Cities, Change and Sustainability


Earlier in February, I had the opportunity to speak to visiting students and faculty from Korea at UT-Dallas. Most of these visitors are focusing on architecture, engineering and public policy so they are usually interested to learn about U.S. cities, governance and economic development. The following are some of the slides I shared. These focus on our early research into why so many cities find themselves in tough times financially. You can find the full briefing, which also covers some basics of Texas municipal government here.

Fiscally Healthy City

We define a fiscally healthy city as one that, over the long-run, its tax base and revenue system supports its services and infrastructure without causing competitive disadvantages.


The Fiscal Cycle

City Fiscal Cycle

Stylized History of U.S. Municipal Finances

The roots of municipal fiscal insecurity are largely from a lack of transparency and citizen engagement. That means… Lax fiscal practices and poor choices until… Major economic crisis reveals the level of ongoing fiscal stress. It is a regular pattern.

There was no golden urban age. U.S. cities have been trying to catch up to their constituents’ demands for more and better services for 200 years:

  • Population growth
  • Technology change (business practices and energy sources)
  • Awareness and costs of health and environmental risks
  • Political and cultural changes
  • Economic competition from federalism

Land use remains an ongoing challenge for cities. Cities shifted from a largely urban form to a majority suburban form. This has several consequences for sustainability:

  • More unproductive space per parcel (setbacks, parking)
  • Requires more public infrastructure per private building
  • Requires more city fleet and staff per household / business
  • More privacy, more space

Sprawl has higher internal and external costs, but mostly internal benefits. It is a higher-cost way of occupying the land. Over time, some cities can afford it, some not.

Neighborhood Decline and the Favored Quarter

Neighborhood Decline

You can find decaying neighborhoods of all types across America.

Any neighborhood, urban or suburban can decline. A city’s prospects depend on how much of its favored quarter remains inside its corporate limits. The fortunes of suburbs largely depends on which side of town they lay.

Favored Quarters

Favored quarters everywhere. Pinks = household inc. > $100K, blues < $25K.


DFW Fav Quarters

Dallas and Fort Worth each have a favored quarter, north and southwest, respectively.


Rise of Modern Cities

19th Cent City Spending

19th Century City Spending.

U.S. cities modernized in the middle of the 19th century. They added professional police and fire departments, adopted libraries and cultural facilities, built parks and all the modern infrastructure we associate with a city: paved streets, water mains and other utilities. Since that time, city spending has grown faster than city population. Larger cities have been spending more for over a century.


Safety Costs

Growing public safety costs, adjusted for inflation and population growth.

In the 20th Century, those services that were adopted in years past cost more and more. This is partly because we are a more metropolitan nation. There are more large cities with residents that have similar, high expectations about the appropriate level of municipal services. It is also because cities produce their services with a lot of labor. Local governments have done little to replace staf with automation, but there have been significant increases in the capital equipment that have helped these staff improve the effectiveness of operations. Still, worker costs keep increasing. Cities will need to look for different ways of delivering services if they hope to stay solvent in coming years.


City Priorities in Hard Times


In this post, we share our latest research on city budget trends. The Great Recession (2008/2009) was the most traumatic downturn for cities in a generation. City’s budget responses to the recession help us understand city priorities. What happened to high-profile city services? We focus on police, fire, park and recreation, and libraries across the U.S. and in Texas.

Data Source

We used data from the U.S. Census Bureau Census of Governments for 2007 and 2012. These are the most comprehensive and accurate measures of local government spending. These Census years let us measure the change one year before the downturn to three years after the bottom. Because of the lag in property tax decreases, most cities saw their worst economy three years after the recession. This should mean that 2007 and 2012 represent the best and worst budget years since the 1980s for most cities.

We are reporting percentage changes in spending that have been adjusted for population growth and inflation. First, we calculated per-capital spending for each year, then changed the 2007 values into 2012 dollars using the state and local price deflator from the U.S. Bureau of Economic Analysis.

Core City Services

In this first look, we wanted to know what happened to the most high-profile city services. We included the two largest operating expenses for most cities: police protection and fire protection. We also looked at two other visible services: park and recreation (parks) and libraries.


Overall, cities nationally cut these four services more than did cities in Texas. Cities in the U.S. and in Texas saw much larger decreases in parks and library spending than in the two public safety areas. In the U.S., spending changed as follows: police (-0.1%), fire (-1.3%), parks (-8.5%) and libraries (-10.2%). The respective changes for Texas were: police (+4.0%), fire (+4.1%), parks (-9.3%) and libraries (-4.0%). So Texas public safety actually experienced higher funding levels after the recession. Remember that this calculation is adjusted for inflation and Texas’ faster growing population. While still cutting, Texas cut libraries less than U.S. cities overall. The U.S. and Texas had similar reductions in parks spending.

Summary observations:

Based on highly visible public services, the recession was a bigger hit to spending nationally that in Texas.

The largest city service in budget terms, police spending, was essentially held flat nationally, but grew in Texas. The recession was certainly a blow to police budgets, but in total, cities’ response was to slow the rate of growth in police spending and cut other services more.

This analysis does not tell us how tax and fee changes impacted cities’ budget strategy. We know that there were many fee increases nationally and some cities raised taxes. Cuts would have been deeper without those revenue strategies, but we will have to consider them another time.

What’s Next

Next week, we will continue our series profiling the economics of major city services when we turn to the service that faired worst in today’s post: park and recreation. In the meantime, let us know how we can help you make more confident economic and fiscal choices for your community. Contact Us.

Research You Can Use

Each month we share some findings and trends we discover in our efforts to track issues that are critical for municipal success. For August, we want to call your attention to recent research on open data, advanced industries and police and community engagement.


Public Attitudes on Smart Cities and Open Data

Smart Cities, a catch-all for more effective government use of information technology, is a hot topic. The agenda so far has been driven by vendors with technology solutions looking for government problems to solve. City governments have been slow to adopt because of budget constraints and waiting for other cities to assume the pilot role. What about the public attitude on government and data issues? The Pew Research Center looked at public perceptions on the topic. The bottom line is that citizens have mixed opinions about government’s ability to effectively use these tools. The good news for cities is that citizens view local governments more favorably than their state and federal counterparts in this area.

For your consideration: Americans’ View on Open Government Data


Advanced Industries and Economic Growth

Brookings Institution Metropolitan Policy Program continues good work tracking the fortunes and role of America’s advanced industries. They define advanced industries broadly. It goes beyond traditional information technology. The focus is on any industry that extensively uses science and research-driven processes to make tangible or intangible goods. It includes sectors like autos, life-science driven companies and traditional information technology, among others. Their latest report found that 60 percent of the economic and job growth in recent years was in these advanced industries. Over 100 metropolitan areas had growing advanced industry sectors. Fifty-nine were slowing or declining over the period. The rest were flat.

For your consideration: America’s Advanced Industries: New Trends


Better Police and Community Engagement

As our recent blog pointed out, policing is the largest operating budget item for cities and towns, and the foundation of local government’s legitimacy in the public eye. Recent shootings across the country have focused more attention on the central role of law enforcement in our democracy. There are clearly opportunities for learning and understanding all around. Education and engagement for local governments and citizens is a good place to start. The U.S. Conference of Mayors released a lengthy collection of efforts to bring police and citizens together for dialogue. There are many great ideas and successes in these efforts already.

For your consideration: Community Conversations


What’s Next

Next week, we will report some of the work we are doing on local economic development and city public finance. In the meantime, take a look at these reports and let us know how we can help you make better choices for your community. Contact Axianomics.

Economics of Policing


Effective policing is critical to society. The police are the most visible demonstration of government’s monopoly on the use of force. Government’s very legitimacy depends on effective and fair policing. Policing is also critical for economic stability in a community. Public safety and the protection of property are the foundations to any successful economy. Finally, policing is a huge focus of government spending. It usually represents the largest piece of cities’ and towns’ operating budgets. Local leaders and their stakeholders should pay closer attention to the economics of policing. Except where mentioned, the statistics in this post come from the Bureau of Justice Statistics.

Scope of Policing in the U.S.

There are about 700,000 police officers in the U.S. Two thirds are at the local level. Two thirds of local officers are with city departments. The rest are in sheriff’s departments and special districts like transit, university and school district departments. Three fourths of the nation’s police departments have 25 or fewer officers. Fully one-third of all officers work in large forces with 1,000 or more sworn officers.

Context Before the Great Recession

A 2013 report by the Justice Policy Institute reviews trends in policing in the decades before the Great Recession. To summarize, the public response to rising crime rates in the 1970s and 1980s took the form of more resources devoted to policing and new policing policies. Beginning in 1994, the federal government provided funds for local departments to recruit and train 100,000 additional officers in community policing tactics. This strategy coincided with zero-tolerance policies and included among other initiatives, the war on drugs. The result was a dramatic increase in police encounters, arrests and incarcerations. Over the same period, there was a dramatic decrease in violent crime. Reported incidents fell almost 50 percent from early 1990s to the Great Recession.

Conflicting Evidence of the Recession’s Impact

Nationally, total spending on police by local governments continued to grow through the Great Recession. Total spending was $72.6 billion in 2007 and had increased to $84.0 billion by 2012. These national totals contradict survey research and other anecdotal reports from departments at the time. The Police Executive Research Forum began surveying departments in 2008 to assess police department responses to the recession. For various reasons, local government budgets felt the effect of the recession three years after the national economy hit bottom. In 2010 half of the departments being surveyed were still facing reduced budgets and 40% planned to have additional cuts in 2011. This was two full years after the official end of the national recession.

It may be that some of the media stories and survey studies at the time were capturing what were actually reductions in the rate of growth in police spending in some communities. Another possibility is that the uneven impact of the recession caused dramatic cuts in some communities but only slowed spending increases in others. There were dramatic examples of departments in poorer communities reducing their forces.

Nevertheless, across the U.S., police departments reported several other strategies they were implementing to manage budgets after the recession. These included: prioritizing calls and not responding to low-level crimes, hiring private security officers for some services, civilianizing portions of the police process, mergers of local departments and sheriff’s offices. It may be that departments faced with several years of lower than historic budget growth were increasingly scrutinizing their spending.

Future Efficiency and Effectiveness Concerns

Regardless of whether a given local department had to actually cut its budget or just slow the rate of growth, several challenges remain for local leaders who will be making the decisions on police policy and spending. Three in particular include:

Continued competition for talent among some departments and with the private sector. Talent is the number one issue when it comes to more effective policing. The key to effective use of that talent is better, ongoing training and better human resource management, particularly supporting officer health.

Improving community relations. Communications, engagement and transparency are perhaps some of the best ways to build a baseline and track police effectiveness and efficiency. Citizen involvement and departmental transparency help improve public perception of policing.

Better use of technology is a third key efficiency and effectiveness focus. Recent work by the RAND corporation highlights that the human factor in technology is an essential gap. Needs include better information on best practices, training on the use of technology including social media, and procurement and deployment of new tools.

All three issues are key drivers of police spending. They will need to be addressed by local leaders who want their governments and police forces remain effective and be even more responsive to unique community needs. There is a role for analysis in each area. This includes a focus on efficiency that goes beyond typical pay and pension debates that surround police finance. Long-term sustainability of effective policing requires better police practices that address community needs, fairness and efficiency.

What’s Next

Next week, we will highlight some of the most interesting local government finance trends and studies we discovered over the last month. In the meantime, let us know how we can help you nurture your community through better decisions.