What are the results of urban decentralization?

Question

What are the results of urban decentralization?

Answer 1

The price of land near expressways always increases dramatically after construction is completed. This phenomenon was recognized nationally as early as 1939 by the Roosevelt Administration, and continues to hold true today. (See a study on increased property values in areas served by new transportation infrastructure.) Two other factors never considered in the study are the increase in household transportation costs when families in sprawling locations must own two or more cars, and the subsidy provided by the state to suburban developers in the form of new infrastructure like sewer lines which hides part of the cost of the new housing. Commonly-practiced exclusionary zoning further limits the affordability of newly developed land.

A recent presentation by Professor Marlon Boarnet at the Brookings Institute describes this phenomenon: “Recent evidence suggests that, at the margin, highway infrastructure contributes little to state or national productivity … Yet the idea that highways enhance economic health is common in the policy and planning communities. … Part of the reason for this disconnect is that when growth occurs along a new highway, people fail to acknowledge that part of that activity shifted from somewhere else within a region.” This findings are described in detail in M. Boarnet, “Highways and Economic Productivity: Interpreting Recent Evidence,” Journal of Planning Literature, volume 11, number 4, pp. 476-486, May, 1997.

Of course transportation cannot spur economic development in a vacuum; other basic infrastructure elements like sewer lines, a water supply, and a livable climate are also needed. The role of transportation in development can hardly be overstated, however: Chicago’s whole economic history is built on its central role in the national transportation networks, from water, through rail, to roads and on to airports. The Illinois Department of Transportation in its March 1997 report, “The State of Transportation in Illinois: Lifelines to the Economy” (emphasis added) states, “An adequate transportation network is indispensable to a healthy economy. It is essential for the distribution of products and services to local, regional, state, national and international markets. It is essential for getting people to work and to the other places where they participate in the economy …”

that decentralization in the early to mid-1900s occurred compactly along rail lines, but has been broadly dispersed throughout the region since the highway era began. See the map above for a visual representation of the timing of highway construction as it relates to housing starts. Although the relationship between highway construction and residential growth is complex, these maps clearly show that they are interdependent and that often highways preceed housing development.

Sprawl is a complex phenomenon, with myriad contributing factors and uncountable consequences.

The international experience with decentrali-sation and development of competitive municipal credit markets leads to a few broad lessons. A basic set of easily understood prin-ciples, a municipal regulatory borrowing framework, will bring greater clarity to local government finance, increase the nature and number of creditworthy projects, and will make it easier for suppliers of credit to enter the municipal credit market. In addition to establishing a clear set of basic principles, accounting, auditing, and disclosure of financial condition are critical reforms required to effective municipal credit market development.

Intergovernmental transfers are a distinctive source of credit security. Central governments can assist in establishing a more positive environment for municipal credit by stabilising the system of intergovernmental transfers and shared taxes. Predictable and stable intergovernmental transfers in no manner implies that transfer levels must remain fixed or that central governments cannot adjust intergovernmental transfer flows to take into account macroeconomic conditions. Predictable and stable intergovernmental transfers imply: i) that the process for establishing transfer levels and allocating the total amount of funds among local govern-ments is clearly spelled out in a transparent tax (grant) sharing formula; ii) that adequate notice must be given to local government in the event of changes; and, iii) that local governments must be a participant in the discussion with the central government with respect to any modifications in the intergov-ernmental revenue-sharing formula.

Finally, it is crucial for central and local govern-ments to be clear on what local investment projects will be financed from local savings or local borrowing. This implies that the revenue and expenditure assignments of the local budget needs to be clearly defined and that local decision makers required to live within the resources available to them. Once it is clearly understood that all local investment projects will have to be financed from local savings, creditors and local government officials should have no recourse to the central government in the event of poor credit repayment ability.