From The Wall Street Journal to the Pew Charitable Trusts, pundits are proclaiming what anyone who lives in or near a big city already knows: big cities are in a seemingly irreversible decline, and no one has the will or desire to do that much about it. Detroit, which is messily making it’s way through the municipal bankruptcy process, is just the tip of the iceberg.
The forces that are pushing big cities to the brink of — and into — financial insolvency, aren’t new, but they seem to be accelerating, putting more pressure on cities at a time when fewer resources are available. Here’s an overview:
- Falling tax revenue
- Rising pension and benefit costs
- Cutbacks in state and federal aid
- Cash flow issues
- Declining revenue
Detroit was the first domino to fall, and it’s likely that due to the reasons above and others, we’ll see other municipal bankruptcies in coming years.
Cities are on the ropes due to several macro trends, which include:
- Flight of the affluent and well-educated to the suburbs.
- Fragmentation of municipal and county government systems in most states, including my home state, Pennsylvania
- Globalization, which has savaged the industries that once made their homes in cities such as Erie, PA, my home for the past 14 years
- The 2006-2009 housing bust and financial crisis.
Let’s take a poll. How many of you reading this live within the borders of a major city? Not me — I was unwilling to entrust my children’s education to the mercies of the city school system and squeamish about higher property taxes. I live in the biggest city outside of Erie, PA, Millcreek Township, which is beginning to experience some spillover of the problems endemic to Erie.
Erie isn’t included in the Pew Report because it isn’t big enough, but it’s problems are typical of its larger cousins. As industry drained from the city due to globalization and the suburbs beckoned the more well-to-do, Erie became the home of the poor and the non-profit hospitals, colleges as well fulfilling its role as the seat of city and county government.
The large non-profit organizations, while taking up at least some of the employment slack of the former industries, are by nature exempt from taxes. The city has made deals with a number of them to make payments in lieu of taxes to help offset the costs of fire and police protection, among other municipal services, but those payments fall far short of what a for-profit entity would pay in taxes. I’m sure this is a story that is repeated throughout the country.
Fragmentation of government is a plague in many states. In Pennsylvania, there are countless cities, towns, townships and boroughs. Each one has it’s own set of elected officials, municipal departments, etc. and citizens with their own self-interest. In Erie, although the region’s cultural resources are predominately located in the city, it’s extremely difficult to get other neighboring municipalities to support the Zoo, the Symphony, etc. even though everyone in the greater metro area benefits. This is just one example of how municipal fragmentation hurts cities.
Globalization and the financial crisis have wreaked havoc. Industry has moved offshore and as the housing market has fallen, property tax receipts are in decline. Governmental austerity on the state and federal level has led to cutbacks in aid to cities. And the promises made to municipal workers are increasingly difficult to fulfill and sustain, because cities simply do not have the resources to make good on or extend these promises.
As voters and beneficiaries of the cultural resources of cities, we need to do what we can to stem the decline of our cities before it’s too late. To that end, we need to encourage and actively support efforts at municipal consolidation and press elected officials in our suburbs to do more to fiscally support our ailing neighbors.