You Can’t Build a City with Handouts

Media Appearances, Municipal Government, Frontier Centre

The eyes of Canada’s civic politicians grew wider this summer as federal Liberal leadership hopefuls lined up to promise cities new money to solve their problems. Their hopes for quick cash were dashed when PM-in-waiting Paul Martin, who had offered urban leaders a new seat at the federal budget table, left the Cabinet. Assuming he replaces Jean Chrétien, who never showed much interest in municipal policy, the country’s mayors expect to be showered with new respect, and revenue.

Should they get it? If they do, will it do their cities any good?

What mayors really want is permanent revenue-sharing, whether it be a share of gasoline taxes, sales taxes or even income taxes. Their over-dependence on property taxes in the absence of more innovative delivery models found in other countries depresses real estate values while deterring new development. Higher levels of government, comfortable in controlling municipal governance, are reluctant to give municipalities wider taxing powers.

John Norquist, the Mayor of Milwaukee, Wis., who spoke to a Winnipeg audience recently, bluntly warns that a city’s sustainability cannot be built with handouts. His book, The Wealth of Cities, cautions against the American style of revenue-sharing: “The effect of this residue of federal aid is not so much to build cities, but to keep mayors wandering in the wilderness, waiting for bread to fall from on high.” He argues instead for policies that maximize the natural advantages of cities — they are tremendously efficient engines for wealth creation — and build a framework for independent prosperity.

Among the recent wave of reform mayors in the United States, Norquist stands out for his no-nonsense approach. After four terms in office, his city is booming. The downtown has blossomed with development and the population is growing. All this happened through smart policy, without outside help and subsidies. An admirer of Canadian cities, Norquist abhors the damage easy federal money and subsidies have wreaked on U.S. cities and warns civic leaders about the danger of assuming that more money is an appropriate remedy for the ills of the city.

Norquist’s success in Milwaukee — he reduced property taxes by more than 20% over eight years — took two tracks which have only been reluctantly embraced by Canadian cities. First, he re-invented operations at city hall. He ended internal administrative monopolies by allowing civic departments to purchase from external suppliers. Services were redesigned to focus on outputs and outcomes, instead of inputs and process. His old-fashioned frugality, a refreshing character trait in a liberal Democrat, inspired him to follow what has become famous as “Norquist’s Law,” that increases in city spending be held below the rate of inflation.

Norquist distrusts outside transfer and subsidy programs and thinks cities should focus on fundamentals by creating excellent and affordable services, good schools and public safety. A hardliner on crime, he aggressively pushed frontline community policing in Milwaukee. It paid off, he says, with “higher property values, business expansion and job creation, restored cultural and civic life, and a renewed sense of community.”

Norquist is also critical of traditional social welfare programs, which perversely discourage people from working by tilting benefits towards those who are unmarried and without jobs. He touts Milwaukee’s New Hope project, which supplemented the wages of low-income workers and assisted with their transition until they rose above the poverty line, as a competitive, outcome-driven model of welfare reform. Three-quarters of them ended up in full-time work.

For Norquist, the public school system is another unproductive sector depressed by government policies on choice and competition. About 1,000 Milwaukee schoolchildren receive vouchers of $4,200 each so they can escape low-performing, inner-city schools. Norquist wants to broaden the program to drop its low-income restrictions and to allow parochial schools to accept vouchers. Offering a full range of school opportunities, he says, “would eliminate artificial constraints and unlock the value of cities.”

Norquist’s appreciation of markets extends to his critique of traffic planning and urban zoning and housing policies. He eliminated one-way streets to create a friendlier driving environment in Milwaukee’s downtown. He calls for the repeal of zoning codes that discourage density by restricting the development of multiple-use neighbourhoods. Cities grew and thrived as polyglot but seamless mixes of housing, businesses and services. Separation by fiat of these life functions through rigid zoning rules forbids cities to express their natural value.

Norquist’s central message is compelling. Seeking a productive role for government to identify and counter impediments to the natural flow of people and capital allows cities to make the best use of their advantages of diversity and specialization. The consequent prosperity takes care of their fiscal problems at the same time.

“You can’t build a city on pity,” is Norquist’s rallying cry. He sees intelligent policy reform as the key to unleashing the potential of cities. For sure, you can do it without handouts from Ottawa.

Canada’s mayors already have all the tools they need to revitalize their cities. If they create the underlying conditions for urban prosperity mainly by getting out of the way it will happen on its own.

Peter Holle is president of the Frontier Centre for Public Policy, a Winnipeg-based think-tank.

© Copyright 2002 National Post