For stimulus, think cities
October 30, 2009
Harry Moroz, Philadelphia Inquirer
Metropolitan areas are the best places to spend federal money and spur growth.
President Obama has pledged "to explore each and every avenue that will lead to job creation and economic growth." One avenue would be redirecting nearly $300 billion in unspent federal stimulus funds to metropolitan areas, where most of the people, jobs, and gross domestic product in this country are found.
While states hoard federal money to do little more than plug yawning budget gaps, cities are more likely to use it to create jobs in the short term and drive economic growth in the long term.
Philadelphia and other local governments own and look after many of our greatest public assets: 75 percent of the roads, 50 percent of the bridges, and 90 percent of the mass transit in the country. For every dollar we put toward this infrastructure, we get back more than a buck and a half in new economic activity. That's what economists call high return on investment, and what the rest of us call a bargain.
A new study by the Economy League of Greater Philadelphia shows how much can be gained from investing in these assets. It cites a 2005 report that found that turning the city's northern Delaware riverfront into a greenway could mean a net benefit of more than $150 million for the area, and almost $4 billion for the state.
This is spending that would help offset the worsening fiscal and economic conditions expected in the months and years ahead. A national survey of city budget officers released last month revealed that cities are expected to feel the most severe effects of the recession in 2010, 2011, and beyond.
Many city governments have not assessed the fall in property values since the housing bubble burst. Property-tax revenues must shrink further before they can bounce back. Philadelphia assesses property on a rolling basis, but it is very far behind on reassessments this year, having completed only 15,000 so far, compared to last year's 413,000.
The employment situation is grim in cities across the country. Nineteen of the 49 largest metropolitan areas cite unemployment rates higher than 10 percent, and the rate in 34 of them increased by 5 to 6 percent over the previous year. Philadelphia's unemployment rate is more than 2 percentage points higher than the national average, and the metro area's joblessness has spiked by more than 3 percentage points in the last year.
And as Philadelphians know, city government can only play so many budgetary tricks before layoffs and service cuts become necessary. Unfortunately, the real pain has only just begun.
Major cities are where the stimulus will reach the most vulnerable people and spur the quickest rebound. Funneling more dollars to them would target the hard-hit areas that states have failed to help despite congressional orders. As Mayor Nutter told Obama in January, cities "have shovel-ready projects, people ready to be put to work, and are the perfect places to look for energy efficiencies and sustainable ways of doing business."
Mayors compiled a list of 15,000 infrastructure projects worth almost $1 trillion that could have begun soon after the stimulus passed. But state governments have largely ignored them.
Often bluntly, mayors have told Obama that giving states priority in the stimulus package was a design flaw serious enough to stamp out the beginnings of economic recovery. They are not just promoting their own interests. Hard evidence is on their side. Over the summer, a bombshell Conference of Mayors report revealed that the most populous 85 metro areas, containing 63 percent of the nation's population and generating 73 percent of GDP, had received less than half the stimulus transportation funds spent so far.
We should not just throw money at cities. Federal officials must help city agencies work together to determine which projects will produce the biggest impact. Instead of fielding duplicate applications for grants from multiple city departments - a problem reported recently in Philadelphia and elsewhere - federal officials overseeing the redirected stimulus should encourage cooperation inside city governments and even among cities. This should be done without the interference of state governments, which needlessly add another layer of bureaucracy.
Luckily, about 40 percent of the $787 billion federal stimulus package has yet to be obligated. There is still time to spend it wisely. If done properly, redirecting the remaining billions to cities could ensure future prosperity and enable Obama to claim victory after taking heat from the left and the right. Smart economics and smart politics can mix.
Harry Moroz is a research associate at the Drum Major Institute for Public Policy and a coauthor of the report "No Economic Recovery Without Cities: The Urgency of a New Federal Urban Policy." He can be contacted at [email protected].
http://articles.philly.com/2009-10-30/news/25273039_1_cities-federal-money-stimulus