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CITY LIGHTS
America's Boldest Mayors
by William D. Eggers
From the Summer 1993 issue of Policy Review
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     There's not much good news coming out of America's big
cities these days. The streets resemble war zones. Racial
tensions are worsening, bridges and sewer pipes are crumbling,
basic services are deteriorating -- and city spending and taxes
keep rising. "Many cities, once mighty financial and
manufacturing centers, are becoming hollow cores of poverty and
crime," says Stephen Moore, an economist with the Joint Economic
Committee of Congress.
     For decades, millions of city dwellers have responded to
these conditions by moving to safer, cleaner, and lower-taxed
suburbs. In 15 of the nation's 25 largest cities, population has
fallen by 4 million since 1965 -- while the U.S. population has
increased by 60 million. A little under one-quarter of Americans
now live in central cities, down from 37 percent in 1960.
Businesses have followed the middle-class stampede away from
central cities, transforming former bedroom communities into
"edge cities," huge commercial and retail centers where
glimmering office buildings and fancy hotels stand beside
middle-class subdivisions. Two-thirds of America's job growth
between 1960 and 1980 occurred in the suburbs.
     Even as the population has declined in many of America's big
cities, city budgets have mushroomed. Per-capita city-government
spending has more than doubled in real terms in the last 32
years. According to a study by the Washington-based Cato
Institute, city governments grew most rapidly in the cities where
the population fell the most. Caught in a vicious cycle of
ever-increasing taxes and ever-diminishing tax bases, population
nose-dived by 37 percent between 1960 and 1990 in the
highest-spending cities. In the worst shape are the once-vigorous
industrial centers of the Midwest and Northeast. Since 1950, the
population in St. Louis has tumbled by over 50 percent, while in
Detroit and Cleveland it has dropped by more than 40 percent.
     For years, big-city mayors have blamed the ills of cities on
the federal government's purported "shameless neglect" during the
1980s. The mayors tell the media and their constituents that
Ronald Reagan and his cuts to local government are responsible
for the doomed cities, but they should know better. Since 1965,
Washington has spent approximately $2.5 trillion on aid to cities
and on inner-city residents in the War on Poverty. Despite the
equivalent of 25 Marshall Plans, the conditions of cities have
deteriorated.
     Yet at a time when the plight of cities seems nearly
hopeless, three new-style, big-city mayors have emerged who
believe most of the answers to city problems begin at home, not
in Washington. These mayors -- Philadelphia's Edward Rendell,
Indianapolis's Stephen Goldsmith, and Milwaukee's John Norquist -
- desperately are trying to reverse the flow of families and
businesses from their cities. Their ideas merit the attention of
mayors across America.

The Philadelphia Fighter

     For most of its history, Philadelphia was an attractive city
to live and work in. Thanks to inexpensive row houses, the City
of Brotherly Love was the nation's leader in working-class home
ownership. Crime was low in tightly knit ethnic and middle-class
black neighborhoods. Central High School and Girls High School
were among the best big-city public schools in America.
     Over the past 30 years, however, Philadelphia has been a
prime example of city mismanagement and urban decay. In 1984, the
police department burned down two blocks when trying to evict the
radical MOVE cult. Sidewalks were so filthy a few years back that
the Philadelphia Daily News published a regular column under the
pseudonym, the "Marquis of Debris." During the past 20 years, a
fifth of the city's population has fled as crime has skyrocketed,
schools have degenerated, and city finances have hurtled out of
control.
     City Hall in Philadelphia long had been famous for
corruption and patronage. "The history of the city of
Philadelphia is a history of bad government," says Fred Voight,
who directs a government watchdog group called the Committee of
Seventy. "In the 300-odd years of the city's history, we've had
about eight years of good government." Despite this, for most of
that time City Hall lived within its means and did not pose an
undue burden on Philadelphia residents and businesses.
     Not so in the 1970s, 1980s, and 1990s, as never-ending
budget shortfalls have been resolved by raising taxes and relying
on state and federal aid. After a decade of teetering on the edge
of fiscal catastrophe, Philadelphia hit rock bottom in 1991. The
City Council turned down a proposed 20th tax increase. The bond
rating fell below junk status. Pension and vendor payments were
suspended and city workers were unsure of receiving their next
paycheck. City & State magazine rated the City of Brotherly Love
last among the 50 largest cities in terms of fiscal health and
called it "the city that has set the standard for fiscal
distress."
     Then came the election of Edward Rendell in 1991. A Democrat
and native New Yorker, Mr. Rendell, Philadelphia's former
district attorney, ran a campaign to the right of his Republican
opponent and handily won the mayoral race on a platform that
promised pain and cuts in government. This was quite a change for
a man who, for most of his political life, was a classic liberal
Democrat. "Ten years ago, tax-and-spend liberal would have been a
fair label," admits David Cohen, the mayor's chief of staff and
alter ego. "The Rendell of the 1990s, however, is not a Ted
Kennedy Democrat. He recognizes that government can't be all
things to all people all the time."

Inheriting a Fiscal Disaster

     By the time the new mayor took office in January 1992, the
city had a $208-million budget shortfall -- projected to rise to
$1.4 billion in five years. "Rendell inherited a fiscal disaster
of a magnitude not seen in the city since 1931," maintains the
Committee of Seventy's Fred Voight.
     Previous mayors faced deficits by raising taxes, 19 times
during the 1980s alone. By 1991, the city's tax burden on the
average family was the highest among all east-coast cities and
twice as high as in Philadelphia suburbs. Businesses also were
socked with high taxes: the typical mom-and-pop store paid twice
the taxes of its suburban counterpart.
     Mr. Rendell realized that this pattern of tax increases had
to end before Philadelphia's remaining taxpayers followed what
had become an annual migration to the suburbs. So he took tax
increases off the table. He pointed out that despite nearly two
tax increases a year in the 1980s, tax revenues, in terms of
purchasing power, did not grow. Why? With each tax increase, more
and more taxpayers fled the city; 20 percent of the population
was lost in the past 20 years. Only the poor were staying. A 1987
study by the Wharton School at the University of Pennsylvania
estimated that up to 130,000 Philadelphia jobs were lost just due
to the differential in wage taxes in the city and surrounding
communities. "If people could have sold their homes, three years
ago there would have been a mass exodus from the city," says
life-long resident Jack Adler.
     Also rejected for closing the budget gap were
across-the-board spending cuts, viewed merely as a quick fix that
would do nothing to solve the structural problems of
Philadelphia's government. This left only one choice available --
to cut the actual costs of government.

Standing Up to the Unions

     Philadelphia's per-capita operating budget rose by 30
percent in the 1980s, after adjusting for inflation, according to
the American Legislative Exchange Council. The major culprit was
the rapid expansion of public employee wages and benefits, which
account for over half of the city budget. A 1991 report by the
Pennsylvania Economy League found that city clerks and typists
were paid 50 to 70 percent more than their private-sector
counterparts in the area. City security guards were paid over 80
percent more than private ones.
     The basic public-employee benefits package made even the
Scandinavian-model welfare states look Scrooge-like in
comparison. Entry-level workers in Philadelphia received 52 days
off each year. Leave time alone cost the city $75 million on
regular and holiday overtime pay in 1991. In almost every area --
holidays, pay, and health care -- the city's benefits packages
were higher than all other American cities.
     City work rules added other costs: firing employees had
become virtually impossible; employees could not be required to
work overtime or do any work under their job-level
classification; contracting out most services was prohibited; and
volunteers could not be used if they displaced any city workers.
     Some of the work rules sounded like bad jokes. Take the
so-called "touch and feel" requirements in the Department of
Public Works. Sludge first had to be scooped from the water pipes
into trucks, then unloaded onto the ground, and then shoveled
into another truck. Result: it took 10 people to transfer sludge
from the city's water pipes to a dumptruck. At the Department of
Human Services, program analysts and supervisors had refused to
use computers for word-processing or spreadsheet operations
because using a computer was not in the job description.
     To cut the costs of city government, Mayor Rendell knew he
had to go after the extravagant wage and benefit packages and
work rules. He also knew he had to play hardball against the very
powerful public-employee unions in a union town.
     His confrontation came in fall 1992, when he rallied the
voters of Philadelphia during a strike by public-sector unions.
With the public overwhelmingly backing the mayor, the walkout
lasted only 16 hours, and Mr. Rendell and the city's taxpayers
emerged the clear winners. He was able to win $353 million in
wage concessions from the unions over four years, including a
two-year pay freeze with only slight increases in 1995 and 1996
(2 percent and 3 percent respectively). Vacation days were cut,
as was the city's monthly contribution to the employees' health
packages, saving $70 million a year. The mayor also won the right
to lay off employees and contract out services, and he eliminated
many of the absurd work rules.
     Are there any lessons here for other cities paralyzed by
strong unions? Mayor Rendell's 81-percent popularity rating after
the strike demonstrates that the "population of this city," says
Mr. Cohen, "cares more about fiscal stability and sanity than
they do about giving generous benefits to the municipal
workforce."

Management and Productivity Improvements

     Mayor Rendell also has enlisted private-sector help -- at no
cost to taxpayers -- in improving city services. Soon after
taking office he created the Mayor's Private Sector Task Force on
Management and Productivity, composed of 41 CEOs from
Philadelphia corporations and over 300 other business executives.
Their job is to take a microscope to city operations and design
ways to save money, increase productivity, streamline government,
and deliver better-quality services.
     The task force, along with city officials, has identified
over 200 cost-saving management and productivity initiatives.
They run the gambit, from eliminating 600 traffic signals and
replacing them with stop signs to streamlining and modernizing
the city's computer information system. Other projects include
centralizing fleet maintenance, contracting out some repair work,
and eliminating duplication of services by different city
departments. Sexy? No, but these changes are saving the city $150
million in the first 15 months alone, according to Mr. Cohen.
Meanwhile, about 1,300 positions have been eliminated from the
city payroll, and employees who remain are being shifted to
high-priority duties. Although the number of police officers was
cut by 200 last year, for instance, the city put 100 more police
officers on the street.

Turning to Privatization

     Increasing productivity, however, can go only so far in a
monopolistic organization with no competitors. Mayor Rendell also
is gradually privatizing city services and facilities through
competitive bidding. Six services have been privatized so far,
including janitorial work in city hall, art museum guards, two
trash transfer stations, and maintenance of a local expressway --
all for a one-year savings of $18 million. Another 38
privatization candidates have been identified, including the city
print shop, the city's nursing home, and one of the district
health centers.
     According to Linda Morrison, who administers the city's
competitive contracting program, cost savings from putting
services out to bid average 40 to 50 percent. Moreover, the
threat of privatization is having a ripple effect across city
government: to stave off privatization, in-house units are
quickly discovering ways to trim costs by 20 to 30 percent.
"Savings that weren't possible before suddenly materialize once
you put a service out to bid," says Ms. Morrison.
     The mayor also is privatizing the city's parking garages by
leasing them to private operators; outright sales will come later
when the real estate market improves. This demonstrates political
courage. Called "a cesspool of political patronage" by one city
employee, the city parking authority is a major employer of
politically connected Democrats.
     While Mayor Rendell's first-year results are impressive, he
needs three more years like it to turn the city around. Moreover,
he has no effective management system in place to insure that
productivity and cost-saving measures do not fall prey to the
bureaucracy. Advises one private-sector task-force member, "The
effort will never truly be successful until every commissioner
and every department head buys into the changes and is held
accountable." Mayor Rendell has been able to hold the line on
city taxes, but he will have to lower them if he is to make
Philadelphia more attractive to businesses and families.

The Neighborhood Mayor

     Milwaukee is famous not only for beer but for a
welfare-state tradition that originates in the city's German,
Scandinavian, and East European heritage. Its citizens long have
had great confidence in government's ability to do good: many of
Milwaukee's mayors this century explicitly have called themselves
socialists.
     By the mid-1980s, however, Milwaukee appeared ready for a
change. Big and generous government had not come without a price
tag -- high taxes and a welfare system associated with high
crime, family breakdown, and neighborhood decay. As in other
Northeastern and Midwestern cities, rising taxes, crime rates,
and deteriorating schools were driving businesses and
middle-income residents to the suburbs.
     Milwaukee now has a Democratic mayor who is trying to wean
the city's citizens from the notion that government can solve all
their problems. A former state senator, John Norquist first was
elected mayor in 1988, at the age of 38. Mr. Norquist had earned
a reputation in the state Senate as being in the left wing of the
Democratic Party. According to one longtime observer of state
politics, "If there was a bill to declare Managua the sister city
of Milwaukee, Mr. Norquist was always out front."
     However, Mayor Norquist has become much more skeptical of
big government. While still liberal on social and environmental
issues, he now advocates free trade and school choice, and calls
for abolishing the welfare system. He calls money from Washington
"the gift that stops giving" and says there are "a lot of federal
programs for cities out there of dubious nature."
     With the motto, "You can't build a city on pity," Mr.
Norquist set about dealing with each of the city's major
problems. To keep down the cost of living in the city, Mayor
Norquist has cut property tax rates in each of his five years in
office. The actual tax bill for most property owners has stayed
about the same, or even increased for some, because assessments
have risen. Without the rate cuts, however, taxes would have been
$25 million higher. He successfully opposed a $366-million
spending referendum for schools, arguing that higher property
taxes would force more people out of the city.

Measuring Outcomes Instead of Inputs

     Mayor Norquist also is keeping Milwaukee's spending growth
below the rate of inflation. He is doing this in part by setting
up a new budget process.
     In the private sector, managers are given performance tests
and rewarded for increasing productivity. In government, the
budgeting process often rewards managers for "growing" their
departments. All too often the system rewards the poorest
performers: if crime goes up, the police get more money; if the
kids cannot read and write, the schools get more money.
     Milwaukee's new budget system requires department managers
to submit strategic objectives, and managers are held accountable
for achieving these outcomes. Department managers must identify
their core businesses and ask the questions successful private
companies ask every day. Does this city service meet one of our
priority objectives? And if not, should we stop performing the
service altogether?
     "We're trying to use market forces to generate improvement
rather than set up a whole system of rules and regulations,"
explains City Budget Director Anne Brooker. "By holding
department managers accountable for outcomes we are generating
pressures from the departments themselves to do away with
inefficient city practices." 
     The police department, for example, decided that unlocking
car doors for people who had locked themselves out of their cars
was not part of its mission, and wasted valuable police time.
Now, people who call the police for such assistance are given the
phone numbers of local locksmiths. By becoming more efficient,
the fire department eliminated two ladder companies without
reducing its capability to respond quickly to fires. 
     City departments now are allowed to purchase computer
services, rent vehicles, or contract out for other services from
private firms. As a result, the city has cut costs, and the
increased competition has spurred some internal departments to
operate more like businesses.

Safer and More Prosperous Neighborhoods

     Mayor Norquist also recognizes the important role that
strong, safe neighborhoods play in maintaining the viability of
cities; it is the cornerstone of his approach to governing.
     To create economic opportunity in low-income areas, Mr.
Norquist has put in place a host of empowerment programs: tenant
management of public housing, enterprise zones, and working with
community organizations to set up incubators for small businesses
in depressed areas. Moreover, most building rehabilitation,
social and recreational services, and 50 percent of Federal
Community Block Grant money are contracted out directly to
community organizations. "We believe [the city] shouldn't be
doing things that others do better. Neighborhood organizations
can respond more sensitively to the needs of donors and clients
than we can," says Leo Reiss, the director of Housing and
Neighborhood Development.
     The mayor also understands that for neighborhoods to thrive
economically and socially, they must be safe. But ridding a
neighborhood of crime cannot be accomplished by the police alone
-- it requires strong community involvement. So, as in many other
cities, the police department is experimenting with
community-based policing. One of its more innovative community
policing programs is training landlords to better screen
potential renters.
     The important role that landlords play in keeping a
neighborhood strong and safe is well understood by police
officers, but often overlooked by policymakers and the courts.
Historically, landlords in low-income, working-class
neighborhoods adhered to the neighborhood's set of norms and
refused to rent to individuals who, in the landlord's judgement,
might be a negative force in the neighborhood. Landlords, for
economic reasons, desire essentially the same thing as neighbors
do for social reasons: responsible and conscientious tenants who
will maintain their property.
     Over the past 25 years, civil rights laws, government
regulations, and court rulings intended to prevent racial
discrimination unwittingly have made it difficult for landlords
to turn away prospective renters or to boot tenants out of their
apartments. The result: solid working-class neighborhoods have
been ripped apart by a rented house down the street turned into a
crack house.
     Almost by accident, Milwaukee has devised a simple, yet
potentially very effective way to fix this problem. Marty
Collins, a 15-year city employee, was looking for a way to
improve the city's drug addiction-prevention program. Knowing
that most drug-dealing in Milwaukee occurs out of rental
properties, he reasoned that the only people who really can
control the situation are the landlords.
     Mr. Collins surveyed Milwaukee landlords and found that 70
percent reported having had destructive tenants at some point,
yet virtually no landlords were using tenant screening
techniques. Many of these landlords were unaware that various
legal means allow them to screen out potentially destructive
tenants. Just requiring a favorable recommendation from two
former landlords instead of one, for example, can eliminate many
undesirable renters. Other effective and legal screening
techniques include credit checks and inspecting a prospective
tenant's current residence.  
     Modeled on a successful program in Portland, Oregon,
Milwaukee is teaching landlords how to screen out disruptive
tenants. A training manual has been developed, and the city will
conduct hundreds of training sessions for landlords over the next
year.
     In addition to the carrot, Milwaukee also is using the
stick. After two neighborhood complaints about drugs being sold
or manufactured from a rental property, undercover police will
attempt to buy drugs at the residence. A successful purchase
triggers a city notice to the landlord instructing him to stop
the property from being used for drug-dealing. If the problem
persists, the city takes the landlord to court and can ask for
the property to be confiscated by the city. It almost never comes
to this; 95 percent of the time, the landlords voluntarily fix
the problem after the city notice.

Choosing Parents over Bureaucrats

     Together with crime and taxes, education is a major cause of
the flight of people and jobs from cities. It is no secret that
the public school systems in America's big cities are in terrible
shape. Yet big-city mayors almost universally have opposed any
changes in the education system.
     Mayor Norquist, by contrast, argues that dramatic change is
essential -- that the current public school system should be
scrapped. He has no real authority over Milwaukee's public
schools; nevertheless, he has used his bully pulpit to support a
state-funded pilot program in Milwaukee that enables low-income
students to attend private schools. He wants to expand the pilot
program, now serving only 600 students, to the entire city. He
also has supported another voucher program -- funded by the
Bradley Foundation and other private institutions -- that enables
more than 2,000 low-income children a year to attend private
schools, including religious ones.
     Mayor Norquist minces no words when he describes the failure
of Milwaukee's public schools: "What we have is a school-finance
monopoly that is not helping public school children, is
suppressing quality, is not customer-oriented, and is overly
bureaucratic." It's too bad John Norquist must stand virtually
alone among big-city mayors in supporting choice. Even so,
inner-city students could do worse than having this 6'7" mayor in
their corner.

The Visionary Mayor

     To most politicians, there seems little reason to overhaul
city hall in Indianapolis. The city is one of the safest among
the 50 largest cities in all the major areas of violent crime.
Last year, the crime rate actually dropped. Race relations are
remarkably good. The public schools, while not great, are in much
better shape than in cities like Chicago and Milwaukee.
Indianapolis has a triple-A rating from Moody's -- the highest
possible -- and thanks largely to annexation, the city's
population actually has grown by about one-fourth in the past 25
years.
     But Stephen Goldsmith, Indianapolis's Republican mayor since
January 1992, is not at all like most politicians nor other
big-city mayors. Mr. Goldsmith is a visionary. He intends to make
Indianapolis the country's first 21st-century city and, in the
process, make his concept of smaller, competitive, and
decentralized government the model for the nation's cities.
     Like Philadelphia Mayor Rendell, Stephen Goldsmith began his
political career as a district prosecutor, has been in office
only a short 18 months, and quickly is acquiring a national
reputation. But that is where the similarities end. While the
gregarious, backslapping Edward Rendell prefers the thrill of
politics to the day-to-day responsibilities of management, the
more stoic Mayor Goldsmith seems more at home crafting policy
innovations than in schmoozing with City Council members.
     Since taking office, the workaholic mayor has embarked on
the most fundamental top-to-bottom restructuring of big-city
government in decades. Driving this revolution is Mr. Goldsmith's
conviction that government is a monopoly, and monopolies, whether
public or private, do not work very well. "A monopoly interferes
with the free market and makes choices that individuals would not
otherwise make," he says. "Government monopoly automatically
creates inefficiency."

Moving Services into the Marketplace

     To break up this monopoly, the mayor has embarked upon the
most comprehensive competition and competitiveness effort of any
major city in the country. To identify opportunities for opening
up city government to competition from the private sector, Mayor
Goldsmith created a private-sector advisory group called Service,
Efficiency, and Lower Taxes for Indianapolis Commission (SELTIC)
soon after taking office. The commission is comprised of nine of
the city's leading entrepreneurs, who each lead a team of
volunteers given jurisdiction over a major functional area of
city government -- including the departments of public works,
parks, recreation, and transportation.
     SELTIC's task is to systematically examine city services and
ask some very basic questions. Is this something in which
government should be involved in the first place? If so, how can
we inject competition into the provision of this service? Can the
private sector provide the service in a more cost-effective
manner than city agencies? So far over 150 services have been
identified as competition opportunities; over 40 government
services already have been moved into the marketplace.
     This competitive process has resulted in significant cost
savings for the city. A private firm now is doing the city's
microfilming for as much as 61 percent less than what it cost the
city. Printing costs are as much as 47 percent lower. And chalk
up another $1.8 million in savings by privatizing sewer-bill
collections. Even when city units have competed against private
companies and come in with lower bids, savings of at least 25
percent have occurred. Total savings from competition are at
least $10 million to $20 million, according to Skipp Stitt, the
lawyer who heads up the competitiveness program.
     But Mr. Goldsmith is interested in more than just making
city hall more efficient. He also wants to make it smaller. He
firmly believes that people governed least are governed best, and
he is not afraid to say so. "Doing things more efficiently is not
the ultimate end of government," explains the mayor. After
evaluating the value of the service, it may become clear that
"government should just get out of the area."
     Sounding like the CEO of a major corporation, he constantly
is encouraging his department heads to focus on their core
businesses, increase efficiency, and abandon activities that
provide little value to the taxpayers. The public works
department, for instance, decided it no longer needed its own
video-production and training center. The transportation
department stopped erecting fences on rideways and picking up
trash on the sides of streets. The parks department got out of
tree maintenance and saved $75,000.

Costs to Fill a Pothole

     When Stephen Goldsmith became mayor, Indianapolis had a
great credit rating and slick, four-color glossy financial
reports rivaling those of Fortune 500 companies. But when he
starting asking questions, like how much it cost to fill a
pothole or to clean out the sewers, no one could tell him.
Without this data, it was impossible to know whether city
services were being delivered efficiently, and he could not
accurately compare the costs of public sector delivery with those
in the private sector.
     So Mr. Goldsmith put in place a system called
"activity-based costing" to measure the total costs of performing
a service. Such costs could include material costs, supplies,
equipment, overhead, and personnel costs. Activity-based costing,
says Mayor Goldsmith, "is the door which has opened up
competition and privatization."
     The system has progressed the furthest in the city's
transportation department under the direction of Mitch Roob, a
management consultant whom the mayor lured away from a
prestigious local accounting firm. He shares the mayor's zeal for
applying successful business-management practices to government.
     Mr. Roob relates the story of the first target of
activity-based costing: filling potholes. The mayor had decided
to open it to competition. The line-level union workers soon
figured out what was going on, went to Mayor Goldsmith, and said,
"You are going to load onto our heads the overhead costs and
indirect management costs involved in filling potholes. There are
92 of us truck drivers and 32 supervisors above us," they said.
"We can't compete if you are going to attribute their salaries
into our costs of doing business."
     The front-line union employees asked the mayor to free them
from the burden of the supervisors. Mr. Goldsmith knew they were
right. Despite the fact that the managers were mostly Republican
patronage employees who had endorsed him in the election, while
the union workers probably had opposed him, he laid off the
supervisors -- catching a lot of flak from the local Republican
Party in the process. The city unit won the contract.
     Competition and activity-based costing not only forces the
government units to get better vis--vis the private sector, it
also encourages healthy competition between the different
government units. For instance, there are 13 city crews that seal
cracks in the roads. "If it's costing your crew a lot more to
patch a crack than the other crews, you're out there and exposed.
You're going to hustle to get your costs down," explains Ray
Wallace, a former Houston Oiler running back who now works with
the city crews on estimating the cost of their services.

Rebuilding Neighborhoods from the Bottom Up

     Mr. Goldsmith hammers away at the theme that government too
often displaces more important local institutions such as
neighborhoods, churches, and families -- the social
infrastructure of cities. He believes that the people in the
neighborhoods know better than government how to spend their own
money. "We tax somebody in a poor neighborhood, we accumulate
their limited wealth, and then we hire somebody in another
neighborhood -- for example, a parks worker -- to go back into
the first neighborhood and do an inefficient service. It's not
fair. It's not equitable," says the mayor. In an effort to
empower neighborhoods, for example, he has proposed letting
neighborhood groups and community-based businesses bid on
maintaining their own neighborhood parks and sweeping their own
alleys.
     Mayor Goldsmith knows, however, that it is not only the
social infrastructure of cities that has come unravelled over the
years; the physical infrastructure also has deteriorated. Last
year's Chicago flood was the most visible example of the crisis
that has been looming in cities for decades. The signs of decay
are everywhere: potholed streets, collapsing sewers, crumbling
curbs, and precarious bridges. Why has this occurred? Politicians
get credit for cutting ribbons on new projects, not for repairing
existing infrastructure. The result: maintenance is deferred on
things like sewer systems in order to pay for fancy new sports
stadiums.
     This used to be the way it was done in Indianapolis. You
cannot walk a few blocks in downtown Indy without running into a
new multi-million-dollar sports facility, while below you, the
sewers, some over 100 years old, deteriorate. After years of
neglect from previous administrations, the city's decaying
sewers, streets, bridges, and parks finally are getting some
attention. In order to stave off the kind of infrastructure
crisis now apparent in cities like Boston and Philadelphia, Mayor
Goldsmith has embarked on a three-year, half-billion-dollar
program to restore the city's infrastructure -- all without tax
increases.
     The city's projects are a far cry from the wish list of pork
projects that the country's mayors submitted to Bill Clinton for
his stimulus bill. You will not find any massive new road
projects, light-rail boondoggles, or big, new facilities. Rather,
the mayor is rebuilding the city's neighborhoods from the dirt
up, literally. Existing bridges, sidewalks, roads, curbs, and
sewers are being repaired both to extend the life of this
infrastructure and to preserve the asset value of the city's
investments. Again, Goldsmith the visionary is looking decades
down the road. Says Mr. Roob, who put together much of the
capital-improvement plan, "If you don't have good streets and
good sewers, the chances of having an economically viable city
are nil."

Deregulating the City

     While most burdensome regulations on free enterprise emanate
from federal and state levels of government, local governments
also are responsible for their share of barriers to enterprise
and homeownership. Ever-changing municipal regulations, ranging
from licensing provisions to building codes, stifle innovation
and entrepreneurship in America's cities.
     Like other government interventions that distort market
forces, city regulations are not safe from scrutiny under the
Goldsmith administration. A 12-member civilian panel, the
Regulatory Study Commission, has been charged with weeding out
unnecessary regulations and evaluating all newly proposed
regulations on a cost-benefit basis -- an Indianapolis version of
former Vice President Quayle's Competitiveness Council.
     The commission is taking a look at all kinds of regulations:
development codes and standards, zoning, licensing provisions,
occupancy requirements, and health and safety requirements.
Leading the effort are Gene Lausch, an attorney and 25-year
veteran of city government, and Tom Rose, a former Los Angeles
television reporter. They have exposed all sorts of bizarre,
outdated regulations. One city ordinance, for instance, required
all milk cows to be licensed by the city -- the rule had not been
enforced since 1961. In dollar terms, the commission's largest
first-year issue was forcing the Air Pollution Control Board to
rethink proposed regulations that would have made the city's
asbestos rules among the most burdensome in the nation. Estimated
savings: $16 million to $50 million a year.
     Mr. Goldsmith's deregulators know that their biggest
political challenges are yet to come. They now are closely
examining the possibility of deregulating taxis, and soon must
look at regulatory restrictions supported by powerful and often
very wealthy interests -- among them development standards,
signage restrictions, landscape requirements, and zoning laws.
They are determined to proceed even though they expect bitter
opposition.
     Whatever mayors do, the communications, transportation, and
information revolution of today's economy has destroyed some of
the historic advantages of urban life. Fax machines, next-day
cross-country package delivery, phones with video monitors, and
suburban shopping malls and gourmet restaurants with plenty of
parking all make it less necessary for people and businesses to
remain in cities. A house in the country -- or at least in the
suburbs -- remains the American dream for most families with
children. Modern technology now makes this dream easier to
achieve.
     Cities, of course, still have enormous advantages of their
own: the grandeur and beauty of civic buildings and public
squares, world-class theaters and museums, the hustle and bustle
of city streets, the neighborhoods with their rich traditions,
the ability to get places by walking, and the energy and vitality
of the people, many of whom are immigrants, who still come first
to cities to raise families and build careers. Many cities also
could become more attractive economically, as suburban taxes rise
and land costs in suburbs begin to surpass those of metropolitan
areas.

Cities Can Work

     Yet if big cities are to escape the nightmarish,
crime-ridden future like that portrayed in the post-industrial
movie Blade Runner, conditions in them must improve dramatically.
As long as the good in cities is outweighed by the bad -- abysmal
schools, skyrocketing crime, high taxes, bloated bureaucracies,
and shoddy services -- people and businesses will continue their
flight.
     This need not happen. In different ways, in different
cities, Edward Rendell, John Norquist, and Stephen Goldsmith are
demonstrating that big cities can work -- if the right policies
are adopted. Their success confirms that by applying a dose of
fiscal conservatism and competition to city government, basic
services can be provided effectively without higher spending and
new taxes. They are showing the positive effects of bringing in
the local business community to help cut back city hall, rather
than pushing businesses away with ever-higher taxes and
regulations. They are revealing how -- by using markets instead
of mandates and empowering neighborhoods rather than
bureaucracies -- problems can be overcome that once seemed
unsolvable. They have learned that to reduce crime, police must
be reconnected to the community, and neighborhood residents and
landlords must be given the empowerment to maintain civic peace.
     City dwellers across America are beginning to take notice.
Running on a platform of tax cuts, school vouchers and reducing
the city's workforce, Bret Schundler became Jersey City's first
Republican mayor in 75 years. Mr. Schundler won the May election
with 68 percent of the vote in a predominantly Democratic city.
In June, Republican Richard Riordan was elected mayor of Los
Angeles on a platform of privatization and more police on the
street. These elections prove that voters who love urban life are
recognizing that cities are too important to be left to a
business-as-usual City Hall.

WILLIAM D. EGGERS directs the Privatization Center of the Reason
Foundation in Los Angeles.

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