'The Gift That Stops Giving'


August 02, 1993|By WILLIAM D. EGGERS

Los Angeles. -- The gradual implosion of America's big cities is one of the clearest examples of a problem that cannot be solved by the federal government. Since 1965, Washington has spent about $2.5 trillion on aid to cities -- the equivalent of 25 Marshall Plans.

The result? Worsening racial tensions, escalating crime, crumbling bridges and sewer pipes, and deteriorating services continue to force millions of city dwellers into safer, cleaner, lower-taxed suburbs. At the same time the U.S. population grew by 65 million, 15 of America's 25 largest cities lost a total of 4 million inhabitants since 1965. Two-thirds of new jobs created in the United States between 1960 and 1980 were in the suburbs.

But the nearly hopeless plight of many urban areas hasn't discouraged three bold, big-city mayors, who believe most of the answers to city problems begin at home, not in Washington.

When Philadelphia's Mayor Edward Rendell took office in January 1992, the city had a $208 million budget shortfall -- projected to rise to $1.4 billion in five years. Previous mayors faced deficits by raising taxes: By 1991, the city's tax burden on the average family was the highest among all East Coast cities and twice as high as Philadelphia suburbs.

Mayor Rendell took tax increases off the table. He identified the rapid expansion of public employee wages and benefits as the major culprit: Entry-level workers received 52 days off each year, and leave time alone cost the city $75 million in 1991. Mr. Rendell played hardball against the powerful public-employee unions and in a public fight during a union strike in fall 1992, he won wage freezes and benefit reductions.

To improve city services, the mayor established a task force of CEOs, business leaders and city officials that has identified more than 200 cost-saving management and productivity initiatives -- saving the city about $150 million in 15 months. One example: Although the total number of police officers was cut by 200 last year, greater efficiency has allowed the city to put 100 more officers on the street.

Milwaukee's John Norquist -- who calls money from Washington ''the gift that stops giving'' -- is another bold thinker when it comes to urban renewal. To keep down the cost of living in his city, Mayor Norquist has cut property-tax rates in each of his five years in office. At the same time, by holding department managers directly responsible for effectively delivering city services, he has kept city spending growth below the rate of inflation.

To create economic opportunity, Mr. Norquist has initiated programs for tenant management of public housing and for enterprise zones. He is working with community organizations to help set up small businesses in depressed areas. Moreover, most building rehabilitation, social and recreational services, and half of all Federal Community Block Grant money are now ''contracted out'' directly to community organizations.

Yet another example is Indianapolis' Mayor Stephen Goldsmith. When he became mayor, Mr. Goldsmith was amazed when no one in the government could tell him how much it cost the city to fill a pothole. He established a system to compare the cost of city services with similar services in the private sector, and allowed private companies to bid on everything from printing to sewer-bill collections to microfilming, saving city taxpayers millions.

The same competitive approach is restoring city sewers, streets, bridges and parks. Mayor Goldsmith has embarked on a three-year, half-billion-dollar revitalization effort, all without raising taxes.

Mayors like Messrs. Rendell, Norquist and Goldsmith show that it's possible for cities to escape the nightmarish future portrayed in post-industrial movies like ''Blade Runner.'' Their success confirms that fiscal conservatism and competition can enable cities to provide services without more spending and new taxes.

And America's city dwellers are taking notice. Running on a platform of tax cuts, school vouchers and reductions in the city's work force, Bret Schundler became Jersey City's first Republican mayor in 75 years. In June, Republican Richard Riordan was elected mayor of Los Angeles on a platform of privatization and better law enforcement. These elections prove voters who love urban life are ready for a new approach to urban problems. And it looks as if, at least in some places, they're going to get it.

William D. Eggers is director of the Reason Foundation's Privatization Center. This article is adapted from the summer issue of Policy Review, magazine of The Heritage Foundation.

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