St. Louis Regional Fiscal Reform_Metropolitan Forum Report

8/9/2019 St. Louis Regional Fiscal Reform_Metropolitan Forum Report

1/54

RegionalFiscalReformin theSt. Louis

Metropolitan Region

February 2008


2/54

x


3/54

I. Introd uction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II. The Proces s: Drafting a Roa dm ap for Chan ge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

III. Policy Advisory Rep ort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

IV. Next Step s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 3

App en dix A: The Case for Region al Fisca l Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

App en dix B: Option s for Region al Fisca l Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

App en dix C: Charter of the Metrop olitan Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

App en dix D: Metro po litan Forum Values an d Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

App en dix E: Biog rap hies of the Mem be rs o f the Policy Adviso ry Pan el . . . . . . . . . . . . . . . . . . . . . . . .37

L is t o f T a b l e s a n d F ig u r e s

Figure 1: Popu lation an d J ob Growth, St. Louis Region: 19 80-2 006 . . . . . . . . . . . . . . . . . . . . . . . . .12

Figu re 2: Regiona l Ran kings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 3

Figu re 3 : Sha re o f St. Lou is Emp loym en t by Ind ustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Figu re 4: Indicators of Racial Disp arity, St. Lou is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Figu re 5: Citizen Sa tisfaction with Local Governm en t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Figu re 6 : Citizen Satisfaction with Local Govern m en t Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Figu re 7: Local Governm en t Fiscal Ran king s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Figu re 8 : Mun icipa l Reven ue s, St. Louis Region : 20 02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Figu re 9: Citizen s Res po ns e To: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18If visiting another city and som eone ask ed y ou w here you w ere from, w hat wo uld you say ?

Figu re 10 : Sen se of Comm un ity Ran king . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Table 1: Com po sition o f Govern m en t Unity, St. Lou is Metro Area . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Tab le 2: Per Capita Mun icipa l Reven ue s a nd Expe nd itures ($) Inflation-a djuste d . . . . . . . . . . . . . . .17

Tab le 3: Sum m ary of Reco m m en da tion s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

T a b l e o f C o n t en t s


4/54

xx


5/54

The contents of this report are the res ults of theinde pen den t work of a p ane l of sixteen distin-guished national and regional pub lic policy andpublic finance experts, both academics and practi-tione rs, who s erved as a Policy Adviso ry Pane l onRegional Fiscal Reform engaged by theMetropolitan Forum.

The recom me ndat ions of the Panel presen ted inthe re port repre sen t the views and thinking of thisgroup o f knowledg eab le an d exper ienced academ-ics and professionals working in the field of localand regional finance and governance, and warrantcareful reflection a nd con structive d eba te am onglea de rs of the go vernm enta l, bus ine ss an d civicsectors in the grea ter St. Louis m etropo litanregion.


6/54

x


7/54

The St. Louis Metrop olitan Forum is a gath ering o f individuals from bus iness, g overnm en t and civicsectors that have com e toge ther to work for posi -t ive reg iona l chang e. The Forum s m em bersbel ieve that the found at ion for chang e mu st res ton a thorough, fact -base d un ders tanding of the

issues and a fair consideration of a wide range of viewpoints.

This report is aimed at building an understandingof one of the m ost in tractable , and som et im esimpenetrable, issues facing the St. Louis regionfiscal reform . As n oted in the re port, the currentsystem of taxation and spending on the local levelaffects econ om ic produ ctivity, re inforces econ om icand racial divisions, a nd som etime s s acrificesregiona l growth for the sake of local fiscal gain.The repor t sugge sts some ideas that m ay be con-troversial and co nten tious . It challen ge s the tradi-

tional ways of doing business in St. Louis. Itshould be viewed as the start of a regional conver-sation. To paraphrase Winston Churchill, thisreport is not the end. It is not even the beginningof the e nd. But we ho pe that i t is the en d of thebeginning

The origins of the Metropo litan Forum trace b ack to November 2000, when a delegation of St.Louisans represe nt ing bus iness , governm ent andcivic interests visited Toronto on a trip spo nso redby the Reg ional Cham be r and Growth Asso ciation(RCGA). The y fou nd Toronto to be a forward-loo k-ing, confident, culturally diverse, growing and eco-nom ically vibran t region. The de legation a lsohea rd a bou t Torontos 1 998 conso lidation with i tssurrounding subu rban c i ties , an act ion b roughtabo ut by the provincial governm en t.

The group cam e ba ck from Toronto en ergized tobui ld o n i t s learning exper ience and eag er tospa rk a n ew spirit of regionalism in St. Louis.RCGA an d FOCUS St. Louis s po nso red a proce ssto br ing the m em bers of the de legat ion together,along with other stakeholders, as a Regional

Governa nce Policy Group . This g roup , which m etseveral t im es a nd issued a repo r t in October 2001,called for a num ber of specific actions in s ubjectsranging from regional governance and t ranspor ta-tion to healthcare. The report also suggested theformation of a federation between RCGA, FOCUSand the East-West Gateway Council of Governm ents to imp lem ent the repor t s recom -m end ations a nd a ct as a virtual orga nization tocoordinate future regional endeavors. Perhaps themo st important feature of the proposed collabora-tion was that i t involved business, government and

civic sectors in advancing a collaborative vision of regionalism tailored to the needs, history and tra-dition of St. Louis.

After m ore th an a year of discuss ion, study anddebate, RCGA, FOCUS and East-West Gateway con-

vene d a two-day lead ership re t reat in Janu ary2003. The retreat was attended by chief electedofficials, prominent business executives and influ-en tial civic lea de rs se lected from the b oa rds of each of the spon sor ing organizations . They con-s idered a nu mb er of papers de veloped by the s taff of the three organ izat ions and heard from nat ionalexperts o n m etropo litan affairs. The retreat re sult-ed in candid, pass ionate and somet imes emotion-al discussion about the problems facing theregion. Im portantly, this dispa rate g roup o f prom i-nen t leade r s r eached consensus on a n umbe r o f positions:

u Three principal problems lim iting the prosp erityof the St. Louis reg ion are:

Racial and e cono m ic dispa rity Slow population and employment growth Unp rod uctive local tax p olicy

u The re is a continuing ne ed for a regiona l collab-orat ion am ong g overnm ent , business and c ivicleaders to engage in discussion of regional con-cerns and to act a s a catalyst for po sitivec h a n g e .

Over the next couple of years, the MetropolitanForum came together, with the a dopt ion o f a char-ter and a se t of values a nd p rinciples (seeAppe ndices C an d D). The Forum delibe ratedextensively and listened to e xpert a dvice a bou thow best to add ress the three pr incipal problem sfacing the region. The sta ff of the three spo nso r-ing organizations met every two weeks in an effortto advance the Forums first project. In the end,the Forum a greed to add ress regional fiscalreform and adopted a case s ta temen t (see

Appendix A) that explained why this is a seminalissue that would de fine the future of the St. Louisregion.

I. In t r o d u c t io n 1


8/54

Because regional fiscal reform is b oth an ana lyti-cally challeng ing sub ject and a h ighly contentiousone , the Forum cho se to follow a study processde velope d b y the Nationa l Acade m ies 1 that is oftenused by Congress to bring together disparateviews in science and technology. The National

Academies policy review process typically utilizes acarefully selected p ane l of acade m ics an d p racti-t ione rs, su ppo rted by staff, which re views inform a -t ion a nd o pinions o ver a ser ies o f me et ings a ndarr ives a t consensu s conclusions that are pu b -lishe d in a pee r-reviewed re port. The ha llm arks of the National Acade m ies proce ss are indepe nde nceand objectivityqualities that the Forum feels areessential to discussions of difficult regionalsubjects .

In keeping with this National Academies model,the Forum brought toge ther s ixteen exper ts , ten

acade m ics an d s ix practitioners, as a PolicyAdviso ry Pan el on Reg iona l Fiscal Reform . ThePanel was re pres en tative o f a ran ge of viewpoints,disciplines and backgrou nds (public po licy, eco -nomics, public administration, elected andappointed leadership, etc.) and was chaired byone m em be r, Gerry Schwartz, who facili tated thediscuss ion. Mem bers rep resented both local andnationa l institutions. The Pane l m et two tim es,with e ach m ee ting lasting for two d ays. Pane lme mb ers enga ged in extensive com mu nicat ionoutside of the meetings as well . Panel member Dr.David Miller was the principal author of the report,a l thoug h other pane l me mb ers and s taff con-tributed m aterial.

This report includes the recommendations of thePolicy Advisory Panel on Regional Fiscal Reform. Itrepresents the best thinking of distinguishedgroups knowledge able and exper ienced academ-ics a nd professiona ls working in th e field o f localand regional finan ce and governance, both in St .Louis an d n ationwide . The repo rt will also be pee rreviewed by a group of local scholars.

By consen sus ag reem ent , th is repor t represents arange of options for fiscal reform, some of whichm ay be m utually exclusive. Not e very pane l me m -ber supports every option. However, panel mem-bers agree that th is repor t represents a s e t of alternatives that should be considered and evalu-ated by regiona l leade rs. The g oal of the Forumwas to be gin to advance idea s that can enh anceour region and address the condi tions that kee pSt. Louis from achieving its full economic andsocial potential as a great metropolitan region.

The pa nel recom me ndat ions do not neces sar i lyrepres ent the views o r op inions o f individua lme mb ers of the Metro Forum o r the three conven -ing organ izations of the Forum . Rather, the seide as are inten ded for careful reflection an d e valu-ation, and to stimulate constructive debate in the

region reg arding its long term fiscal challen ge sand opportuni t ies .

The Forum would like to thank a ll of the p ane lmembers for their valuable contributions andinsights, and especially Gerry Schwartz and DavidMiller, who he lped shap e the deliberations a nd thefinal repo rt.

2 I. In t r o d u c t io n

1 http://www.nationalacademies.org/studycommitteprocess.pdf


9/54

The St. Louis reg ion is e xpe rien cing s m all pop ula-tion gains, but many residents are leaving theregion for o ther a reas every yea r. The St. Louiscomm unity ranks high am ong i ts peer me troarea s in the severity of econom ic and s ocial dis-parity. Regiona l em ploym ent is increasing, b ut a t alower ra te com pared to other m etropolitan areas .There is a n ee d to a ttract and grow a skilledworkforce, but adequate and equitable funding of pub lic schoo ls are u rgen t concerns. And, althoug hthe St. Louis area has more local governmentsthan most , those governments ra ise and spendless money for public purposes than their counter-parts nationwide.

To the Forums m em bers , it has b ecome clear thata single, causal thread running through the threeprincipal regional issues previously identified bythe group (racial and econo mic disparity, slowpopu lat ion an d em ployme nt growth, and unp ro-ductive local tax policy) is the uneven and ofteninadequate provision of public services across theregion. Because governments at all levels increas-ingly find the m se lves in fiscal peril, furth er e rosionof the q uality of pub lic services threa tens to wide nthe ga p be tween comm unities , exacerbat ing theim pact o f the se crit ical issu es and lim iting theregions growth potential.

II. T h e P r o c e s s 3

Glen Hahn CopeProvost and Vice Chancellor for Academic AffairsUniversity of Misso uri - St. Lou isFellow, National Acad em y of Pub lic Adm inistration

Lawrence D. DahmsMetrop olitan Trans po rtation Comm ission (RetiredExecutive Director) Oakland, CA

S t e v e n E . Eh l m a n nCounty Adm inistratorSt. Charles County, Missouri

R. Sco t t Fos le rVisiting Profess orRog er C. Lipitz Senior FellowScho ol of Pub lic PolicyUniversity of Maryland

J a m e s O. Gi b s o nSenior FellowCenter for the Study of Social PolicyWash ington, DC

Wayne GoodeFormer Missouri State Senator

J a m e s H . J o h n s o n , J r .

William Ran d Ken an , Jr. Distinguishe d Profess orDirector, Urban Investment Strategies CenterCo-Director Center for Sustainable EnterpriseUniversity of North Carolina

Th o m a s G. J o h n s o nFrank Miller Professor of Agricultural EconomicsDirector, Community Policy Analysis Center of Missouri-Columbia

Robe r t A. Kun tzCity Adm inistrato rCity of Ballwin , MO

David You n g MillerAssociate Dean and ProfessorPub lic a nd Urba n AffairsGraduate School of Public and International AffairsUniversity of Pittsb urg h

Myron OrfieldAssociate Professor of LawFesler-Lampert Chair in Urban and Regional AffairsExecutive Director, Institute o n Race and PovertyUniversity of Minnesota

Michael A. PaganoFellow, Grea t Cities InstituteCo-Editor, Urba n Affairs ReviewProfessor, Public AdministrationUniversity of Illinois - Ch icago

J o a n R ie h mFormer Deputy Mayor Louisville-Je fferso n County Metro Governm en t, KY

H.G. "Gerry" Sch wartz, J r.Ph.D., P.E., F.ASCEPresident, Board of TrusteesAcade m y of Scien ce of St. Lou isJacobs Civil, Inc. (Retired Chairman)

David L. Sjoqu istDirector, Fiscal Res earch CenterDan E. Sweat Distinguishe d Cha irin Educational and Comm un ity PolicyGeorgia State University

Murra y Weide nb au mEdward Mallinckrodt Distinguished ProfessorHonorary Chair, Weiden ba um Center o n the UniversityEcon om y, Governm en t and Public PolicyWas hing ton University in St. Louis

M emb er s o f t h e Po l ic y A d v is o r y Pa n el o n F is c a l Re f o r m

D r a f t in g a Ro a d ma p f o r C h a n g e


10/54

The Forum set out to explore the developm ent of an aggressive regional fiscal reform agenda tom itigate the effects o f the th ree issue s. At the out-se t , the object ives of th is age nda were to :

Finance a minimum acceptable level of essentialpu blic se rvices in all com m unities .

Create a fiscal environment that supports higherlevels o f reg iona l econom ic growth.

Foster an environment of economic and fiscalcooperation, rather than competit ion, betweenlocal governme nts .

Build a produ ctive a nd e ndu ring partne rshipam ong pub lic, private and civic sectors.

Develop a region that is more fiscally self-reliant.

Im plem ent tax policies th at are fair an d eq ui-table to c it izens , bu sinesse s a nd comm unities .

Undertaking the development of such a wide-rang-ing regiona l fiscal reform a ge nda called for aprocess that would employ the best experts from arang e of discipline s to as sist the Forum in consid-er ing the m ajor issue s facing the reg ion an d sug -gest ing a rang e o f opt ions for im provem ent .

T h e N a t io n a l A c a d e mies S t u d yPr o c e s s M o d e l

The Forum sough t to em ulate the Nat ional

Acade m ies stud y proces s b y en listing 16 m ultidis-ciplinary expe rts, both aca de m ics an d pra ctit ion -ers, to form a Policy Review Panel on RegionalFiscal Reform. This Panel was charged with devel-oping a road ma p for chang e. The Panel was rep re-sen tative of a rang e o f nationa l and regiona l view-points, disciplines and ba ckground s in pu blic poli-cy, econ om ics, pu blic ad m inistration, and electedand a ppointed leade rship .

The Pane l was chaired by one of its St. Louisregional members, Gerry Schwartz. Each memberserved a s a n individual expert , contributing to

deliberations on the basis of his or her ownexper tise and good judgm ent . The Panel wasenco urage d to con sider ne w ways of thinkingabout fiscal reform as it related to the St. Louisregiona l, bi-state s ituation.

The Panel me t twice o ver a six-mo nth p eriod(November 2005 and April 2006) for 1-1/2 dayme et ings each s ess ion to condu ct their del ibera-tions . At the o utse t, the Forum provide d the objec-tives of its a gen da for fiscal reform as a forma lstatem ent o f task to de fine the work of the Pane l.

Two outside consultants provided support andacted as meeting facilitators for the deliberativesessions of the Panel. Forum staff assembledresou rce m aterials an d was available for consu lta -tion; h owever, the Panel carried out its d iscussionsand delibera tions inde pen de ntly to a void po litical,

special interest and sponsor influences. The prod-uct of the Panel is this report, assembled andauthored by Panel member Dr. David Miller, assist-ed by Forum staff and consultants, and reviewedand approved by the Panel .

Funding for the work of the Panel was provided bythe Metropo litan Forum s con vening a gen cies a ndthe Grea ter St. Louis Com m unity Founda tionthroug h its discretiona ry gran t prog ram for kno wl-edge developm ent re la t ing to current comm unityissues .

Pa n e l M ee t in g s

Prior to meetings, Panel members were givenextensive briefing materials on the St. LouisRegion an d informa t ion p er t inen t to each m ee t-ings a gen da. Forum staff also provided the Panelwith a case statement that described problemsand issues confronting the St. Louis region tofram e the bas is for pu rsuing fiscal reform .

Panel meetings were structured to foster interac-t ion be tween me mb ers and es tabl ish an environ-ment that maximized creative thinking and thegen eration, crit ique , m odification and advance -me nt of ideas . The group process included a com -bination of pres enta tions b y pan elists an d Forumstaff, sm all grou p de libe ration, a nd p lena ry discus-s ions .

D ev el o p in g a n d Ref in in gR ec o mme n d a t io n s

At the first Panel meeting, Forum staff providedpresen ta t ions on the St . Louis s i tuat ion as back-ground. The Panel then worked in two su b-groups

for pu rpos es of gene rating policy options forfuture discussion an d e xploration.

One su b-grou p e xam ine d the regions fiscal struc-ture as a whole and generated a l ist of possiblereforms that could result in system-wide changes.This group focused its deliberations on under-standing the relationship between who is taxedand who bene fits . Recom me ndat ions centered onbringing the two p arts o f that relations hip into ba l-ance and structuring incentives to match policygoa ls m ore close ly.

4 II. Th e Pr o c ess


11/54

The s econd s ub-group address ed s pecific prob-lem s and issues confront ing the region, such a slack of affordable housing, inadequate transporta-tion system options, and unequal access to educa-tion. Panel members in this sub-group focused onide ntifying ne w ways to ge nerate revenu e a nd

reduce costs for these public services, and gener-a t ing regional econom ic de velopmen t .

At the conclusion of the first da y-and -a h alf m ee t-ing, the Panel had gene rated 35 opt ions (SeeAppendix B) for future deliberation. These optionsfell into four m ain categ ories: Governa nce a ndDecision Making, Tax-Relate d Reform s, Loca lDevelopm ent Incentives, and RegionalCooperation.

A g r ee in g o n Rec o mmen d a t io n s f o rImp l e men t a t io n

In the ir secon d m ee ting in April, Panel me mb ersexplored these 35 options in depth. In a plenarysession, assisted by presentations by selectedPanel mem bers , opt ions in each catego ry wereanalyzed as to their impact, effectiveness and easeof im plemen tat ion. Opt ions were conf irme d, m od-ified o r elim ina ted, an d are as re quiring furtherresearch were identified.

The Panel went through a process of determiningpriorit ies , resulting in a final se t of 11 re com m en -

dat ions to b e carr ied forward. The e lem ents of animplementation strategy were discussed, includingimportant steps in the effective communication of reform con cepts to the pu bl ic and the n eed todevelop a comm on, regional economic develop-me nt vis ion the pub lic can und ers tand a ndsuppor t .

The findings of the Panel and its final recom m en-dations are documented in the following sections.

D r a f t in g a Ro a d ma p f o r C h an g e 5


12/54

6


13/54

F r a min g t h e Is s u e

As m ore Am ericans l ive a nd work in u rban area s,the cha lleng es a nd com plexities of governingthese area s increase dram atically. In e arlier t imes ,m ost u rban Am ericans l ived in a m ajor city andm ost o f the e cono m ic activity of the area occurredwithin th at city. Man ag ing a city was (an d is) acom plex task an d it is no t the intention o f thisPanel to minimize that task. However, times havechanged and u rban a reas a re now much m orem etropo litan. A city is imp ortant to a re gion, bo thecon om ically and s ocially, but m ore pe ople l ive,m ore jobs exist , and m ore e conom ic activity nowoccurs in multiple jurisdictions within a metropoli-

tan area. In a sociological sense, what was oncecalled a city now spa ns a n are a tha t covers m an ycities . Som e re fer to this e xpan ded area as am etropo litan re gion. For purpos es of this repo rt,this notion of the metropolitan region is used,without m aking assum ptions abou t what gover-nance structures that entails.

Indee d, m uch of the current d iscuss ion a bout thenumber of governments in a metropolitan regionis misguided and counter-productive. How manygovernments the re should be in a m etropol itanregion is a polit ical issue, not an economic one.Through history, culture, and state laws and regu-lations, the St. Louis reg ion, like o ther re gionsthroughout the United States, has elected to con-stitute itse lf with a relatively large nu m be r of loca lgovernments. The Panel identified numerousinstances where compe t it ivenes s am ong com mu -nities can be healthy for a region and noted thatthe very nature o f governan ce in the St. Louis are ais based on a healthy spirit of competition. Also,the evidence on jurisdictional fragmentation isinconclusive. Metropolitan regions likeMinne apo lis/St. Paul and Boston ha ve a s m any

local governments as St. Louis, but boast strongand vibrant local communities.

Deciding the purpose, structure, and nature of local government is a function reserved to eachstate . Since th e 18 th centu ry, 50 differen t stateleg islature s ha ve d esigne d 50 differen t ways togo vern loca lly. As a res ult, me tropo litan reg ions inthe Uni ted Sta tes are the aggreg at ion o f thosedecisions and come in all governmental sizes andshapes . Some have many local governments ;some have relatively few. Local governments in

som e s ta tes have more power than local govern-me nts in other s ta tes . Some me tropolitan regions

rely heavily on the use of special districts. Somehave devolved more power to county govern-ments. The Panel believes that building local gov-ernment systems in the United States is a long-term, legal process that i s bas ed on local customand culture. It should not be tampered with lightly.For the St. Louis m etropo litan region it has led toa s ystem highlighted by num erous local govern-m ents a nd sp ecial districts that are often in com -pe tit ion with ea ch othe r.

That said, the Panel believes that once a regionhas made the polit ical decision on its governmen-

tal structure, it also ha s a resp ons ibili ty to ad dres sthe unintended and potentially unhealthy conse-quences, primarily economic, that might resultfrom that p olit ical decision. No g overnance struc-ture is pe rfect. A de cision to h ave re latively fewlocal governments may well have the conse-que nces of minim izing cit izen p articipation a ndhampering the generation of innovative ideas thatmight result from a more competit ive environ-m ent. A decision to h ave num erou s local govern-ments may well foster participation and competi-t ion, b ut m ay also m ake it more difficult toachieve o ther des i red outcome s.

The Pane l believes that the problem for the St.Louis region is this inability to deal with the unin-tended consequences of having many local gov-ernm ents . As a result , m inim izing the se un intend-ed cons eq uen ces of the regions governance s truc-ture should be the communitys primary focus.

U n in t en d ed C o n s e q u en c es

Analysis of different metropolitan regions in theUnited States shows six m ajor uninten de d conse -

que nces a ssocia ted with systems that have a re la-tively large num be r of local governm ents .

1 Econom ic growth ten ds to occur une venlyth roughou t the r eg ion . Some a reas a re m oreattractive to capital investment and will growwhile other areas will stagnate or decline. Themore local jurisdictions there are, the more thisphenom enon is a ccen tua ted .

III. P o l ic y A d v is o r y Pa n e l R ep o r t 7

Rep o r t o f t h e M et r o p o l it a n F o r u m P o l ic y A d v is o r y P a n elO n R eg io n a l F is c a l Ref o r m


14/54

2 The e conom ic gap b etween r ich comm unitiesand poor com mu nities is h igh. This conse-que nce is close ly related to th e first f inding. Thecontras t between afflue nt an d no n-affluent ismu ch m ore ob vious a nd is m uch m ore l ikely todrive tension and conflict within the local gov-

ernm ental s t ructure than serve to create com -mon g round and sha red unde rs tand ing .

3 Because the econo m ic s takes are so h igh, localgovernment tax policy is more apt to be domi-nate d by unhe althy com pe tit ion o r fiscal m er-cantilism . This fiscal m ercan til ism occurs whenea ch com m unity use s i ts tax policy to attractonly ne t revenue prod ucing activit ies. The seactivities may improve the fiscal health of a par-ticular jurisdiction, bu t come at the e xpe nse of othe r jurisdictions or impo se significant cos ts onthos e jurisdictions withou t corresp ond ing rev-

enu es to offset tho se costs. In addition, i t ispossible that such local economic developmentcould have little net effect or, worse, an undesir-able e ffect on the overall econom ic health of theregion.

4 Segrega t ion by race and c lass is apt to be m uchhigher. Local governm ents a re one of the sor t -ing m echanisms used by cit izens to grou pthemselves into communities in which they feelassociated and comfortable with their neigh-bors . The m ore local governm ents that are cre -ated in a metropolitan region, the more likelythis sorting will result in communities that look very different from each other based on race,class an d qua lity of public se rvices.

5 The coordination of land-use planning and eco-nomic development is much more difficult andcomplicated. One of the important functions of alocal go vernm en t in the United Sta tes is its a bili-ty to de fine the n ature o f that com m unity.Deciding the relationship among residential ,indu strial , comm ercial, agricultural and ope nspace use s , and how much to have of each of

those use s , are fundam ental rights of each com -m unity. Althoug h su bject to som e federal andstate l imitations, comprehensive planning andzoning is virtually a monopoly power of localgovernment. Obviously, the more jurisdictions inan a rea, the m ore the se individua l plans willpotentially conflict with each other without anycorrespon ding me chanism to arbit ra te thoseinconsistencies.

6 Communities that are professionally managedma y becom e be t ter and more so phis ticated a tgen erating ways to p rotect their self-interes ts,even if they are implemented at the expense of the region as a whole. This point raises theimp ortant quest ion, when d oes d esi red com pe -

tit ion b ecom e u nhe althy? The m ore local gov-ernme nts there a re in a m etropolitan region, thegrea ter the likelihoo d tha t individual comm uni-ties can adopt strategies that turn competit ionun he althy. Conversely, poorly m an ag ed co m -munities are more likely to inhibit the regionsab ility to d ea l with a wide a rray of policy iss ue s.

S t a t emen t o f T a s k

The region and its leadership identified a specificset o f idea l outcome s to frame the Pane ls discus-sion in this rep ort. After m uch d elibe ration, thePanel refined those outcomes to include:

Finance a minimum acceptable level of essentialpub lic services, s uch a s e ducation, pu blic safetyand infrastructure, in a ll communit ies ;

Create a fiscal environment that generates high-er levels of regional economic growth;

Foster an environment of economic and fiscalcooperation as a basis for healthy competit ionam ong local governm ents ;

Build a produ ctive a nd e ndu ring partnersh ipam ong pub lic, private and civic sectors;

Increase self-determination in the regions fiscalresources; and

Im pleme nt ta x, su bsidy and incen tive policiesthat are effective, fair and equitable to citizens,businesses and com mu nities in the region.

8 III. P o l ic y A d v is o r y Pa n e l R ep o r t


15/54

A b a n d o n O l d W a y s o f T h in k in g

St. Louis is no t the first urba n a rea in the UnitedStates th at h as tried to d eal with the reality of theem erging im portance of the m etropol itan regionin todays urb an issu es . Inde ed , it is pro ba bly

safer to say that virtually all urban areas in theUnited States are simultaneously struggling withhow to deal with public issues at this expandedspatial level while preserving and retaining impor-tant cultural and political institutions that form thebuilding b locks of the region. These other experi-ences m ay be informa t ive , as m uch in de mo n-strating what not to do a s in identifying succes sfuls t ra tegies that m ight be mo dified and app lied inSt. Louis. Such an ana lysis gen erate s four im por-tant lesson s of what n ot to d o.

L e s s o n 1 : D o n t t h in k t h a t t h e t a s k o f a l l o c a t in g r es p o n s ib il it ie s b et w e en l ev el s o f l o c a l g o v er n me n t w il l b e s imp l e .

Many efforts at regional decision-making havebe en focuse d o n 1 ) iden tifying one set of servicesthat are local in nature 2) delegating those servic-es to local governm ents; 3) ide ntifying ano ther se tof services th at are regional in n ature; an d 4 ) del-ega t ing tho se s ervices to a regional governm ent .A fed eral system is crea ted in this ma nne r, as canbe see n in the re la t ionsh ip b etween the Uni ted

States government and the individual states. Sucha strate gy, after 20 0+ yea rs of lim ited trial anderror, ha s failed to g ene rate effective exam ples. Asone expert states , the e ffort to create a functiona ldivision of power is base d on the idea that there isa n on-con troversial way to divide governm en talfunctions between those that serve a parochialconcep tion of self interest a nd those that will servethe greater good. Such a neutral basis for the allo-cation of power is not simply illusory. The searchfor i t has frustrated the effort to achieve regionalgoals .

L es s o n 2 : D o n t j u s t c r ea t e mo r e r eg io n a l s p e c ia l d is t r ic t s w it h o u t t h in k in g t h r o u g h h o w t h o s e n e w e n t it ie s w i l l b e c o o r d in a t e d a n d c o n n e c t ed t o t h e ex is t in g n e t w o r k o f l o c a l g o v er n in g .

Between 1 967 an d 1997 , the nu m ber of spe cia ldistricts in the United States grew 63%, from21,26 4 to 34,68 3. Mea nwhile, oth er forms o f localgovernm en t (coun ties, cit ies, towns) grew by 5%,

and the n um be r of schoo l districts in the UnitedStates decreased significantly. The emergence of the special districts represents one of the mostsignificant chan ge s in the overall structure of localgovernm en ts in the last 50 years. Many of thes espe cial districts are re gional and provide a s pe cial-

ized service in a ll or a n um be r of local govern-m en t jurisdictions in a m etropo litan a rea. Often,urba n problem s do not ea sily follow jurisdictiona lbou nda ries , so a spe cial district allows a prob lemunique to a particular area within a metropolitanregion to be addressed. Secondly, i t allows a prob-lem to be solved withou t having to re structure thegovernance of the ent ire region or those areasaffected by the p roblem or issue. The sp ecial dis-trict is a practical respon se to a particular prob-lem . Hence , it is a pop ular and growing strategy.

But the sp ecial district creates a nothe r set o f prob-

lem s. First , it ad ds ano ther layer o f governan ceand another governm ental ins t itu t ion to an a lreadycom plex structure. Often, the ide a o f solving aproblem o f too m any governme nts by addinganothe r government ins t itu t ion beg ets a sys temthat will add more governmental insti tutions as apreferred strategy for regional problem -solving.Second ly, one e xpe rt has even chara cterized su cha ph eno m enon in Southe rn Cal ifornia as shad owregionalism. This type of system is characterizedby: an em pha sis on s cientific and technical solu-tions; single-purpose compartmentalization of regional policy that pa rtit ions , not s pan s, regiona lpolicy boundaries; and rigidity and institutionalinsu larity. His studies su gge st that re pres enta tionon regional policy boards has yet to produceregiona l polit icians and constituencies; rathe r i ta l lows local governm ents to op erate in a regionalforum to protect and enha nce local in teres ts evenat the e xpen se o f regional goals and interest . Thisform of silo reg iona lism be gs the q ue stion of whocoordinates the s i los?

L e s s o n 3 : D o n t c r e a t e r eg io n a l in s t it u t io n s in s p it e o f t h e r e g io n s

l o c a l g o v er n me n t s .

Local governments are creatures of their respec-tive s tate legislatures. Iowa Su prem e Court J usticeJoh n F. Dillon esta blishe d for the courts in 18 68what is now clearly settled law that local govern-m ents are m ere tenan ts a t will of their respe ctivestate legislatures and could be elim inate d b y thelegislature with a stroke of the pen. As such, it isthe s ta te that es tabl ishes the purpose a nd natureof local go vernm en t within i ts bou nda ries. Thisnot ion o f local governm ents a s m ere conveniences

Reg io n a l f is c a l Ref o r m 9


16/54

to be utilized by the s tate is a foun dational princi-ple that would seem to sugg est orga nizing m etro-politan a reas shou ld b e a relatively ea sy task.

Unfortuna tely, its n ot th at s imp le. In th e ru ling ,the judge concluded his broad grant of authority

by saying he could not ever im agine s o g reat awrong and so grea t a folly. Intere sting words inthat the courts were saying to the leg islature , youcan, but then again you shouldnt. This notion of local government as sovereign is also a founda-tional principle. Dillon was defining an importantdistinction, the unresolved and necessary tensionbetween the legal nature of local governm ents a ndtheir cultural nature. From a legal and adm inistra-tive perspective, local governments cannot be sov-ereign. They are, an d n ee d to be , institutiona lly,subdivisions of the state. Someone or some insti-tu t ion h as to b e a ble to m ake the final decis ion.

But from a cultural perspe ctive, local governme ntsare one of the im portan t ways in which a cit izensconstitutiona l right to free dom of asso ciation isadvanced and protected. The wrong and follyoccur when the s tate e xercises i ts po wer to takethose ass ociationa l rights casua lly. The cit izenoften guards that right to associate more strong-ly tha n h is willingne ss to p articipa te in th e a ffairsof the ass ociation. The imp ortance of preservingthis ass ociationa l right is why threats to e liminat-ing local governm ents o ften touch the nerve end -ings of the pu blic, as was s o e loqu en tly put b yseveral experts.

Local governments are, indeed, the framework under which governance ope rates in a me tropoli -tan re gion. As su ch, they mu st be active p artici-pants in the developm ent an d e xecut ion o f region-al solutions to the area s pu blic problem s.

L e s s o n 4 : D o n t c r ea t e r eg io n a l in s t it u t io n s t h a t a r e mer e e x t e n s io n s o f l o c a l g o v er n men t s .

There is e qua l dange r in s imp ly creating regionalinsti tutions and policies that ha ve n o p ower overlocal governments. To be a simple extension of local governm ent m eans that those e nt it ies can doan ything collectively that th ey can do individually.Because such actions are voluntary, i t means theagenda is restricted to only a few sets of activitiesthat can gen erate una nimity of action. Further,reg ional institutions can an d will act collectivelyonly when it is in the individual interests of theund erlying local governm en ts. Regiona l insti tu-t ions ne ed to be ba lanced to accomm oda te the

likelihoo d tha t local governm ents, in reg iona l set-ting s, will act with a pa rochial conce ption of self-interes t . Currently, as noted in Lesson 2 a bove,regiona l insti tutions are m ore likely to e nab lelocalit ies to a dvance the ir se lf-intere sts ra ther th anact in ways that advance the interests of the

region.

Local governments are creatures of the state leg-islature and can be required to balance their priva-tized n otions of self-interes t with the ne eds of theregion when take n as a whole. As such , regionalinsti tutions , although built arou nd local govern-me nts , mus t a lso ha ve so me author ity to be a bleto m ake de cis ions for the reg ion.

This balance can be achieved by turning regionaldecision-making into a form of inter-local deci-sion-making. Consider the establishment of the

Europea n Union (EU) as a g overnm enta l reo rgan i-zation p rocess not tota lly unlike tha t which a m et-ropolitan re gion in the United States m ight gothrough. The sovereignty and au tonom y of eachnation in Europe is gre ater tha n tha t of local gov-ernments in the U.S. Language differences, cur-rency incom patibili ty and centuries of wars andoccupations would suggest that the EU nevershould have bee n forme d, base d on the ab ility of governme nts in the Uni ted Sta tes to form such a nequ ivalent o rganization. But the EU was form edand n ow s tand s as an example of how regionaldecision-making can be turned into a form of localdecision-making that balances the tensionbetween local and regional.

The St . Louis region shou ld no t aspire to be comea m ini-EU. Rathe r, it is e nou gh to recog nize thatthere were processes tha t were use d as the EUwas being crafted that worked to create a balancebetween local and regional. At its foundation wasthe u nde rstanding that the EU would be built withthe authority to act regionally while retaining theautho rity of each con stituen t country. Such a pe r-spe ctive s ugg es ts a ne w way for the St. Louis

region to frame the discuss ion o n the role o f regional institutions that neither trivializes the roleof local governments nor patronizes the role of regional governance insti tutions.

1 0 III. P o l ic y A d v is o r y Pa n e l R ep o r t


17/54

A d o p t N ew W a y s o f T h in k in g

Based on the lesson s learned from o ther par ts of the United States an d Western Europe an d theguidelines that were ad opted in the s ta teme nt of task, the Panel identified four principles that

should be us ed in developing i ts recomm enda -t ions .

Pr in c ip l e 1 : Maintain co re values of equ ity,efficien cy an d e ffectivene ss. Each recom m end ationshould addres s the regions de s ire to create asystem of governance built around the equitable,efficient and effective delivery of public services.

Pr in c ip l e 2 : Mitigate the unintende d conse -que nces of a sys tem bui lt on a large num ber of local governm en ts. The Pan el gen erally accep tsthe no t ion that the St . Louis region h as m ade apolitical decision that its system of governance willbe highlighted by a large number of those insti tu-tions. Recommendations, therefore, shouldaccomm odate th is sys tem a nd propose solutionsthat will seek to remedy some of the unintendedconseq uen ces inherent within such a system .

Pr in c ip l e 3 : Embrace the values of communityby crea ting a s ens e o f regional com m unity withreal institutions, real constituencies and real citi-zens built on the strong local tradition. Local gov-ernm ents a re indeed the f ram ework on which the

St. Louis com m unity sho uld be built .

Pr in c ip l e 4 : Turn regional decision-makinginto a form of inter-local decision-making. Trueregiona l decision-m aking, while recogn izing theimp ortance of local governm ents , a lso m ean s thatthe interests of the region, taken as a whole, needto be incorporated into the powers of thoseregiona l institutions .

K e y F i n d i n g s

The Panels deliberations and review of data led to14 findings a bou t the e conom ic, social, and p olit i-cal environme nt that shape operat ions in the m et -ropolitan a rea. Se veral of the findings prese ntinformation from Whe re We S tand : The Strategic

Asses sm ent o f the S t . Louis Region , 5th Edition200 6. This rep ort was p rodu ced b y East-Wes tGateway Coun cil of Governm ents and de scribe sthe standing of the St. Louis region among 34pee r regions u s ing m ore than 1 00 socia l, eco-nomic, fiscal and physical variables.

Thes e findings relate to:

The cha nging natu re of the regions econo m yand h ow those change s have created incompat i-bili ty betwee n the econo m y and the tax struc-ture;

The critical opinions and significant concerns of citizens regarding the current quality of localservices;

The emerging but still ill-defined role of regionalgovernan ce institutions and their relationship tolocal governments; and

A definition of economic development thatallows too many non-wealth generating, non-sustainable a ctivit ies to occur in the n am e o f econom ic de velopm ent .

Reg io n a l f is c a l Ref o r m 1 1


18/54

F in d in g 1 : The St . Louis reg ion cont inues toexperience s low popu lation a nd job growth. Incomp arison to 34 p eer m etropolitan areas , theregion ranks 2 6th in pop ulation growth, 26 th inem ploym ent g rowth, 22nd in g rowth in businesses tabl ishm ents , and 33rd in per capi ta gross

metropolitan product.2

Like most metropolitan areas, St. Louis has expe-r ienced a decline in ma nufactur ing em ployme ntsince the 200 1 re cess ion. While o verall emp loy-me nt in the reg ion no w exceed s the p re-recess ionpeak, manufactur ing employment has neverrecovered. There is growth in the se rvice s ectors

to offse t ma nufacturing s ector de clines, bu t theform er m anu facturing workers who lack a colleg edeg ree or oth er tran sferable skills a re u nlikely tofind employment at the level of their previouswages .


2 Where We Stand: The Strategic Asse ssm ent of the St. Louis Region , 5th Edition 2006

Source: U.S. Census Bureau, Bureau of Labor Statistics, Where We Stand : The Strategic Asses sm ent of the St. Louis Region , Eds. 1-5

F ig u r e 1Reg io n a l Ra n k in g s


19/54


A V E R A G E

HI

GHER

LOWER

1 Phoenix 18.92 Austin 16.23 Atlanta 15.84 Charlotte 14.35 Dallas 12.76 Houston 12.07 San Antonio 10.48 Portland 8.78 Washington DC 8. 7

10 Nashville 8.411 Denver 8.311 Miami 8 .313 Indianapolis 7.614 Salt Lake City 6. 8Average 6.315 Kansas City 6.116 Columbus 5.916 Minneapolis 5.918 Oklahoma City 5. 619 Seattle 5.220 Memphi s 4 .621 Los Angeles 4.522 San Diego 4.323 Baltimore 4.023 Louisville 4.0

25 Chicago 3.826 Cincinnati 3 .026 St. Louis 3.028 Philadelphia 2 .429 New York 2 .330 Detroit 0.830 Milwauke e 0 .832 San Francisco 0. 733 Boston 0.434 Cleveland -1.035 Pitt sburgh -1.9

POPULATION CHANGEBy percent, 2000 - 2005

Source: U.S. Census Bureau

1 Phoenix 6.92 San Diego 5.03 Miami 4 .94 Nashville 3. 85 San Antonio 3 .16 Baltimore 2.97 Houston 2.78 Indianapolis 2. 59 Charlotte 2. 4

10 Washington DC 2. 111 Austin 1. 812 Atlanta 1 .713 Cincinnati 1 .514 Los Angeles 1. 414 Minneapolis 1. 416 Philadelphi a 1 .317 Oklahoma City 1. 2Average 1.118 Denver 1. 119 Columbus 1.020 Salt Lake City 0. 921 Kansas City 0.721 New York 0.723 Dallas 0. 524 Portland 0.425 Memphi s 0 .326 Louisville 0. 126 St. Louis -0.1

28 Seattle -0.429 Pittsburgh -0.530 Chicago -0.731 Milwaukee -1.332 Cleveland -1.833 Detroit -2.634 Boston -2.835 San Francisco -3.4

JOB GROWT HPercent increase in jobs,

2001-2004

Source: Bureau ofEconomic Analysis

A V E R A G E

HIGHER

LOWER

1 San Diego 18.92 Nashville 17.73 Memphis 16.83 Washington DC 16. 85 Los Angeles 15.46 Cincinnati 14.36 Philadelphia 14. 38 Oklahoma City 14. 19 Baltimore 13.9

10 Pittsburgh 13.811 Miami 13.612 Minneapolis 13. 513 Indianapolis 13. 114 Charlotte 12.915 San Antonio 12. 616 Milwaukee 12.417 Louisville 12.3Average 11.918 New York 11.319 Phoenix 11.120 Boston 11.020 Cleveland 11.022 San Francisco 10. 923 Seattle 10.624 Houston 10.025 Columbus 9.925 Kansas City 9.927 Salt Lake City 9.628 St. Louis 9.529 Detroit 9.230 Portland 9.131 Austin 8.132 Dallas 7.833 Chicago 7.334 Denver 7.135 Atlanta 6.5

GROWTH IN GROS SMETROPOLITAN

PRODUCTPercent change per capita,

2001-2004

1 Miami 155.22 New York 120.83 San Francisco 92. 24 Dallas 50.75 Los Angeles 46.06 Seattle 23.3

Average 19.87 Philadelphia 18. 98 Cincinnati 18.59 Houston 16.2

10 Atlanta 13.511 Austin 13.312 Chicago 13.213 San Diego 13.114 Phoenix 12.814 San Antonio 12. 816 Louisville 12.517 Denver 11.718 Minneapolis 10. 119 Columbus 9.320 Kansas City 8.121 Nashville 7.722 St. Louis 7.022 Washington DC 7. 024 Baltimore 6.325 Portland 6.026 Oklahoma Cit y 5 .527 Memphi s 3 .328 Pittsburgh 2.929 Detroit 1.330 Indianapolis 0.931 Milwaukee 0.632 Charlotte 0.033 Cleveland -4.834 Sa lt Lake City - 11.935 Boston -24.2

GROWTH INBUSINESS

ESTABLISHMENTSPercent change, 1999-2004

Source: County Busin ess Patterns,U.S. Census Bureau

AV E R A G E

HIGHER

L

OWER

Source: U.S. Conference ofMayor s

GROSSGROWTH IN

METROPOLITANPRODUCT

Average annual growth rate,1995-2005

1 Austin 8 .22 Phoeni x 7 .63 Houston 7.24 Dallas 7.14 Washington DC 7. 16 Charlotte 6.96 San Antoni o 6 .96 San Diego 6.99 Denver 6.6

10 Atlanta 6 .511 Miam i 6 .411 Salt Lake City 6. 413 Nashville 6.113 Oklahoma City 6. 113 Portland 6.1Average 5.716 Minneapolis 5.716 Seattle 5.718 Indianapolis 5.619 Baltimore 5.519 Los Angeles 5.521 Boston 5.321 Memphi s 5 .323 San Francisco 5.124 Columbus 5.024 New York 5.026 Philadelphi a 4 .927 Kansas City 4.828 Cincinnati 4 .729 Chicago 4.530 St. Louis 4.331 Pittsburgh 4.232 Louisville 4.033 Milwaukee 3.934 Cleveland 3.635 Detroit 3.2

F ig u r e 2Reg io n a l Ra n k in g s


20/54


Source: U.S. Bureau of Labor Statistics

F in d in g 2 : The St. Louis e cono m y, like the restof the nation, has moved from an economy withan e mp loyme nt base in m anufactur ing to anemployment base in the services. Manufacturing issti ll an imp ortan t part of the e cono m y but i t nolonge r gene rates the jobs that i t once did .

Manufacturing in the coming years will be increas-ingly capital intensive, rather than labor, intensive,and requ ire a m ore s killed workforce than in thepas t. In the global econo m y, that cap ital isincreasingly mobile, especially investment in newcapital.

F in d in g 3 : The St. Louisregion is plagued by highlevels of racial disparity.Where We Stand r epor t sthat , compared to 34 peermetropolitan regions, St.Louis ranks a bove averagein disparity in infant mortal-ity (4th), unemployment(4th), college enrollment(9th) and po verty rate s(9th). St. Louis is essentiallya b i-racial region: 78.2 per-cent of the p opu lation iswhi te a nd 17.9 p ercent i sAfrican Am e rican .

F ig u r e 3

Source: Where We Stand , East-Wes t Gateway

F ig u r e 4


21/54


F in d in g 4 : Citizen sa tisfaction ra tes for the s ys -tem of local governa nce in the St. Louis reg ionare significantly less than is generally the case forother metropolitan regions across the UnitedS ta tes . 3 Only 33 percent of St. Louis citizens are

F in d in g 5 : Citizen satisfaction rates for key localgovernmental services in the St. Louis region arege ne rally be low national averag es . The g ap isgreatest for Major Highways, Local Streets, TrafficFlow, and Elem en tary Educa tion.

Source: East-West Gateway How We See It Com m unity Survey , 2005

Source: East-West Gateway How We See It Com m unity Survey , 2005

3 East-West Gateway Council of Governments, How We Se e It Com m unity Survey , 2005

F ig u r e 5

F ig u r e 6

satisfied with the overall value received from theirlocal governm ents com pared to 4 7 pe rcentnationally. Only 46 percent are satisfied with theoverall qu ality of local go vernm en t services , com -pare d to 62 percen t nationally.


22/54


4 Where We Stand: The Strategic Asse ssm ent of the St. Louis Region , 5th Edition 2006

F in d in g 6 : The co st of local governm en t in theSt. Lou is reg ion is co m pa ratively low. Loca l gov-ernm en ts ran k lowes t na tiona lly in local govern-me nt revenue per capi ta and local governm entdeb t . 4 The region ranks third lowest in local gov-e rnmen t spend ing .

A V E R A G E

HI

G

HER

LOWER

a 2o 2

r 2

i 1

x 1

1a 1

1

1 New York 5,7342 Los Angeles 5,1323 Wa sh in gto n DC 4,7744 Seattle 4,7345 Austin 4,6876 Denver 4,5537 San Francisco 4,5498 Milwaukee 4,5209 San Diego 4,485

10 Cleveland 4,46811 Minneapolis 4,43912 Detroit 4,42813 Memphi s 4 ,41914 Phoenix 4 ,247

15 Charlotte 4,21316 Chicago 4,19617 Philadelphia 4 ,11618 Miami 4,11019 Portland 4,104Average 4,04320 Columbus 3,94421 Indianapolis 3,85522 San Antoni o 3 ,81323 Boston 3,80124 Pittsburgh 3,76525 Atlanta 3 ,75626 Salt Lake Ci ty 3,61127 Houston 3,60328 Kansas City 3,49429 Dallas 3,47830 Nashville 3,46731 Cincinnati 3,43832 Baltimore 3,17233 St. Louis 3,02234 Louisville 2,71835 Oklahoma City 2,650

LOCAL GOVERNMENTSPENDING

Total direct expendituresper capita, 2002

Source: 2002 Census ofGovernment s, U.S. Census Bureau

1 Pittsburgh 3.02 Louisville 2.73 Houston 2.44 Austin 2.24 Minneapolis 2.24 San Francisco 2.27 Philadelphi .17 San Antoni .19 Denve .0

10 Salt Lake City 1.911 Cincinnat .811 Dallas 1.811 Detroit 1.811 Phoeni .8Average 1.715 Portland 1.716 Chicago 1.616 LosAngeles 1.616 Nashville 1.616 Seattle .620 Atlant .520 Columbus 1.520 Kansas City 1.520 New York 1.524 Cleveland 1.424 Indianapolis 1.424 Miami 1.427 Charlotte 1.327 Milwaukee 1.329 Boston 1.229 Oklahoma City 1.229 Washington DC 1.232 Baltimore 1.132 Memphis .132 St. Louis 1.132 San Diego 1.1

LOC AL GOVERNMENTDEBT

Ratio of local government debtto local revenue, 2002

Source: 2002 Census ofGovernment s, U.S. Census Bureau

1 Austin 11.61 Memphi s 11.63 Phoenix 9.74 Salt Lake City 9.55 Charlotte 9.36 San Antoni o 9.27 Cleveland 9.18 Indianapolis 8.98 Miami 8.9

10 New Yo rk 8.711 Seattle 8.5

12 Los Angeles 8.212 Nashville 8.214 Atlanta 8 .014 Columbus 8.014 Denver 8.0Average 7.917 Portland 7.917 Washington DC 7.919 Kansas City 7.820 Chicago 7.620 Dallas 7.620 San Diego 7.623 Cincinnati 7.124 Houston 7.024 Philadelphi a 7.026 Pittsburgh 6.827 Milwauke e 6.728 Minneapolis 6.629 Detroi t 6 .330 Louisville 6.230 Oklahoma City 6.232 St. Louis 5.933 Baltimore 5.833 San Francisco 5.835 Boston 5.6

LOCAL GOVERNMENTREVENUE

Total annual revenue as apercent of total personal income ,

2002

Source: 2002 Census ofGovernment s,U.S. Census Bureau

2004 County and C ity Extra

F ig u r e 7

T a b l e 1

C o mp o s it io n o f Go v er n men t U n it s ,S t . L o u is M et r o A r ea (M SA )

Counties 15, plus St. Louis City

Municipalities 243Townships (IL only) 105Special Districts 368School Districts 136Total 868

Source: 200 2 U.S. Census of Local Governm ents,U.S. Census Bureau


23/54


F in d in g 7 : Facing increasing expenditures andstagnant tax revenues, many local governments inthe region are in fiscal crisis. Continued fiscal dis-tress threa tens to further erod e the qua lity of pub-lic services, widen the gap between communities,and limit the regions growth potential. Local gov-

ernm ents in the St. Louis a rea are pa rticularly vul-nerab le to fiscal pressu re.

Controlling for inflation, average county andmunicipal revenues did not keep pace with expen-di tures du r ing the past de cade. In 2002, nea r lyhalf of the m unicipalit ies in ou r region ha d ne ga -tive operating margins. The median operatingmargin for all municipalities was1 .8 percen t . Th ir teen pe rcen t o f municipalities saw declining rev-enues after inflation adjustments.

Driving m uch o f the increa ses inexpend itures were ou tlays for trans -portation, public safety and housing.There is an increasing gap in expen-ditures and public services betweenmunicipalit ies that are predominant-ly white and those whose majority isAfrican Am er ican.

P er C a pit a M u n ic ip a l Re v en u e s a n dEx pen d i t u r e s ($ ) In f l a t io n -A d j u s t ed

1992 2002 Increase

Total Expenditures 491 747 52 %Total Revenues 505 679 34 %Property Taxes 40 49 23 %Sales Taxes 71 55 (23%)

Source: 1992 and 2002 Census of Local Governments, withInflation Adjustments

F in d in g 8 : The current collection an d d istribu-tion of tax revenues is broken. It is highlighted by:a disconnect between the a lignm ent of the e cono-my and its fiscal structure (e.g., the sales tax basedoe s no t include a tax on se rvices) ; a ga p be tweenthose who pay for the service and those who

de rive b en efits from the s ervice; a system thatrewards destructive competit ion; and then over-reliance on sales tax. As the chart be low indicates ,sa les tax revenues con t inue to com prise a largerportion of overall revenues for St. Louis munici-palit ies th an the national average of 7 percent.

Source: 2002 U.S. Census of Local Governments, U.S. Census Bureau

T a b l e 2

F ig u r e 8


24/54


F in d in g 9 : A stron g se ns e of reg ional ide ntityexists in the St. Louis region. When out of town,69 percent of cit izens consider themselves to befrom St. Louis/St. Louis area. In East-WestGateways 2006 Whe re We S tand , the region rankssecond in Sense of Community, an indicator that

measures home ownership , length of tenure ,num ber of local governm ents a nd voterparticipation.

A V E R A G E

HIGHER

LOW

ER

1 Pittsburgh 57.12 St. Louis 44.43 Kansas City 36.44 Louisville 33.35 Cleveland 30.86 Cincinnati 28.66 Minneapolis 28.66 Philadelphia 28.69 Detroit 26.79 Milwaukee 26.7

11 Indianapolis 25.012 Columbus 23.5Average 22.613 Chicago 22.213 Memphis 22.213 Salt Lake City 22.216 Baltimore 20.016 Oklahoma C ity 20.0

16 Portland 20.019 Denver 19.019 Seattle 19.021 Houston 18.221 Nashville 18.223 San Antonio 17.424 Charlotte 16.724 Miami 16.724 San Diego 16.727 Boston 16.027 Phoenix 16.029 Washington DC 15.430 Atlanta 14.830 Austin 14.830 Dallas 14.830 Los Angeles 14.834 San Francisco 13.835 New York 13.3

SENSE OFCOMMUNITY

Index of four variables

Source: CNN, U.S. Census Bureau

F in d in g 1 0 : There exists an emerging frame-work for creating reg iona l decision-m aking insti tu-tions. The work of the Metropolitan Forum and thethree convening organizations is impressive.

F in d in g 1 1 : Althou gh the fram ework exists,there are currently few ways to mediate local andregional interes ts. In ad dition, the re is a m ism atchbe twee n e xisting planning p olicies a nd inten tions ,particularly with re gard to re gional land use plan-

ning and the resulting landuse s. This disconnect is notlost on the citizenry, asonly 32 percent are satis-fied with th e current plan-ning for the region.

F in d in g 1 2 : In bothMissouri and Illinois, thesystem of Tax IncrementFina ncing (TIF) that h asem erge d in the St . Louisregion is fundamentallyflawed, an d TIFs m ay actu-ally work to the economicdisadvantage of the regionas a whole. Althoughexceptions exist, this find-ing ge ne rally applies whe n

TIFs are u sed to sup port retail developm ent.

F in d in g 1 3 : Some resources currently beingspent in the name of economic development donot create a significant nu m ber o f ne w jobs orim prove the overall hea lth a nd sus tainability of theregional economy. It is clear that many of theincentives and much of the support for economicdevelopment, particularly as relates to locally ori-ented development, merely accelerate develop-ment in individual jurisdictions that would haveoccurred s om ewhere within the region a nyway.

F in d in g 1 4 : The importance of educationalreform cannot be overstated. Many of the neededreforms of the educational system extend beyondthe Panels focus on fiscal reform. The Panel con-siders ed ucation reform crucial to the g rowth of the region, and bel ieves reforms should add ressquality, cost, effectiveness and equity which may,inde ed, requ ire fiscal reform to re alize.

Source: East-West Gateway How We See It Comm unity Survey , 2005

F ig u r e 9

F ig u r e 1 0


25/54


The Panel proposes 11 recommendat ions that ,take n co llectively, crea te:

A more balanced power relationship betweenlocal governm ents a nd re gional governance;

Clear roles and responsibilities for the civic andprivate sectors; and

Standa rds o f local governm en t se rvice deliverythat will improve performance and satisfy citizenexpectations.

Recom me ndat ions 1-5 bui ld regional governancecapaci ty; recom m enda t ions 6 -8 enha nce localgovernment performance; and recommendat ions9-11 realign the local government tax structure.

B u il d Reg io n a l G o v er n a n c e C a pa c it y

R ec o mmen d a t io n 1 :Ad o p t r e g i o n a l g u i d e l i n e s f o r l o c a l e c o n o m i cd e v e l o p m e n t .

The local governm ents of the St. Louis reg ionshould collaboratively develop and agree upon aset of economic development guidelines. It isimp ortant to note that m ost of the larger count iesand municipalit ies have already agreed to abide

by a comm on code of conduct with respect tobusiness a t t ract ion and recrui tm ent as par t of thei r me mb ership in the Greater St . LouisEcono m ic Developm ent Network. The Panel rec-om me nds that m unicipal it ies and count ies work together to establish guidelines for locally orient-ed projects l ike reta il and hou sing. Developing aset o f agre ed-u pon plans for locally orienteddevelopm ent shou ld reduce so me of theunh ealthy com pe tit ion be twee n m unicipalit ies inthe St. Louis region.

The criteria for the guidelines sho uld include :

The impact on regional job and wealth creation(household income);

A clarification be twee n p rim ary jobs and seco nd-ary job s;

A clarification of what aspects of quality of lifenee d to be improved; and

The es tab lish m en t of priority of reg ional infra-s t ructu re nee ds .

Rec o mmen d a t io n 2 :U n d e r t a k e c o m p r e h e n s i v e r e f o r m o f Ta x -I n c r e m e n t F in a n c i n g (TI F) a n d o t h e r e c o n o m -

i c d e ve l o p m e n t f in a n c i n g i n b o t h Mi s s o u r ia n d I ll in o i s .

The Panel recom me nds de velopment of a se t of principles to gu ide the u se o f TIF and oth er eco -nom ic developm en t financing tools, as well as leg-is la t ion and regulat ions to implemen t the us e o f the following principles :

A clear and defensible definition of blight thatcan be statistically jus tified;

There sho uld be an em phasis on projects that

create sustainable jobs and net regional eco-nom ic ben efit as thresh old indicators;

The but for criteria should be re-balanced toplace a harder bu rden on the de veloper to provethis criterion;

Restrictions sho uld be placed o n p rojects ingree nfields or flood plains; a nd

To the de gre e th at TIF is a form of tax policy, itsimp lem entat ion and adm inis tra t ion sh ould bedesigned to:

Minimize fiscal mercantilism;

Decrease unhealthy competit ionbetween jurisdictions; and

Encourage regional cooperation.

Rec o mmen d a t io n 3 :D e ve l o p a n e w, o r t r a n s f o r m a n e x i s t i n g ,o r g a n i za t i o n f o r r e g i o n a l g o ve r n a n c e t os p e a r h e a d r e g i o n a l d e ve l o p m e n t .

The reg ion ne eds to bring tog ethe r all local stake -holders to create and implement a coheren tregiona l developm en t strateg y. Local planning isim portant, but i t need s to b e cons istent withcounty plans, which then need to be consistent insup porting a reg iona l age nda . An en tity that is notsolely looking out for its own interests is neededto be the a rbiter an d provide g uidance. A neworganization is not necessarily needed, but atlea st a virtual organ ization or collabo ration nee dsto be created from a m ong e xis t ing bu siness ,government and civic leadership. A virtual organi-zation like the Metropolitan Forum might play thisrole of synchron izing regional econ om icdevelopm ent act ions .

Rec o mmen d a t io n s o f t h e Po l ic y A d v is o r y Pa n e l


26/54


Good work has b een done to develop the e le -ments of a comprehensive economic developmentstrategy for the region. But l it t le is b eing d one tobr ing togethe r these e lem ents an d the m ult itudeof developm ent age ncies to impleme nt a com pre-hensive strategy. This is particularly true when

looking a t the counte r-productive incen tives givento attract retail sales tax generators that do noth-ing to increas e the overall em ploym en t and fiscalhealth of the region.

In a ddition to creating a re gional strategy thatgenerates jobs (i.e., effective workforce develop-ment and retention/recruitment strategies), theorganization would need to focus on changes instate legislation to su ppo rt the overall strategy.The Panel recommends the key tasks of thisgroup include:

Analyzing the future workforce needs for thechosen economic c lus ters and ensure that thoseclusters are being effectively developed;

Developing metrics that enable the region tome asure the heal th of the bus iness c lima te; and

Developing a s e t of econom ic developm ent p r in-ciples tha t minimize unhe althy com pe tit ionbetween local governments; realize regional andcitizen g oals of increa sing prima ry jobs an dhouse hold income s; create m inimum levels of government se rvices and procedures to br ingservices not m eet ing those s tand ards up tothose minimums; decrease racial disparit ies inlocal service pro vision; and ass ist in the re de vel-opm ent of b lighted a reas .

Re c o mmen d a t io n 4 :Cr e a t e a c i vi c e n t r e p r e n e u r i a l r e s o u r c ec e n t e r.

The Panel recom me nds that the region considercreating an inde pe nde nt Civic Entrepre neu rialReso urce Center (the Center) that would s erve as

a think tank and consulting service for the regionto cons tructively ada pt the be st thinking in thebus iness and non -profit worlds to d evelop civicstrategies that m axim ize p ositive social im pact.

Its purp ose would be to: 1) develop strateg ies toincreas e the financial, physical, hum an, culturaland social capital of the re gion, an d 2) provideass is tance to local governme nts , businesses andnon -profits to imp lem ent the strategies. The civicentrep rene urial mo del, with a coalit ion of busi-ness , government and community leaders that

blend new business models of networking andventure capital to solve public problems, has beenuse d in Aus tin, Dallas , Nas hville, Sa n J os e a ndNorth Carolina s Rese arch Triangle. 5

Initial fund ing for the Center cou ld com e from the

philanthrop ic com m unity. The Center would p ro-mo te cross-sector learning, adapt ing b usiness andentrepreneu r ia l concepts and s t rengths for theimprovement of the various capital assets of theregion and exploring new ventures that promiseenha nced socia l and com mu nity developm ent andsusta inab ility. The blending o f bus ines s a nd entre-prene urial techniques with the m ore traditiona lgovernm ental and char itable a pproaches to solv-ing social and com mu nity issue s can result ininno vative and effective respo nse s to social needs .

Rec o mmen d a t io n 5 :Cr e a t e c o n s i s t e n c y b e t w e e n l o c a l/r e g i o n a lp l a n n i n g a n d in f ra s t r u c t u r e .

The Panel recom me nds that consis tency betweenlevels of governm ent be adop ted a s a ke y plan-ning an d op erating principle for the region.Curren tly there is no cons isten cy be twee n cou ntycompreh ensive plans and mu nicipal p lanningefforts. Local planning will remain an integral partof com mu nity developmen t , but shou ld be consis -tent with coun ty and regiona l plann ing.

East-West Gateway, as the regions MetropolitanPlan ning Orga nization (MPO) an d Cou ncil of Governm en ts (COG), could be given the auth orityto arbitrate consistency between regional compre-hens ive plans an d local comprehe nsive plans .

5 Center for Comm unity-Based and Nonprofit Organizations atAustin Community College, www.austincc.edu/npo; The Institutefor Social Entrepren eurs , www.socialent.org/abou t_us.htm ;Nahs ville Civic Design Center; San Jos e Entrep rene ur Cente r,www.ecenteronline.org/hom e.htm ; Advanceme nt o f SocialEntrepreneurship, www.fuquastore.com/center/case/about


27/54

En h a n c e L o c a l G o v e r n men tP e r f o r ma n c e

R ec o mmen d a t io n 6 :S t a n d a r d iz e p u b l ic fi n a n c e a n d m a n a g e m e n ti n fo r m a t i o n t o i n c r e a s e t r a n s p a r e n c y.

The Panel recom me nds that uniform s tand ards bedeveloped and imp lem ented by local governm entsfor the presentation of accounting and financialma nage me nt informat ion to as s is t cit izens a ndcomm unity lead ers in asses s ing governmen t per-formance.

The more this initiative is seen to be driven by thelocal governme nts them selves , the greater thechance that imp roved trust and cit izen s atisfactionin local governm ent se rvices can be enha nced.

R ec o mmen d a t io n 7 :Co n s o l id a t e s p e c i a l s e r vi c e d i s t r ic t s o r p r o -vi d e f o r r e ve n u e s h a r in g .

The Panel recomm end s that the region create avoluntary mech anism that would guide e xistingspe cial service districts throug h a proces s toexam ine current se rvice levels and explore o ptionsfor increased efficiency and effectiveness. Amongpossible solutions to consider are merger, serviceconsol idat ion and revenue shar ing.

R ec o mmen d a t io n 8 :E s t a b l i s h s t a t e a n d o t h e r i n c e n t i v e s f o rr e g i o n a l c o o p e r a t i o n .

The St. Louis reg ion sho uld join with the Kans asCity region a nd othe r m etropo litan re gions inMissouri to convince state government to createprogram s that increase funding to those regionsthat d evelop collabo rative s trategies to leveragelocal governm ent re sources and private d ollarsand de crease des tructive com petit ion. Misso urisregions each n eed s t ra tegic and o perat ional p lansthat em phas ize regional cooperat ion. The s ta tecould provide ne w incen tives and tie e xisting eco -nomic development incentives to promotion of regional coope rat ion.

Rea l ig n t h e L o c a l G o v e r n men t T a xS t r u c t u r e

Rec o mmen d a t io n 9 :P o o l r e g i o n a l a n d / o r c o u n t y l e v e l e x i s t i n g a n dfu t u r e s a l e s a n d p r o p e r t y t a xe s .

The Panel recommends the exploration of optionsto increase the sales tax pooling in the region.Currently, the collection of sales a nd prope rtytaxes a t the m unicipal level me ans that hou se-holds in prosperous municipalit ies pay less percapita for government services and receive betterservices than households in poorer municipalit ies.Pooling some or all of locally collected sales andprope rty taxes reg iona lly and redistributing the mon a per-household or per-capita basis could miti-gate som e o f the tax burden and service qu al ityinequities.

Rec o mmen d a t io n 1 0 :Br o a d e n s a l e s t a x b a s e t o in c lu d e t a x o ns e r v i c e s .

The Panel recomm end s ana lysis of me thods tobroaden the scope of sa les taxes in the region.State an d local governm ents in the St. Louisreg ion d erive significant, b ut varying , levels of rev-enue from sales taxes. The current system isregre ssive in that p urchas es of services like finan-cial advice, dry cleaning, and legal services are

exem pt from the s ales tax while b asic staples l ikeclothing are sub jected to i t .

Rec o mmen d a t io n 1 1 :Co u p l e r e g i o n a l e a r n i n g s t a x wi t h a p a r t i a lr o l l- b a c k o f p r o p e r t y o r s a l e s t a x e s .

The Panel recommends the exploration of ways torestructure the composition of taxes in the region.Local governments derive revenue from business-es on the b asis of retail sales and prope rty valueand they have a strong incentive to locate re tailbus ines ses in their comm unities. They have lit t lefiscal ince ntive, h owever, to a ttract local job s th atpay higher sa laries but d o no t involve s ales taxreceipts. If local governme nts raised revenu e o nthe basis of wages, rather than sales receipts, theywould have a m uch gre ater incentive to a ttracthigh-pa ying jobs tha n the y currently do.

The intent of this recommendation is to changeincentives , not raise taxes. It would be ne cess aryto couple any implementation of a local earningstax with a roll-back of som e o ther taxessales,prope rty, or both.



28/54


This recomm enda t ion is not de s igned to increasethe overall revenues to the local governments inthe region, but ra ther as a revenue -neutra l taxshift away from prop erty and sa les taxes.Substituting an earnings tax for all or some por-tion o f sales ta xes would red uce m unicipal incen-

tives to com pe te for retail projects an d instea dincen t mu nicipalit ies to co ncen trate on job cre -ation rather than retail receipts as an economicdevelopment goal. Further, an earnings taxextende d b eyond th e city of St. Lou is would lesse nthe disincentive that firms have to locate withinthe city limits. And finally, creating a shared rev-enu e s ource would redu ce fiscal ineq uality acrossmunicipalities.

T a b l e 3S u mma r y o f Rec o mmen d a t io n s

B u il d R eg io n a l G o v e r n a n c e Ca pa c it y

Adop t regiona l guide lines for local econom ic de velopm ent.

Unde rtake com preh ens ive re form of Tax-Increm ent Finan cing (TIF) and other econo m ic devel-opment financing in both Missouri and Illinois.

Develop a n ew, or transform an existing, o rganization for regional governance to spe arhea d

regional developme nt .

Create a civic en treprene urial resource center.

Crea te cons istency be twee n local/reg iona l planning a nd infrastructure.

En h a n c e L o c a l G o v e r n men t Pe r f o r ma n c e

Standardize public finance and management information to increase transparency.

Cons olidate spe cial se rvice districts or provide for re venu e sha ring.

Establish s tate a nd othe r incentives for reg iona l coop eration.

Rea l ig n t h e L o c a l G o v er n men t T ax S t r u c t u r e

Pool reg iona l and/or coun ty level existing an d future sa les and prop erty taxes.

Broaden sales tax base to include tax on services.

Couple regional earnings tax with a partial roll-back of property or sales taxes.

In one possible scenario of implementing thisreform , the e arnings tax could b e collected a t thecounty level and then allocated to m unicipalit ieswithin each coun ty on a pe r capita bas is. Thecounty could retain so m e p ortion in return forlowering its sa les tax rate, and retain the per capi-

ta sha re for unincorporated a reas in the cou nty.Municipalities would not receive their per capitashare unless they reduced some other (i .e. , salesor prop erty) tax in ord er to m ake th e p olicy asclose to revenue n eutra l as po ss ible .


29/54

IV. N e x t S t e ps 2 3

The Policy Advisory Pane l has p res en ted a b oldand challenging agenda for regional fiscal reform.However, the Panel does not have the deep under-stand ing of the p olit ics, history and tradition of theSt. Louis re gion to sug ge st s pe cifically how suchan a gen da s hould be im pleme nted. Suffice i t to

say that the recommendations will challenge lead-ers and other s takeholders from a cross the regionto be fully engaged in discussing, debating andshap ing whether, when and how any of the recom -mendations would move forward.

Toward that en d, there are s om e logical first steps.

The Metropolitan Forum itself, representingimportant leadership in the community, shouldbe fully briefed on the Pane ls reco m m en dationsand have an opportunity for extended discussionand de ba te to de te rmine which recomm enda-

t ions m igh t be pursued .

The Boards o f the three spons or ing orga niza -tions of the Forum should be individually briefedon the Panels report.

The Metropo litan Forum sho uld recruit partnersto continue to develop better information on theecono m ic and fiscal im pact o f Panels re com -menda t ions .

The Forum should convene sm all groups of leaders for candid and in-depth discussionsabout the recomm endat ions and to tes t accept-ance for various implementation strategies.These groups should m irror thepu blic/private /civic comp osition o f the Forum .

There should be a process to engage the com -m unity at-large. The p rocess o f comm unityenga gem ent sh ould be extensive , forma lized,and disciplined. Toward that end, it is importantto ha ve a n institutiona l hom e for the eng age -ment process. FOCUS St. Louis is one possibilityto serve in that capacity, because its membershave well de velope d s kills in com m unityeng age m ent. FOCUS also is m ore likely to beconsidere d a ne utral party in the discussion,where as the m em be rs of East-West Gateway andRCGA will have specific interests to advance.

These are issues that will affect the future of theregion an d of every cit izen, so th ere n ee ds to b ea formal process for building community under-standing before moving forward.


30/54

2 4


31/54

A p p e n d i x A 2 5

Three principal issues affect the long -termprospects for a successful and prosperous St.Louis re gion: racial and e cono m ic dispa rity, slowregional populat ion an d em ployme nt growth and

unp rodu ctive local tax structures .6

After m onth s o f discussion, data collection a nd Forum m ee tings, i thas be come clear that one thread that runsthrough these three issues is the une ven an dsometimes inadequate provision of public services(education, public safety, infrastructure, etc.)across the reg ion. 7 Governments at all levels are infiscal perila produ ct of stagna nt tax reven ue s,fragm entat ion of governance and decis ion-m ak-ing , and a de facto econ om ic strategy that isincons istent with prod ucing the conditions for rea lgrowth. Continued fiscal distress threate ns to fur-ther erode the quality of public services, widen thegap between communities and limit the regionsgrowth po tential.

The fiscal crisis am ong local governm ents inSt. Louis is a prod uct of the ero sion of reven uesources and of the peculiar geopolit ical landscapeof the region. The political fragmentation of theregionDavid Rusk refers to similar regions aslittle box regions 8leads to a local tax structurethat is eco nom ically unprodu ctive a nd that fuelsinternecine com pet i tion a mo ng go vernm ents anda g rowing d ispar i ty in reso urces am ong them .

The fiscal ine quities in St. Louis are not a resu lt of premeditated choices in a pure competit ive envi-ronm en t. This is no t an illustration o f the Tieboutm o d e l 9 in which the optimal allocation of locallyprod uced pub lic goo ds is provided by sma ll juris-dictions com pe ting for m obile re sidents. This is a nenvironme nt where local governm ents can gene r-ate re venu es th at they do no t ea rn from theirresidents or businesses, but that are effectivelyand arbitrarily app ropriated from the ir neighb orsor from overlying jurisdictions through use of the

local tax system . Curren t local tax po licy ine vitab lyleads to dramatic and arbitrary shifts in tax rev-enues between governments , and the creat ion of low tax, high service municipalities and high tax,

low se rvice co unte rparts. This m ay have lit t le ornothing to do with the effectiveness or compe-tence of a local governme nt. Rathe r, it is largelythe result of the diffuse d d ecision-m aking, gover-nan ce structure a nd tax policy that cha racterizesSt. Lou is.

There are d irect connect ions between the threeissues that the Forum has identified and gover-nan ce s tructure a nd tax policy that is fueling inter-

jurisdictiona l compe tit ion and the erosion of pub-lic services. Research shows that decentralizationof local governm ent doe s not gen erate a m oreeffective or com pe tit ive regiona l econom y andthat, in fact, decentralized regions are likely to beless com petit ive a nd face a g reater cha lleng e insusta ining econom ic pe rforman ce. 10 The WhereWe Stand series of reports published by the East-West Gateway Council of Governments records thepoor dem ograph ic and econom ic growth ra tes of the region o ver se veral ed itions , the first pu blishe din 199 2 . 11 Some observers initially attributed thiscondition to the poor economic standing of rust-belt cities in the Midwest. However, in the lastde cade , the com pe tit ive p osition o f St. Louis ha scontinued to slip b ehind our Midwest p ee rs l ikeLou isville, Ind ianap olis a nd Kan sa s City, are aswhere decis ion-m aking and governance is lessf ragmented .

Jerry Paytas, with the Carnegie-Mellon Center forEcono m ic Developm ent in Pittsburgh , concludesthat fragm ented governance a t the m etropol itanlevel reduces the competit iveness of the metropol-itan economy. 12 He ob serves tha t mo st of thefocus on f ragm entat ion of governance has bee non issues of efficiency ra ther than on effective-ne s s , particularly as i t relates to d evelopm en t.

Similar to observations made by the Forum during6 Critical Conce rns Backgrou nd for the St. Louis Leade rshipRetreat. Regional Chamber and Growth Association, FOCUSSt. Louis, East-West Gateway Council of Governments. St.Louis. Janua ry 30, 2003.

7 More for Our Money. Regional Chamber and GrowthAsso ciation, FOCUS St. Louis, East-Wes t Gate way Coun cil of Governm ents. St. Louis. Augus t, 200 3.

8 Rus k, David. Little Boxes Limited Horizons: A Stud y of Fragme nted Local Governa nce in Pennsylvania Its Scope,Consequences, and Reforms. Brookings Institution,Wash ington D.C. Decem ber, 20 03.

9 Tiebo ut, Cha rles W. A Pure Theo ry of Loca l PublicExpen ditures. Journ al of Political Econom y, 64 : (416-24 ),1956.

10 Ham ilton , David K., Miller, David Y., and Paytas, Je rry.Exploring the Horizontal and Vertical Dimensions of theGoverning of Metropolitan Areas. Urban Affairs Review, Vol. 40,no. 2, Sage Publications. Thousand Oaks, CA. November, 2004.p. 166.

11 Where We Stand: The S trategic Asses sm ent o f the St. Louis Region . East-West Gateway Coordinating Council. St. Louis,Missouri. 2002.

12 Paytas, Je rry. Does Governan ce Matter? The Dynam ics of Metropo litan Governa nce and Compe titivene ss. Carne gieMellon Center for Economic Development. Pittsburgh,Pennsylvania. December , 2001 p.22

T h e C as e f o r R eg io n a l F is c a l Re f o r m


32/54

2 6 A p p e n d i x A

its deliberations, Paytas indicates that Long-termcompetitiveness requires flexibility, and fragment-ed re gions a re less l ikely to m ob ilize the cons en-sus for change. Fragmented regions divide theregiona l constituency, offering opp one nts of change mo re oppo rtunit ies , forums and e ven

institutional suppo rt to resist chang e.13

Governa nce and tax policy are also l inked to racialdisparity. David Miller, of the University of Pittsburgh , conclude s that even when accoun t-ing for population and region, jurisdictional diffu-sion is s ignificantly an d u nqu estiona bly linked toBlack se greg ation in m etropo litan Am erica. 14 Hefurther concludes that Too much diffusion of power in m etropol itan area s se rves to increase theprob ability of racial se greg ation an d to d eter theabili ty of the m etropo litan region to take a dvan-tage of econom ic expans ion o ccurring within the

region. 15 The sa m e logic appl ies to econ om icsegregation as well . Local governments, throughtheir planning an d zoning a utho rity an d the ir abili-ty to redirect the flow of tax doll

St. Louis Regional Fiscal Reform_Metropolitan Forum Report

Documents

Transcript of St. Louis Regional Fiscal Reform_Metropolitan Forum Report