Urban Governance: Merger and Fragmentation

Let's consider two hypothetical cities. For convenience, I'll call them "Hartford" and "Nashville."  Both are state capitals.  Both are favorably located on bluffs overlooking large rivers and are surrounded by abundant buildable land.  As of 1960, both cities proper had comparable populations, with Hartford at 162,000 and Nashville at 170,000.  Hartford was in 1960 by far the wealthier of the two, being located in one of the richest states of the union and hosting the headquarters several of the nation's largest insurance companies, yet housing costs were reasonable in relation to Boston and New York.

From the standpoint of a 1960 observer, Hartford appeared to have the brighter prospects for population growth.  Hartford's metropolitan area, represented by the county of which it was the seat, was in fact growing at a more rapid clip than Nashville's Davidson County, with a population increase of 28% during the 1950s compared to 24% for Nashville, even though Tennessee at the time had a higher birth rate than Connecticut and Davidson was absorbing heavy in-migration from much of the central Tennessee region.

Around 1960, however, two developments reshaped the governance of both cities.  In that year, Connecticut's abolition of county government went into effect, leaving only the state government and 166 town governments, one of which was the rump city of Hartford, a jurisdiction of 17 square miles.  Only three years later, Nashville moved in the opposite direction, merging itself with the 504-square mile Davidson County and forming a consolidated city-county government.

Since 1960, Hartford County has grown 23%, while Davidson County has grown 40%.  By 2010, Nashville's urbanized area population exceeded Hartford's.  As of 2014, Davidson County with 668,000 inhabitants held fully 62% of the greater Nashville urbanized area population.  By contrast, the city of Hartford had lost population since 1960, and with only 125,000 residents held only 13% of the greater Hartford urbanized population.  Nashville's downtown area is today booming with apartment construction, while Hartford has seen little multifamily development since the 1960s.

The factors in the success of Nashville relative to Hartford obviously are more complex than the arrangement of city government, and involve developments as varied as the economic rise of health care and higher education and the general increase in prosperity in the American south relative to the nation during the mid and late 20th century.  Nonetheless, the relative fragmentation or centralization-by-annexation/merger of city governments is of major importance in how cities are run, regulated and taxed.  For instance, consider that a home in Hartford today bears a tax burden more than three times that of a home of identical value in Davidson County.

For the 2010 Census, the list below shows the top and bottom 15 rankings for the population of cities proper expressed as a percentage of total urbanized area population (out of the top 50 largest urbanized areas):

The list of metros with the highest percentages of their urban population contained within their cities includes several of the fastest-growing and most economically resilient cities in the United States: of Brookings' list of the top 10 performing cities over the past several years, five are on this list.  Only one metro on Brookings' list, Salt Lake City, appears on the bottom 15.

Simply because a metro appears on the low end of the rankings, however, does not necessarily mean that it is highly fragmented overall.  Washington D.C., for instance, is surrounded by large and relatively powerful county governments, including Fairfax (1.1 million, 407 sq. mi.), Montgomery (1.0 million, 507 sq. mi.), Prince George's (890,000, 598 sq. mi.), as well as the smaller but populous Arlington County and city of Alexandria.  Others, such as Bridgeport, CT, Providence, RI and St. Louis, MO do have a highly fragmented governing structure throughout the metro area, with a large number of small towns each guarding their own local taxing and land use prerogatives.  County governments fractured into townships tend to replicate, in approximate fashion, the metro areas of non-county states such as Connecticut and Rhode Island.  The proportion of people living within the central jurisdiction is suggestive of degree of fragmentation, however.

I can hear the reader say right now: but correlation isn't causation!  While that is certainly true, and while I also bear in mind Jane Jacobs' comment that a region "is an area safely larger than the last one to whose problems we found no solution," those who have studied this issue have found definite advantages to a more centralized form:

• Zoning.  Although one might imagine that a multiplicity of jurisdictions might compete with each other for residents, thereby raising the net quality of life, what is observed instead is that jurisdictions attempt to compete for wealthy residents by imposing restrictive zoning regulations.  This results in a zoning race to the bottom, as towns enact ever-stricter regulations to keep prices high.  The result is high citywide housing costs relative to income.  More centralized cities tend to have more permissive zoning.
• Property Taxes.  A highly fragmented metro tends to have high property taxes as well, due to lack of economies of scale.  Central cities often suffer the most, as they have the largest share of public or non-profit land, and must impose nearly ruinous taxes on the remaining devalued private land to cover basic municipal services.  The taxes further drive down property values, resulting in a situation where (as with Hartford, see below), the situation nearly becomes unsustainable.
• Education.  As I've written about before, overall educational outcomes in county-wide educational systems funded out of general revenues can be as good or better than even the best and most lavishly-funded local school systems.  
• Transportation.  In general, regional transportation planning would be expected to have a smoother political course in a centralized city.

There are disadvantages too.  Very local governments, for better or worse, can be (or at least are perceived to be) more accountable to the individual citizen.  These governments may have long histories and impart to an urban area much of its character.  Some of the advantages of the centralized form can be overcome through adopting elements of a centralized form, such as pooling of certain services, without relinquishing all local authority.  

Still, where all else fails, consideration of more drastic measures may eventually become necessary.  In its election just a month ago, Hartford elected a new mayor, Luke Bronin, who defeated the incumbent in an earlier primary.  Although the local paper has wished him well, it closed a post-election op-ed with words that may soon need to be uttered more forcefully:

"The steep challenges facing Hartford and Bridgeport [which also elected a new mayor] raise the question of whether these cities, which have heavy costs and little property to tax, can continue to be viable. The canary in the coal mine on that may be New London, where Democrat Michael Passero, a city council leader and former firefighter, was elected to replace Mayor Daryl J. Finizio.

At seven square miles, New London is the second smallest geographical municipality in the state. Like Hartford and Bridgeport, it bears a disproportionate amount of its region's social costs. 

If the new mayors cannot make these cities work, we shall have to rethink them."

Whether Connecticut has the capacity to "rethink" the organization of its centuries-old towns is a reasonable question, as is the question of whether any such reorganization would work to solve central city ills.  That the question is presenting itself at all, however, is indicative of the scale of the problems at hand.

The Problem with Schools and Housing Supply

In an earlier post, I discussed how the population of young adults and young children is rapidly declining in the wealthy suburbs of New York City, a trend previously noted by the New York Times.  Although I alluded to high housing costs being an important factor in these changing trends, I failed to mention an absolutely crucial element that is driving much of the opposition to increasing housing supply: school funding. This factor is so important that is helps explain not only regional patterns in the New York area, but the NIMBY attitudes prevalent throughout much of the United States that have been so heavily covered in recent books and articles.

While it's often pointed out that the American system for education funding creates great disparities both between states and among school districts within states, what's less often noted is that the same locally-slanted funding system greatly contributes to and reinforces opposition to increasing housing supply. A glance at the particulars of the funding system makes it immediately obvious why this should be the case. Crunching the numbers for the city of Rye, in Westchester County, the Zoning Plan blog estimates that:

"Only a small percentage of households in Rye pay enough school taxes to cover the cost of two children in the RCSD. Even most large new homes do not pay enough taxes to pay for two students."

I can't vouch for the accuracy of these particular estimates, but there's no doubt that the typical state's funding system, which places around 44% of the cost of funding local schools directly onto homeowners through local property taxes, punishes those jurisdictions that choose to increase their residential housing supply, and in particular the type of housing supply that is aimed at families with children.* The town that adds additional homes of this type has two basic options: either increase the tax burden on existing residents, with no improvement in the quality of education, or keep taxes constant while letting school quality decline.

The quoted blog is particularly interesting in how it illustrates how opposition to demolition of smaller homes, and their replacement with so-called McMansions, is linked to concerns about school-related property taxes. The site puts its bluntly: "We don’t want to be told we can’t replace a three bedroom, senior-friendly ranch, with a five bedroom, family-friendly colonial, but then, why should neighbors pay more school taxes and endure class-overcrowding when [school] enrollment increases?"

The blog suggests the common-sense solution of increasing the proportion of child-free households by constructing much smaller single-family homes to retain empty-nesters, something I've advocated previously.  In most American towns, however, and certainly in the elite suburbs of Westchester and Fairfield County, such a recommendation is likely to be met with intense hostility. Multifamily residential is even less welcome, and non-residential uses are feared as nuisances and traffic generators. Faced with the threat of larger homes bringing increased taxes and smaller homes portending decreased property values, the shrill NIMBY voice is raised against any project, large or small.* 

The typical American system of local school funding appears to be unique in the world, or nearly so. As psychologist Robert Slavin wrote in 1999:

"To my knowledge, the U.S. is the only nation to fund elementary and secondary education based on local wealth. Other developed countries either equalize funding or provide extra funding for individuals or groups felt to need it. In the Netherlands, for example, national funding is provided to all schools based on the number of pupils enrolled ... ."

Canada's provinces maintained a roughly analogous funding system in the not-too-distant past, but educational reforms in several provinces in the 1990s — notably in Ontario, British Columbia and Alberta — brought about a transition from joint local-provincial school funding systems to provincial-level systems. These changes also seem to have involved a shift in funding sources away from local property taxes and toward general tax revenue. In the case of Alberta, these reforms are reported to have enabled a reduction in residential education property taxes of 65%.

The heavily localized school system in the United States long predated Brown v. Board of Education and school desegregation, but incentives for localization were greatly increased with the Milliken v. Bradley decision from 1974, which endorsed political balkanization of urban areas as a means of evading desegregation mandates. In combination with exclusionary zoning codes, which the court had approved nearly 50 years earlier, self-governing municipalities were given almost every imaginable enticement and ability to restrict increases in housing supply. Since good schools, no matter what their enrollment, are associated with higher property values, the incentive is to create the best possible schools for the fewest possible students.

At worst, the result is an urban area composed of petty fiefdoms, each groaning under the weight of local property taxes and thus resistant to the arrival of any new families, but equally resistant to conceding any revenue or authority to higher-level governments. A handful of jurisdictions with legacy stocks of time-worn apartment rentals are made to absorb most of the region's low-income students, and with correspondingly lower levels of per-student funding. Is it any surprise that young families are deserting these areas in large numbers, as I showed was the case in Fairfield and Westchester Counties?

Not every state has so localized a school system, however. In Fairfax County, Virginia (a state that doesn't lack for its own school funding problems and controversies), where schools are run at the county level, property taxes are half the level of Westchester, achievement is comparable or higher, and the under-5 demographic, which is in freefall in Fairfield and Westchester despite overall population increase, is growing rapidly. Similarly, in Davidson County, TN, which merged with the city of Nashville 50 years ago, the 25-35 and under-5 populations have surged.

Westchester County school administrators object that the high cost of housing in the county requires higher teacher and staff salaries, but this too is partly a consequence of restricted residential supply. The attempt to exclude families in an effort to limit property taxes increase ends up inflating housing costs, and these increased costs are shifted back onto property taxes in the form of the increased employee salaries needed to account for the cost of living. Lately, cities have attempted to shift even this consequence onto the private sector by mandating inclusionary zoning for new development to provide for city employees (typically, law enforcement, firefighters and educators) unable to afford market prices, and doing so for purportedly altruistic reasons. However, when Darien, CT, attempted to limit its own inclusionary zoning program to so-called priority populations, including town employees, it drew attention from the Department of Justice.

Policymakers haven't been blind to the perverse incentives created by localized school funding. Massachusetts' Chapter 40R, which creates incentives for towns to upzone residential land, has companion legislation providing for additional funds for cities and towns that establish such upzoned districts to cover the costs of educating children who move into those same areas. Not that it has been successful in this end, at least as of a few years ago: according to a 2009 study, "[v]ery few districts approved to date allow construction of the type of housing (modest single family "starter" homes) that would be expected to trigger payments under [the law]."  In addition, the charter school phenomenon, although far too complex a topic to delve into in any detail here, frequently involves direct state-level funding of charter schools.

Even in Connecticut, the problem has long been known and obvious solutions proposed: a report from back in 2003 observed that the state was "badly in need of regional and statewide revenue raising and land-use planning for long-term development." In Connecticut's case, as is the case for many states, this is a solution that is easier said than implemented.

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*It's an easy task to find quotes from city and state officials raising concerns with affordable housing programs on the basis that they attract young families with children, typically prefaced with the caveat that the legislator in question doesn't disapprove of children per se. A state representative from the town of Trumbull, in Connecticut:, reacting to the effects of the state's affordable housing law (the notorious Section 8-30g): "The [affordable] developments tend to have children, and children are great. But the fiscal reality is that our schools have grown considerably. We've had to build a new school in part because of our increasing population. We would have had to have built it eventually, but that [affordable housing] sped that along."

*This paranoid mindset, especially when paired with other latent biases and prejudices, can result in what I would term "NIMBY derangement syndrome," where otherwise reasonable and mild-mannered homeowners make shocking, hysterical and/or outrageous claims and allegations, usually against so-called "greedy" developers.