Magazine article USA TODAY

Financing Sustainable Cities

Magazine article USA TODAY

Financing Sustainable Cities

Article excerpt

"With insufficient public revenue to meet the rising demand for services, cash-starved municipal authorities have relied increasingly on the resourcefulness of local communities and the profit-making drive of the private sector."

LIKE SO MANY ARTIFACTS of civilization, money and finance arose in cities. Researchers believe that cash first flowed in ancient Mesopotamia as early as 2500 B.C. As many more goods became available in urban centers like Babylon and Ur, bartering became unmanageable and, for the first time in history, people needed a standard medium for setting prices. Today, cities remain the engines of economic growth--generating a disproportionate share of national income--but their problems with money are legion.

For the sake of the public good, citizens and local officials alike struggle to harness the money they generate, but all too often it becomes yet another squandered urban resource. Among the obstacles keeping money from constructive uses are lack of support from Washington, poor financial management by city officials, and the outflow of money from a city as banks or store-owners invest in places that inspire more confidence.

Lack of local budgetary control limits the ability of citizens and city officials to make urban environmental concerns a priority. Washington has shifted many responsibilities to city governments in recent years without expanding the ability of local authorities to raise revenue. Generally, city governments still must rely on the central government to transfer to them a share of the national tax revenue. Often, the amount of the transfer depends upon the size of the local budget deficit, thus encouraging overspending and mismanagement. If and when the transfers come through, local officials--and the citizens who elect them--may have little say in how they are to be spent.

Washington can block local efforts to create healthier cities even more directly. By subsidizing water and energy, it can undermine a city council's building codes to improve efficient use of these resources. National transportation and land-use priorities can similarly foil local environmental goals. For instance, metropolitan areas such as Portland, Ore., that have tried to constrain sprawl have historically been thwarted by national transportation policy that offers far more money for road building than for mass transit.

Encouraging reforms in the 1990s include the Intermodal Surface Transportation Efficiency Act and its successor, the Transportation Equity Act of the 21st Century--which set aside a small, but important, sum for alternatives to highways--and Clean Air Act revisions that withhold highway money from cities that do not meet air quality standards.

Cities usually have at least two types of tools to raise their own revenue--fees and taxes--although their ability to levy them varies widely. Many issue municipal bonds. Partnerships with the private sector and communities can help local authorities achieve their goals. The challenge is to figure out which tools local governments are best equipped to use and how they can exploit them to benefit their budget.

One of the best ways for cities to close the gap between revenue and expenditure would be to charge adequate fees for the local services they provide. It stands to reason that, if cities are required to supply services, they should also be allowed to charge for them. Water provision, waste collection, and transportation have a profound impact on natural resources and quality of life--yet they are usually underpriced. Various fees are effective in meeting both economic and environmental goals. Fees for unsorted household garbage, for instance, have bolstered urban recycling efforts. The success of water conservation programs in Boston, for example, has hinged on charging higher prices.

Rather than maintain artificially low prices for all, water authorities or electric utilities can provide targeted subsidies, such as loans or grants to help the poorest families pay for the initial hookup, which is often the most prohibitive cost. …

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