbed by another level of government with broader spatial jurisdiction (such

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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as the state or federal government), or at least the costs of such activities should not be the sole province of the city. That some cities—New York is the most notable example—are required by their respective states to assume redistributive responsibilities increases the likelihood of intrametropolitan disparities.

Larger central cities provide more unreimbursed social services to their residents than smaller cities and suburban cities, according to recent studies. The resulting intrametropolitan disparities (primarily in the form of a higher tax burden for residents of larger cities) might be addressed by the state's assuming, or reimbursing the costs of, those redistributive functions that contribute to the disparities. An option short of state assumption is to expand the authority and professionalism of county government. Responsibilities traditionally associated with cities could be shifted to the counties, reducing cities' fiscal burdens and enhancing the county's capacity to deliver certain services to its residents fairly (for a discussion of strengthening county governments, see Harrigan, 1993).

The 1990-1992 recession was an important catalyst for thinking through the "sorting out" issue of which functions ought to be state responsibilities and which functions ought to be local responsibilities. Gold and Ritchie documented these shifts in a series of reports (Gold and Ritchie, 1992, 1993). In 1991, for example, Maryland assumed responsibility for Baltimore's jail, Idaho covered some costs of county indigent health care, and North Dakota expanded state expenses for local courts. The motivation for state assumption of local responsibilities was primarily fiscal, although not necessarily to improve the local fisc. Indeed, states at times devolve responsibilities to local governments as a means of helping the states' fiscal conditions.

States often provide county residents the option of reforming county government, which can mean enhancing the power of the county's chief executive or requiring city-county negotiations for revenue or assuming city functions or exchanging functional responsibilities (see Thomas and Boonyapratuang, 1993; Marando and Reeves, 1993; Sokolow, 1993). While Harrigan considers city-county consolidation problematic in a political sense, he observes that strengthening county governments has become more important over the past few decades and expects it to continue (Harrigan, 1993).

Commuter Tax/Payroll Tax

As proof that city-suburban disparities have increased in the past decade, Chernick and Reschovsky (1995:10-11) found that, "In Chicago in 1960 the ratio of per capita income in the city relative to the income in Chicago's suburbs was 0.86. By 1989 this ratio declined to 0.66. Similarly, in New York, the ratio fell from 0.84 to 0.68. The declining average income of city residents has adverse effects on central city fiscal capacity. As cities' population becomes increasingly poor, cities' tax bases usually shrink."

They also argue that central-city/suburban fiscal differentials are exacer-

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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bated because jobs are moving to the suburbs, suburban residents work at high-paying jobs in the cities, and higher-skilled workers are getting paid more relative to lower-skilled workers. Thus, cities that depend on the property tax for their revenues are becoming increasingly more fiscally stressed. This is a true statement, indeed; unless, of course, cities that are becoming increasingly poor are maintaining high-income employment opportunities and those high-income employees can be taxed at their place of work rather than at their place of residence. In other words, a tax on the income or wages of those high-income suburban residents who work in the city might address the problem of fiscal disparity. Indeed, Chernick and Reschovsky conclude that one way to restructure the metropolitan fiscal system would be "to expand reliance on payroll or income taxes which are payable in the jurisdiction where income is earned" (1995:36-37).

Ladd and Yinger conclude their study on fiscal disparities by noting that states can better help their municipalities' fiscal position through fiscal institutional means rather than through grants-in-aid. In particular, they advocate two institutional mechanisms: (1) shift certain service provision responsibilities to the states (as noted above) and, more important, (2) allow cities to export their tax burden through a commuter tax. They argue, "the potential for exporting tax burdens to nonresidents is greater with an earnings tax than with any tax the cities actually employ" (Ladd and Yinger, 1989:300).

The import of their argument is certainly not new to legislators of the nation's capital. Over two decades ago, in 1976, a bill was introduced in Congress allowing the District of Columbia government access to a "commuter tax," a 1.5 percent tax on income earned in the District. Defended as analogous to a state income tax, proponents argued that for tax purposes the Congress should grant the District similar authority that states have; moreover, they argued it should be approved because it was equitable. Stewart McKinney (D-CT), the sponsor of the legislation, argued (U.S. Congress, House, 1976:10): "When the city stops functioning as an economically viable entity, there will cease to be a reason for suburbs to exist. Suburbs exist only because cities do. The jobs which generate the income which supports the suburban community are there because the city is there. I introduced this proposal because I think it is necessary for the well-being of the entire Washington metropolitan area." Then-Mayor Walter Washington lamented that 59 percent of the income earned in the city was earned by nonresidents (approximately $199 million) and 55 percent of the city's real property was tax exempt (approximately $123 million) (U.S. Congress, House, 1976:18, 57).

The idea of a commuter tax is raised frequently and advocated ardently by many scholars (witness the recent call for a D.C. commuter tax 20 years after Mayor Washington's). Gilbert's evaluation of property tax-sharing schemes, for example, concluded that the benefits of shared property taxes would be relatively small and that "the most effective ways to reduce central city fiscal strains are shifting from local property tax financing to personal income tax financing at the regional and especially at the state level" (Gilbert, 1979:688). Based on the Ladd

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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and Yinger measures, the cities with the greatest revenue-raising capacity (measured by the proportion of total revenues that can be exported to nonresidents) are, not surprisingly, in the state with the most progressive municipal earnings tax. Cleveland's actual revenue-raising capacity was 1.41 and Dayton's was 1.59 in 1982, much higher than their potential (Ladd and Yinger, 1989:142-143). Sometimes proposed as part of an "income-with-tax-exporting" scheme (Ladd, 1994), it is a glaring omission in the literature on intrametropolitan disparities that no systematic study has been undertaken of municipalities and metropolitan regions in the only state (Ohio) with nearly unbridled access to the income tax.14

In 1957, the Ohio General Assembly passed Senate Bill 133, which was primarily due to the work and support of legislators from urban areas. The bill was proposed by a senator from Cincinnati and support for the legislation seemed to run along urban lines, particularly in the Senate. There the legislation passed 24-5 (with 5 abstentions) with a majority (nearly 60 percent) of the affirmative votes coming from legislators representing urban areas within the state. Ohio's municipal income tax is a 1 percent tax on wages, salaries, and other compensation earned by residents and nonresidents who work in the municipality. The rate may exceed 1 percent only with a vote of the people. A municipality may grant partial or full credit to its residents for income taxes paid to their municipality of work, although it is not legally required to grant credit to residents. As a consequence, in the absence of an interlocal credit agreement, a taxpayer living in a suburb of Cincinnati who works in the city of Cincinnati may pay a 2.1 percent Cincinnati income tax in addition to her 1 percent tax to the suburban municipality. In 1995, 233 cities and 292 villages (under 5,000 population) collected $2,515,317,037 in local income taxes (the city portion was $2.4 billion and the village portion was $163 million) (data from Ohio Department of Taxation).

In an advocacy report published in 1959 by the Research Bureau of Akron's Chamber of Commerce, the authors present a strong case for adopting the income tax (Akron Chamber of Commerce, 1959). The report noted that, if a 1 percent income tax were enacted, the municipal income tax might yield $8-10 million. By 1995, the rate was 2 percent and yielded $80.5 million for the city. The portion attributable to nonresidents, however, is not known. Indeed, nonresident contributions to a city's finances are not collected systematically statewide. The city of Toledo estimates that 25.1 percent of total income tax collections for the city are from nonresidents. In 1995, for example, of the $129 million collected (the tax rate is 2.25 percent), the city shifted $32 million in city government costs to nonresidents. Columbus, which levies a 2 percent income tax, generated income tax revenues of $290 million in 1994 with approximately $72.5 million derived from nonresidents. Unfortunately, neither Toledo nor Columbus can accurately track the personal income or social status of the nonresident contributors for purposes of assessing the distributional impact of the income tax. Like most cities in Ohio, Toledo and Columbus do not have a mandatory city filing system that could identify individual contributors and their total income.

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
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For states that are contemplating the adoption of a local-option income tax that can be exported to nonresidents, a caveat is in order. Substantial differential income tax burdens (or tax burdens more generally) between central-city and suburban locations may create a disincentive to locate or reside in the central city. Cities with the authority to levy an income tax are less likely to be viewed negatively as a place of residence or business if the surrounding suburban municipalities also impose an income tax of similar value, as is the case in Ohio, in which nearly all municipalities over 5,000 population levy at least a I percent income tax. Cities that export too much tax burden to nonresidents, however, might be disadvantaged as places of residence and business. However, empirical studies on precisely what is "too much" are lacking.

Political Feasibility

Although there are persuasive theoretical reasons for designing state policies that mitigate intrametropolitan disparities, the empirical evidence shows that state beneficence does not manifest itself in times of economic downturns (see the argument linking state aid and business cycles by Gold and Erickson, 1988). State aid for local governments, especially for general-purpose local governments, tends to decline during times of anemic state fiscal performance. The recession earlier this decade and the severe recession of the early 1980s saw states adjusting their budgets by holding the line or cutting state aid to local governments, at a time when local governments were in need. Furthermore, although state equalization grants for elementary and secondary education are designed with a needs component, in general, "state aid is not very responsive to city need" (Morgan and Shih, 1991:67).

Even though tax base sharing may be more politically palatable than consolidation, the number of metropolitan areas that have experimented with the policy is limited. The conditions under which tax base sharing can be adopted have not been examined except in an ad hoe fashion, and they seem to rest on a perception that destructive competition among local governments has led to unsupportable levels of government subsidy to firms. Once local government officials believe that their municipality or township might be next to see a business migrate to the neighboring jurisdiction, then calls for cooperation through tax base sharing are issued. Nevertheless, it is questionable whether local government need can be designed into the sharing formula in a politically acceptable fashion, that is, defined in a way that would redistribute resources from the more desirable locations in the tax base sharing area to the least desirable (usually the central cities). In the two examples cited above, questions about the distribution formulae were raised by some analysts (definitions of needs in equalization formulae are discussed in U.S. Advisory Commission on Intergovernmental Relations, 1964). In Minnesota, one study noted the high service costs of Minneapolis; in Ohio, the report noted Dayton's high poverty population. Neither formula includes those

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

measures of need. Indeed, although studies demonstrate that the Twin Cities tax base sharing scheme has reduced intrametropolitan disparities, political agreement among local jurisdictions on what to include in the distribution formula can be expected to be difficult if one jurisdiction feels it is ceding too much.

Although a municipal income tax is probably the most effective fiscal stretching policy for reducing intrametropolitan disparities, as long as suburban legislators hold sway in state capitols, a municipal income tax that taxes income at the place of employment has a low probability of being adopted.15 Until and unless suburban legislators come to the realization that their economic lifeline is dependent in some important and meaningful way on the central city's health and vitality, the prospects of approving municipal income tax legislation that can effectively tax their residents twice is remote. Moreover, if a local income tax is levied by only the central city and not by surrounding municipalities, a locational disincentive may work against the central city, potentially exacerbating, rather than reducing, intrametropolitan disparities.

Gaps in Our Understanding of Metropolitan Disparities

Policies directed at reducing intrametropolitan disparities are fraught with political difficulties. The key to successful adoption and implementation of any of the policies discussed above is that the participatory process of working through metropolitan area-wide issues must be legitimate, an issue not pursued in this paper (Dodge, 1996). The policies identified above have been designed with an objective of reducing, or at least addressing, intrametropolitan disparities either through stretching the political reach of central cities to a larger metropolitan area or through stretching their fiscal reach.

Future research on reducing intrametropolitan disparities needs to address at least the following issues that have, thus far, been overlooked or slighted in studies: (1) local government revenue structure diversification and changing measures of taxpayer burden, (2) the effect of proliferating residential community associations on service delivery and on taxpayer burden, and (3) defining the territorial limits of metropolitan areas.

Revenue Structures

At a time in the evolution of U.S. local governments when they were highly dependent on a general tax (principally an ad valorem tax on land and structures) to fund their services and activities, a tax measure might have been an appropriate indicator of comparative equity. Revenue structure diversification, especially in user charges over the past two decades, calls into question the public policy utility of such a measure. Efforts to standardize measures of fiscal health certainly move in the direction of cross-metropolitan fiscal comparisons, but the

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

indices often rely on government tax structures (and often the property tax) at a time when local governments have become more independent of the property tax—the major exception is school districts, however. These outmoded measures limit the reach of the analysis. A better measure of fiscal burden, which would necessarily include the full cost of all publicly provided services to each user or resident, adjusted for each citizen's ability to pay, needs to be developed.

Although there is both an equity and efficiency argument for charging nonresidents for services consumed in the central city, such as public safety (police and fire), transportation (streets and bridges), parks, and other amenities, the export potential of city revenue structures may need to be reexamined. For example, cities that rely primarily on a property tax to finance their activities may not be shifting the full cost of service delivery to nonresident consumers (employees and visitors), whereas cities that attach a fee or charge to city services may be capturing revenue from nonresidents. Cities with an earnings or commuter tax, however, may be exporting this tax to a low-income nonresident, thus potentially violating horizontal equity among similarly situated income earners who live in separate political jurisdictions in the same metropolitan region. This line of research would build on the already substantial body of literature that examines the mismatch hypothesis (see, among others, the paper by Ihlanfeldt in this volume). The purpose would be to extend the analysis to include the tax equity and service delivery issues in the metropolitan area. Are jobs located in municipalities that impose a fiscal barrier (tax equity) or a service barrier (e.g., transportation systems) on workers?

The Role of Quasi-Local Governments in Intrametropolitan Disparity

Increasingly, residential community associations are created as providers of traditional government services within municipal boundaries (see McKenzie, 1994; Dilger, 1992; U.S. Advisory Commission on Intergovernmental Relations, 1989). Nearly 30 million Americans reside in housing under the control of residential community associations, with an undetermined number who are also citizens of a municipal corporation. The proliferation of residential community associations in the past decade, and the projection that by the year 2000 there will be approximately 225,000 common-interest developments, or CIDs as they are formally known, raise a number of questions for reducing intrametropolitan disparities. First, because residential community associations have quasi-governmental powers to tax (all property owners are required to contribute an annual fee), residents of these communities who reside within the political boundaries of municipal corporations are receiving in many cases a higher level of services than other residents. Studies of metropolitan service delivery levels and tax burdens routinely ignore these "add-on" services, even when they duplicate or add to existing municipal and local government services (e.g., policing, sanitation, street sweeping, zoning enforcement). Without the cost of these "volun-

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

tary" contributions, average taxes per capita (a surrogate measure in Ladd/Yinger and other studies for revenue-raising capacity), understate actual contributions for service delivery because these measures do not include contributions to residential community associations. Consequently, without factoring these contributions to a quasi-local government into the measures of fiscal health or disparity, studies that conclude that local services tend to be provided equitably regardless of neighborhood income might not be entirely accurate. Although indicators of tax burden and of service consumption might suggest a pattern of equity, ignoring the nontax contributions to quasi-governmental services (e.g., rental security agencies, additional garbage collection and street sweeping, zoning enforcement) may skew the analysis considerably. The preponderance of residential community associations in suburban municipalities compared with their presence in central cities might make the intrametropolitan disparities in services and in financial burden between central-city and non-central-city residents substantial.

Space and Mobility in a Federal System

Policies on stretching political boundaries and fiscal boundaries are built around the immutable fact that federal republics are layered with overlapping governments, each of which exercises authority within a finite space. Unlike the India model, in which state boundaries change as migratory patterns and settlements change, political boundaries in the U.S. federal system change only at glacial speed, if at all. How a metropolitan region has become defined, then, tends to rely on fixed political boundaries that may or may not reflect any one person's understanding of today's "real" boundary (see also Warren, 1974). As Haar questioned long ago, why should geopolitical service delivery regions be expected to remain static?

Metropolitan reform through consolidation or two-tier governments or tax base sharing may address some concerns over intrametropolitan disparities, but the policies also have a downside, namely, their dependence on fixed political boundaries. Counties were carved out of states as administrative units designed to be accessible to the people, and their boundaries rarely change. But metropolitan development does not confine itself to the niceties of boundary drawings. Migration and settlement patterns can easily step over those boundaries and remove themselves from the control of consolidated service delivery districts. Not only has this happened to nineteenth- and twentieth-century American municipal corporations via railroads, trolleys, buses, and automobiles, but it is also happening in the late twentieth century to regional corporations. Pierce reports that Metro Toronto, the two-tier municipal governmental system in Canada (which became a unified city in 1998 under Bill 103 of the Province of Ontario, The City of Toronto Act of 1997), now contains only slightly more than half the total metropolitan population; ditto for Indianapolis and Unigov. His lament is that "[t]here's no single regional leadership to plot economic advances, to speak

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

out for mass transit or other measures to prepare Indianapolis for the 21st century" (Pierce, 1996:2654). In other words, population growth has already leapfrogged over Metro Toronto's and Unigov's legal boundaries, exacerbating the prospects once again for intrametropolitan disparities.

Final Note

Municipal government reform movements in the past were motivated by political or economic crisis. The corruption of cities in the late nineteenth and early twentieth centuries provided much grist for the reform mill; the economic and fiscal pressures on central cities in the post-depression era did the same. Nevertheless, the powers to change municipal and metropolitan government boundaries rest with states, which have the power to create and alter local governments, and in some cases with local citizens, who have the voting power to make regional governance a reality or not. The prospects of an affirmative action toward metropolitan governance at either place is remote, so long as state legislatures do not represent cities' interests and so long as suburban residents see no relationship between their corporate welfare and the welfare of their central-city brethren (on this point, see especially Orfield, 1997). Enlightened leadership at the state and local level, coupled with persuasive models of regional governance, might overcome the political resistance to political and fiscal stretching policies designed to reduce intrametropolitan disparities.

Peterson persuasively reminds us that a city's influence is severely circumscribed by the space over which it operates and has legal jurisdiction (Peterson, 1981). His observation on the limits or reach of city government control extends to metropolitan or regional governments as well. Just as states limit the reach of municipalities, so are the spatial and legal limits of metropolitan or regional governments also controlled by the states. Federal systems with inelastic local-government political boundaries will eventually confront the fiscal and economic realities of shifting populations. Mobility within and among metropolitan regions has implications for reducing or exacerbating intrametropolitan disparities. The challenge to policy makers at the state and metropolitan levels is to build public support around political and fiscal stretching policies that address the broad issues of intrametropolitan disparities without compromising the objectives of a federal system.

Acknowledgments

I am indebted to Hal Wolman, Julian Wolpert, Alan Altshuler, other committee members, and anonymous reviewers for comments on an earlier draft of this paper. I would also like to thank Richard Campbell and Dan Durning of the Carl Vinson Institute of Government at the University of Georgia for contemporary information on consolidation efforts. The research assistance of Pain Van

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

Zwaluwenburg is gratefully acknowledged, as is the able assistance of Andrew Dudas, who researched the section on Ohio's municipal income taxes.

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Notes

    1  

    Gyourko and Summers (1997) note that large cities (over 300,000population) spend 30 percent of their own-source revenues on health, hospitals, and public welfare, compared with only 9.1 percent for smaller cities (under 75,000 population) Pack (1995) found that on average cities spend 3.5 percent of their own-some revenues on unreimbursed ''poverty'' programs (excluding hospitals), but that Philadelphia spent 7.6 percent in 1995 (see also Salins, 1993).

    2  

    For an opposing view, see Hill and Wolman (1995).

    3  

    Much research has centered on the efficient production of local government services, which certainly needs to be factored into any discussion about tax burden. Productivity has received popular attention with the publication of Osborne and Gaebler's Reinventing Government (1992).

    4  

    It should be noted that some special districts, such as sewer and water authorities, mass transit districts, and gas and electric utilities, are usually denied access to any general tax, but rather are restricted to a user charge for revenue generation.

    5  

    Ladd and Yinger's measures are presented because they are more accurate measures than others. The representative tax structure, developed by the U.S. Advisory Commission on Intergovernmental Relations, is premised on measuring fiscal capacity as equal tax rates, ignoring tax burden (defined as taxes as a percentage of wealth). For a review of other budgetary and economic measures of fiscal health, see Bahl et al. (1992a:420-432 and 1992b:49-66).

    6  

    This variation in service responsibilities was an important factor in Fuchs's finding that New York City's fiscal condition suffered more than Chicago's (see Fuchs, 1992).

    7  

    Addressing issues of intrametropolitan disparities, according to some analysts, cannot and should not be left to the local governments in question. Nongovernmental organizations, such as the Atlanta Project, the Providence Plan, and many others, may be more successful in addressing

Suggested Citation:"Metropolitan Limits: Intrametropolitan Disparities and Governance in U.S. Laboratories of Democracy." National Research Council. 1999. Governance and Opportunity in Metropolitan America. Washington, DC: The National Academies Press. doi: 10.17226/6038.
×

       

    intrametropolitan inequities than are either formal regional governments or ad hoc interlocal (voluntary) agreements.

    The Atlanta Project (TAP) was begun by former President Jimmy Carter and funded primarily from industry and foundations for the purpose of "accomplishing social goals associated with poverty, including teen pregnancy, childhood immunization, school dropout rates, and crime and violence" (Wallis, 1994:304). It provides services to 20 neighborhood clusters in 3 counties in the Atlanta metropolitan region. Each neighborhood cluster has a corporate sponsor and designs programs to address poverty-related problems (e.g., teen pregnancy, violence, school dropout). Rich argues that the solution to municipal social problems, such as Atlanta's, ought to shift from being a responsibility solely of city hall to one that includes the nonprofit sector (see Rich, 1993; Giles, 1993). Nonprofits, unlike municipalities, are usually not constrained by the political boundaries of the municipal corporations. Consequently, they can reach out beyond the central city to the broader metropolis. Moreover, he argues that, in an environment in which the likelihood of substantial federal or state support is remote, partnerships between local governments and nonprofits not only fill the breach, but also, because they spring from local concerns, are more likely to be tailored to local problems. Programs such as the Atlanta Project have spread and have been supported by a number of large foundations, such as the Annie P. Casey Foundation, the Rockefeller Foundation, the Pew Charitable Trusts, among others, and have been implemented in cities and metropolitan regions across the country.

    8  

    Under the state's Municipal Annexation Act, cities over 100,000 population are allowed territorial dominance for five miles beyond the corporate limits. In this extraterritorial jurisdictions, cities "can impose subdivision regulations, approve the creation of MUDs [municipal utility districts], designate tax exempt 'industrial districts,' and prohibit new incorporations" (Thomas, 1993:289).

    9  

    Correspondence with Dan Durning, Carl Vinson Institute of Government, University of Georgia, January 31, 1997 (updated to include two referenda defeated in November 1996). In testimony before the Senate Committee on Intergovernmental Relations, El Paso, Texas, April 1, 1996, Terrell Blodgett, Professor of Urban Management at the University of Texas School of Public Affairs, counted four likely elections for city-county consolidation and eight studies under way in 1996.

    10  

    Testimony of Terrell Blodgett, p. 6 (see note 9).

    11  

    Yet on the basis of their own data of residents' subjective ratings of services, the only substantial discrepancy in ratings is in the education function, which is only one of two services rated (the other was police). One might just as easily speculate that consolidation has reduced the disparity in perception between residents of the pre-Unigov city and the other residents over how well schools were performing because the data are not longitudinal ratings of satisfaction.

    12  

    Bell (1994) argues the purpose is also to rationalize land use planning, an issue not discussed here.

    13  

    In a similar vein, Fischel contends that the Serrano decision in California may have actually caused the tax revolt (Proposition 13) by forcing wealthy school districts to raise their own property tax rates even while state equalization grants in response to Serrano were redistributing more aid to poorer school districts (see Fischel, 1989).

    14  

    Pennsylvania also allows an income tax, but nonresidents cannot be taxed at more than 1 percent regardless of the city's income tax (excluding Philadelphia).

    15  

    This is an admittedly very tenuous conclusion because no comprehensive study of the effect of Ohio's municipal income tax on intrametropolitan disparities has been conducted.

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America's cities have symbolized the nation's prosperity, dynamism, and innovation. Even with the trend toward suburbanization, many central cities attract substantial new investment and employment. Within this profile of health, however, many urban areas are beset by problems of economic disparity, physical deterioration, and social distress.

This volume addresses the condition of the city from the perspective of the larger metropolitan region. It offers important, thought-provoking perspectives on the structure of metropolitan-level decisionmaking, the disadvantages faced by cities and city residents, and expanding economic opportunity to all residents in a metropolitan area. The book provides data, real-world examples, and analyses in key areas:

  • Distribution of metropolitan populations and what this means for city dwellers, suburbanites, whites, and minorities.
  • How quality of life depends on the spatial structure of a community and how problems are based on inequalities in spatial

    opportunity--with a focus on the relationship between taxes and services.

  • The role of the central city today, the rationale for revitalizing central cities, and city-suburban interdependence.

The book includes papers that provide in-depth examinations of zoning policy in relation to patterns of suburban development; regionalism in transportation and air quality; the geography of economic and social opportunity; social stratification in metropolitan areas; and fiscal and service disparities within metropolitan areas.

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