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Economic Development Fri Jan 04 2013

Entrepreneur-in-Chief: The New Model City

Jamelle Bouie, a moderate liberal writer for The American Prospect, tweeted this:

...around the same time that Mick Dumke, a left-leaning Chicago Reader reporter, wrote this:

Desperate for money, state and local governments around the country have explored all sorts of privatization deals, or public-private partnerships, as advocates prefer to call them. Florida, Arizona, and other states have sent inmates to private prisons. Detroit has considered outsourcing management of its street lighting system...Chicago isn't just part of the trend. For more than two decades, it's been one of the privatization leaders. "You could say they're at the head of the pack," says Leonard Gilroy, director of government reform at the libertarian Reason Foundation. "Chicago is reflective of the outsourcing that's been going on for years."

Not long after, we read about this:

Beginning January 1, Chicago's parking meters will be the most expensive in North America. It'll cost drivers $6.50 per hour to park in the Loop. Near downtown the rate will be $4 per hour. Other metered areas throughout the city will be $2 per hour.

and this:

For Skyway drivers, tolls are going up from $3.50 to $4.

and this:

Mayor Rahm Emanuel's administration will explore the possibility of privatizing Midway Airport but will take a shorter-term, more tightly controlled approach than was employed by former Mayor Richard Daley's team on the city's first go-round.

All the while, Mayor Rahm Emanuel continues to be lauded by left-neoliberals and fellow travelers for his aggressively pro-business economic development policies, including mass privatization. Meanwhile labor unions and community organizations scrambled to find a critique of these policies that will resonate with a public increasingly incensed with a policy atmosphere that regressively taxes them while slashing jobs and services.

With the election over and no longer sucking all the air out of the room, and with President Obama comfortable ensconced in his second term but before the 2016 jockeying starts in earnest, now may be the time to step back and think about the big picture. What is this amorphous policy regime to which Mayor Emanuel, and mayors across the country hew? A policy regime that is comfortable enough for the wealthiest and most powerful Americans that they can comfortably donate both to Mayor Emanuel and Mitt Romney?

What we're feeling viscerally, but seeing from too close to appreciate, is the logical end of decades of neoliberalization of government, which has transformed a managerial state into an entrepreneurial one. Our mayors are now "entrepreneurs-in-chief," and the result is that governance has been transformed from a participatory process of pooling resources and regulating behavior for the public good into one of government by private negotiation and enticement of capital through competition between states, cities and even neighborhoods.

The neoliberalization process, broadly speaking, began in the 1970s. Neoliberalization impacted local governments in various ways, but the most directly relevant are, first, the shift in federal policy from direct spending to "pro-growth" policies and, second, the liberalization of trade and regulatory regimes that introduced international competitive pressures on localities, particularly cities. The abandonment of federal and state commitments to infrastructure and social welfare programs required localities to resort to debt (in the form of bonds) and the active pursuit of capital investment to make up attendant budgetary shortfalls. The introduction of international competitive pressures made this need more acute.

In the pre-neoliberal Keynesian context, cities behaved more managerially, responsible for administering programs like public housing and developing regimes like Euclidean zoning, as well as encouraging business development and protecting labor interests. When cities were "disciplined" by a loss of federal and state funds, they were expected to either shrink in size or find private sources for revenue--the antithesis of the Keynesian principles of recession response. Both to avoid capital flight and to attract new capital, therefore, cities must act entrepreneurially, engaging businesses and enticing them to develop new projects.

Enticing investment can take many forms, of course. Among these are tax incentives like tax-increment financing (TIF) overlay districts or sales tax rebates, direct subsidies, and "particularized" regulations that permit the government to be more flexible to the needs of development parties. Particularized regulations (for example, development agreements with developers that exempt them from the controls in a zoning statute) counter the unpredictability and vicissitudes of the administrative and legislative process and thus have inherent value to businesses; it reduces risk by vesting contractual rights, and thus ensuring predictability. The parking meter "lease" deal is a perfect example.

The story of the parking meter lease deal is the perfect neoliberal story. Throughout the late '90s and early 2000s, Chicago's budget survived in large part on a particular tax, the real estate transfer tax. In the housing bubble years, there was no problem relying on this revenue to fund transportation, mental health clinics, and living wage city jobs. But as with the neoliberal bubbles of the past, it couldn't last; between 2006 and 2009, revenues from the transfer tax cratered, from $242 million to $63 million. Between 2007 and 2008, the drop was over $80 million--representing nearly 40% of the budget deficit in the year the parking meter lease deal was made. It's no secret now that Mayor Daley entered the deal to make up for a huge deficit without raising taxes.

Bubble that made some people very rich bursts. Revenues disappear. Working class families pay the price (see above, "most expensive parking.") Only two options are available to the government of the New Model Entrepreneurial City: race to the bottom in terms of taxes and regulations to encourage "growth," and thus boost revenues, or start selling off assets.

Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts?

See above; Chicago is no longer a political community, it is an economic entity that is in competition with other cities in the region, in the state, across the world. In that mental framework, tax is cost, or price. You raise prices, you drive away your clients. In the case of the neoliberal city, the client is the developer, the investor, the employer. The federal government and the state are not going giving the city any real money; they are not investing in infrastructure, or education, or social welfare in any real way, the way they did up through the late 1970s and '80s. The name of the game is "growth" through enticement of capital.

And capital plays the game perfectly. They condition "jobs" they're supposedly creating on tax rebates, regulatory relief (i.e., from zoning codes), and more and more say in how the city is run--World Business Chicago being an example of that. Big business can always periodically threaten to leave the city, setting off the competition between cities and states that drive down standards, that abrogates regulations, that eliminates taxes.

This is our challenge in the coming era. Breaking this backward idea that the purpose of the city is to prostrate itself in pursuit of investment that is never really satisfied. Part of this will be a political solution: we need the position of the mayor's office to be one unsatisfied with the role of an entrepreneur begging for investment, and willing to work politically to change the status quo. The other answer is a social one: alternative models to big business investment. Whether that means large-scale cooperatives, developing local sources of investment that can be pooled to provide employment, or some other method doesn't matter. What matters is that cities begin to show that they can remove themselves from the uneven geographic development of capitalism that forces cities to regressively tax working class families and immiserate workers through wage depression and service elimination.

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Eric M / January 7, 2013 8:43 AM

I'm confused.

"Working class families pay the price (see above, "most expensive parking.") Only two options are available to the government of the New Model Entrepreneurial City: race to the bottom in terms of taxes and regulations to encourage "growth," and thus boost revenues, or start selling off assets.

Why not raise property or luxury taxes, or institute a city income tax, to make up the deficit? Why not divert money from the TIF districts? "

So high parking rates, which now actually allow people to find parking instead of forcing people to drive around in circles looking for a space due to underpricing of a public benefit, is bad, but universally increasing incomes taxes or property taxes somehow doesn't impact the working class?

What out planet are you from, exactly?

Chris Poulos / January 7, 2013 4:56 PM

First, the privatization of public spaces and public sector functions leaves pricing up to the private sector at the expense of the public. For instance, Chicago Parking Meters charged the city $13.5 million for the free spaces disabled people get. Privatizing the meters, thus, forces us to pay a double fee--one for the public use of parking and then an added fee for the private company. Second, increasing the governments ability to tax to create revenue allows the city to increase revenue without selling everything off. Moreover, it's possible, since it's a govt function, to better plan this form of revenue creation and therefore pricing, as opposed to leaving pricing up to a private company seeking profit first and foremost. So, for property taxes, things like property tax circuit breakers could be implemented to make a more equitable property tax. This can't be separated from a political strategy of course. But the point is revenue creation via the govt and the emboldening of the public sector has far more potential than a privatized system to be rational and democratic.

cg / January 11, 2013 4:09 AM

Wasn't a problem of parking meters transfer to a private company the idea they did it for cheap $1.1 Billion upfront for 75 years? Basically sold this for $15 million a year in upfront cash.

Plus, all the other areas the city lost control over with the sale.

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