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Financing Metropolitan Cities Executive Summary
Is there a “best” way to finance public services in a metropolitan area with a population of five million or more? The common pattern is for many different governments and enterprises to provide services within a single metropolitan area. This ultimately involves a balancing act in determining who governs, who manages and who pays. At almost every turn, there is a political dispute about the “right” balance of power among these governments. This paper is about the theory and practice of financing government services in metropolitan areas and about reform options. The scope of this review is both governance and finance. These two topics cannot be separated because the arrangements for financing public services in metropolitan areas is largely driven by the service delivery responsibilities assigned to the various governments and enterprises. Industrial countries must satisfy the residents’ demands for higher quality services, the investors’ demands for providing what is needed to become an internationally competitive city, the demands from higher level governments to realize mandates, and the overall demand to remove bottlenecks impeding a higher quality of life. In middle or low income countries, the staggering level of unmet needs and expectations for how these needs will grow, while facing in-migration together with limited experience and resources, make it clear that the problem will not be resolved quickly or easily. The resource base available to meet these
needs is obviously very different between rich and poor countries, as are the metropolitan finance problems.
The Problem The underlying problem between metropolitan governance and finance is the unrealistic goal of marrying these two very different spatial units. The functional economic region has boundaries that are informal and always changing, as one expects of a labor market. The “champion” of the region, as a governing entity, is a planner or social reformer who sees the great efficiency and equity gains that would come with regional service delivery. The other spatial unit, the local government, has fixed boundaries. The champions of the local government are elected officials and voters, both of whom want to maintain control over services provided in the local area. It seems unlikely that these two units will come together easily in support of a general purposeful region wide government. The issue is further complicated by overlapping special districts or public companies whose service boundaries may or may not be coterminous with either the metropolitan area (labor market area) or the general purpose local governments.
Governance Countries and metropolitan areas have reacted differently in deciding on a governance arrangement for service delivery. Some have created very fragmented structures with a
Roy Bahl Georgia State University, U.S.A.