Economic Development and Governance in Small Town America

Paths to Growth

Daniel Bliss

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9780815393726
• eBook ISBN:
  9781351188012
• Topic: Politics & International Relations
• Subtopic: Economic Policy
• Index: Politics & International Relations

Who governs? And why? How do they govern? These remain vital questions in the politics of our small cities and towns. In this new book, author Daniel Bliss takes issue with those who believe that small towns and cities are fatally vulnerable to the pressures of a global economy. Based on in-depth analyses of small town America, this book demonstrates how political agency can address and solve real problems affecting US towns, including capital flight, industrial closures, and job losses. Bliss illustrates how small localities exercise choices – such as nurturing local businesses and developing infrastructure rather than engaging in a "race to the bottom," heavily mortgaging tax revenues to attract large box retailers and small box call centers while passively watching more productive firms and better-paying jobs slip away.

Taking careful account of comparative literature as well as variations in city governments, their planning agencies, and their relations with state authorities, this book explores the ways in which local politicians and public planning bodies can mobilize local constituencies to weather global challenges and common structural problems such as unfavorable demographics, skill shortages and out-migration. Economic Development and Governance in Small Town America holds out the promise of meaningful democratic change even in unfavorable political and economic circumstances.

1A Theory of Institutional Capacity and Governance for Economic Development

This book is about analyzing and trying to answer, in a small town context, the question of whether and how local governance still matters. This includes studying the institutional organization, policies and leadership of government. It addresses both economic development – direct grant, loan, infrastructure or other assistance to private business – and community development, which here means building the infrastructure and public services necessary for a better quality of life and more opportunity for individuals, neighborhoods and businesses alike. Despite the obvious economic and financial constraints, there are powerful opportunities, at least on paper, for even a small community with effective leadership, political openness to change and shared policy goals to gain a great deal from better and more stable organization and processes.

The institutional governance of economic and community development plays a major role in defining the scope of this opportunity. Economic development boards, city administrators, planning and zoning commissions and other entities influence decision-making in these policy areas, and city councils may or may not choose to directly intervene in most actions. However, the capacity of such institutions to foster agreement and enact change varies greatly. Consider intergovernmental relations. The peer-to-peer relations among states range from administrative arrangements that can be made or broken without legislative approval, such as tuition remission and highway planning, to arrangements covered under the Compact Clause of the Constitution¹ and ratified by Congress, such as the Colorado River Compact (Hundley, 2009), that have the force of a treaty and are difficult to alter. Agreements among local governments are as diverse; they range from ad hoc contracts for specific services to long-term standing obligations mutually held with other governments (Feiock, Steinacker, & Park, 2009); in the absence of direction from regional or state institutions of governance they may be the only framework local government has to solve problems that overlap boundaries, as seen, for example, in the rapidly expanding Denver metropolitan region (Spensley, 2001).

Governance within the community also counts. For example, while council-manager systems do not assure an impact on government spending (Carr & Karuppusamy, 2009), the city manager has more delegated power and more direct authority (Ruhil, Schneider, Teske & Ji, 1999) than a city clerk or city administrator, who is merely one of several department heads reporting to the city council, and there is also evidence of a reduction in conflict in council-manager systems (Folz & French, 2005). Then again, council-manager systems do not automatically improve the odds for policy delivery, as large-sample research has demonstrated (Carr, 2015). Sidelining of political debate, for example, can introduce a bias toward less active policy output, austerity limits on public services and infrastructure and more dependence on deregulation and lowering costs (Davies & Blanco, 2017). Thus, we must consider more universal values in addition to bureaucratic “best practice.” The institutional framework of government interacts with, influences and is sometimes deeply affected by the political culture of a community: trust in public officials, leadership, the level of voter resentment, precedent and practice. Concentration of the ability to define policy (“steering”) and fund and deliver it (“driving”) in a single venue can strongly empower a government. It can also prevent those seeking concessions from government from “venue-shopping” (Baumgartner & Jones, 1991; 2009; Pralle, 2003) for a board or commission to agree to a proposal that other bodies may reject or have rejected.

Accordingly, a central concept for this study is institutional capacity. I take this term beyond the “increasing ability of organizations to absorb responsibilities, operate more efficiently, and enhance accountability” (Savitch, 1998) to include the presence of standing, long-term, coherent and often binding arrangements for setting policy agendas, and developing, funding and delivering policy. The central theory of this book is that greater institutional capacity delivers a higher output of public support for public policy. We look here at public-sponsored economic and community development. Public-sponsored economic development means public support, through any combination of tax breaks, subsidies, incentives, worker training, discounted land or acceleration of the planning and zoning process, for private-sector jobs schemes. Community development implies a broader approach of building amenities in a municipality; the focus here is public infrastructure for local, but the term can also be taken to mean public services and quality-of-life improvements in general. Institutional capacity, influenced by elected and appointed leaders who can enhance or diminish it, interacts with the economic, institutional and intergovernmental context addressed in Chapters 2 and 3 to influence the policy-making process. These institutional arrangements do not necessarily need a council-manager system to function; they simply need to be established and generally accepted as part of the policy process, providing a degree of continuity and a forum in which both brainstorming and implementation can take place. The stronger these arrangements and leadership, the more coherent the policy process.

Measuring Governments’ Institutional Capacity to Make Policy

Institutional capacity has the potential for a broad and deep influence on both local community and economic development outcomes, even in situations in which a community is short of financial resources or what would be conventionally viewed as bargaining power with private business. Communities with high institutional capacity in their governance deliver more policy than those with lower capacity; they may also be more responsive and accountable to their constituencies. Favorable signs include management stability, a defined and transparent process for delivering public policy, and handling of management functions that enables a city council to direct policy with a minimum of personal and minor disputes. For economic development, it may also include a city board or commission and/or a development corporation that answers to a city board or commission, specifically charged with the task of promoting economic development. Financial support for local government from the state is also an important element of institutional capacity, especially if it is redistributed to local governments on a need-based formula to ensure basic levels of public services and facilities are provided.

Examples of low institutional capacity in local governance may include internal dysfunction and conflict, such as in a commission government in which each council member is head of a city department and political rivalries may be imposed on interdepartmental bureaucratic functions; or weak arrangements for developing policy among municipal and township governments in an economic region that is politically fragmented. Low-capacity governance may also depend disproportionately on the intervention of outside public officials with lobbying and grant money when it comes to getting economic and community development projects done.

Institutional capacity is not the only determinant of economic and community development. The political, cultural and financial strength of a small town matters as well, particularly in broader-based community development projects – the efforts in downtown revitalization, worker training, parks and recreation, housing, streets and infrastructure, and other initiatives to boost a town’s image, quality of life and, hopefully, its economy. Even within the United States there are major variations from one state to the next in terms of how local government is supported and empowered or constrained by state law. In the Dillon’s Rule world of North American politics, the laws of the state or provincial level of government determine a local government’s taxing powers, its ability to borrow for capital projects, and even managerial issues such as whether a local jurisdiction is allowed to require employees to reside within its municipal boundaries.

Additionally, the state level of government can choose how to finance local governments. For example, some US states simply share a proportion of state revenue based on population and/or on where the revenue was generated in the first place. Others use a redistributive approach, providing need-based assistance to local government or offsetting local property taxes in tax-poor areas. States can choose whether to allow localities to levy sales taxes, and where to cap those sales tax rates; they can and often do impose levy limits on property tax revenues, and some states grant income-tax-raising powers to certain municipalities. Taken together, state and local rules regarding how government and governance are organized influence whether an agenda for economic development gets implemented, whether action is taken and which policies get chosen.

How Institutions Frame Small Town Policy-Making: Plans of Governance, Territory and Internal Organization

The roots of this theory come from literature and experience regarding collective action problems, organizational process and fragmented governance. A successful process of local governance will likely minimize collective action problems, geographical fragmentation in terms of external relations among local government entities, and institutional fragmentation in terms of competing centers of power within local government entities. In other words, it is built to transcend situations that result in competing lines of authority or emphasize conflicting interests. The application of Mancur Olson’s definition of collective action problems (Olson, 1965) is relevant, in that people without institutional responsibility toward the group (or, in this case, the community as a whole – not simply the municipality) are less likely to work toward group goals. Fragmentation among local governments (Feiock, 2005) or within them (Cook, 1993) can aggravate these problems in situations in which the economic community is divided among several governmental units (Dreier, Mollenkopf & Swanstrom, 2001; Swanstrom, 2006; Scholz, Berardo & Kile, 2008). On the other hand, when a local or regional government encompasses multiple communities it may inadequately serve and represent certain communities (Savitch & Vogel, 2004; Imbroscio, 2004; 2006). Collective action problems are particularly strong in small communities if institutions are weak, as peer pressure is a bigger factor in this context than in a larger city (Cook, 1993; Vidich & Bensman, 2000).

The nature of city–county consolidations and annexations in medium-sized to larger metropolitan areas is a case in point. A common theme has emerged in the United States on such consolidations that goes back 50 years. Louisville with Jefferson County, Kentucky; Indianapolis with Marion County, Indiana; and Nashville with Davidson County, Tennessee, all ostensibly sought governance that would bring about better and more efficient government and make the central cities – or, at least, the downtown areas – more financially secure and viable and more of an equal player in the economies of their metropolitan areas.

But, in every case, regional or metropolitan political elites drove the process rather than citizens of the central cities. For example, in Indianapolis they bypassed the referendum altogether (Scott & Nathan, 1970), securing an act of the Indiana state legislature that made consolidation between city and county automatic in “first class cities”, defined as places of more than 250,000 population – a definition that in 1970 comfortably excluded all Indiana cities but Indianapolis.² Such plans heavily diluted central city populations with large suburban populations, giving the latter the dominant political voice, and sometimes, even as plans were under way, exclusions were made (such as certain municipalities and all fire protection and schools from the Indianapolis Unigov project) that limited the liability of annexed suburban residents for central city problems (Savitch, Tsukamoto & Vogel, 2008).

All these state-driven institutional reorganizations succeeded to at least some extent in terms of their goals, which centered on stabilizing downtown business districts. The fact that they did little for the surrounding inner cities reflects the fact that the promoters of these consolidations were not particularly concerned with inner city problems but, rather, with downtowns losing their viability and threatening the economic security and jobs of often suburban residents. Longtime Indiana State Senator Tom Wyss (R–Fort Wayne) bluntly captured both the flaws and the benefits of the late 1960s merger of local governments in his state’s capital city at a 2003 public forum regarding his home town’s annexation proposals, saying that “the reason it’s so ugly is because Unigov³ was designed to make the Republican Party dominant in Indianapolis. That’s why, though, at the same time, Indianapolis has been able to move forward with the things that they’ve done with the pro teams, with Circle Center Mall, all of these other things that they’ve done.”⁴

Equally important to the exercises of designing processes and institutions for policy results are the locally devised or chosen arrangements within a unit of government. One obvious distinction within the chosen cases concerns the difference between mayor-council governments without a city administrator, mayor-council governments with a city administrator and council-manager governments. Consolidating the governance of a municipality through a city manager or city administrator does not automatically mean better government (Banfield & Wilson, 1963), but it often opens opportunities to deliver policy because such governments are less prone to internal political conflicts (Nelson &...

Table of contents

• Cover
• Half Title
• Endorsement
• Title Page
• Copyright Page
• Contents
• Preface
• Introduction
• 1 A Theory of Institutional Capacity and Governance for Economic Development
• 2 The Economic Context of Municipalities
• 3 Institutional Frameworks: Intergovernmental Support and Bureaucratic Organization
• 4 Ely: Infrastructure Delivered, Governance Contested
• 5 Hibbing, Minnesota: The Evolution of Activist Development
• 6 Sterling and Rock Falls, Illinois: Reform and Recovery?
• 7 Comparing Governance of Economic Development
• 8 Conclusion
• Appendix: Survey Questionnaire
• Index