Presented by Lamia KAMAL-CHAOUI, OECD Territorial Reviews and Governance Division
METROPOLITAN GOVERNANCE IN OECD COUNTRIES
Why metropolitan governance matters?
As globalisation progresses, urban regions are emerging as key players in the world economy. Therefore, the pursuit of competitiveness in urban regions has become a major local and national policy objective. Cities increasingly compete with one another, and with other cities around the world, to attract innovative investments and knowledge activities. Meeting the challenge of competitiveness . requires certain conditions, among which:
x Support clustering and innovation.
x Develop links between institutions of higher education, research institutions, private industry and government.
x Supply skilled human capital that can operate effectively in the knowledge and information-based industries.
x Strengthen communication – roads, airports, railroad links and electronic communications.
x Develop an international strategy and international networking.
And last, but not least,
x Cities are for living in as well as working in. The quality of life of a city is a key factor of competitiveness. Competitive cities need the economic, social, environmental and cultural conditions, which will attract and retain a potentially mobile workforce and capital. In particular, this includes:
1 o An attractive physical environment where urban sprawl, congestion and pollution, as well as distressed neighborhoods, are limited.
o A cultural environment characterised by the richness of natural and cultural amenities.
o A right social environment. Social cohesion and economic competitiveness are mutually sustaining, not mutually exclusive. High social disparities and poverty within metropolitan regions pose a major threat to social capital, a factor of economic growth.
The ability to meet all these challenges will depend upon substantially on the institutional capacity to mobilize public, private and community resources in the long term. Therefore, the success of the implementation of policies and strategies strongly depends on the governance framework.
Main challenges of metropolitan governance
The governance structures in place in the metropolitan areas of many OECD members are, generally, outdated and not well adapted to the tasks they face. Among obstacles to better governance are:
o Fragmentation of administrative jurisdictions, which results in a lack of correspondence between administrative and functional territories. One important consequence is that in many countries, metropolitan areas still function with a minimum of co–ordination and strategic planning at the local level.
o Strain on the financial and fiscal ability of local authorities in metropolitan areas. Metropolitan areas face four major financial and fiscal issues: They must adjust to decentralisation and fiscal federalism; increase local autonomy while reducing fiscal disparities within metropolitan areas; improve their access to investment capital; and integrate the private sector as an investment partner and service provider.
o Lack of transparent, accountable decision-making processes.
“Who does what” and at what level? Implementing decentralization and the principle of subsidiarity at the metropolitan level has led OECD Member governments to:
1. introduce national legislation or institutional reform to strengthen governmental structures for metropolitan areas at the urban or wider regional level;
2. adapt structures of urban public finance to better espouse new or modified institutional structures and responsibilities of different levels of government. This is taking place within an overall context of constraints on public expenditures whereby municipal and metropolitan authorities are being asked to do more with less;
3. modernise local government in order to improve the level and quality of services across the metropolitan region; and assess the impact of policies through performance evaluation;
4. replace hierarchical structures by new flexible forms of horizontal and vertical co-operation (partenerhsips involving several levels of government, or involving similar jurisdictions
2 within a metropolitan area, sometimes with the participation of the private and/or the voluntary sectors);
5. introduce greater transparency and accountability in decision making processes; improve the access of the public to information and public services; enhance local democracy through improved election procedures;
6. develop better frameworks for long term strategic planning; allow local authorities to take the initiative in the domain of economic development strategies and to work in partnership with the business community and jobseekers.
Main trends in metropolitan governance reform
New modes of urban governance, involving reform of traditional institutional and financial structures of major urban centres, are an arduous task. They pose a multitude of problems relative to the roles and responsibilities of different levels of government operating in metropolitan areas, intergovernmental co-ordination, and new relationships with the private sector and civil society.
In the 20th century, as major cities of OECD countries expanded geographically outward, old administrative boundaries usually remained in place, creating a patchwork of municipalities within the urban area, each with its own vested interests to defend. The lack of correspondence between administrative and functional territories has resulted in a complex policy environment in which area- wide consensus is difficult to reach on important multi-faceted medium and long term goals such as economic development and competitiveness, social cohesion, equitable public finance, and effective public services across the urban region.
While there is a need for area-wide structures which enjoy legal capacity and greater authority, it is, however, clear that a uniform model of general application is not appropriate even within one single country. There has been several experiences in OECD countries to create or reinforce area-wide metropolitan governments. One option, surely the most radicale one, has been the amalgamation, i.e. the mergers of municipalities. Amalgamations are promoted on the grounds that bigger metropolitan governments would improve competitiveness of metropolitan areas. With amalgamation, upper level of governments try to overcome the combined pressure of metropolitan fiscal fragmentation, in some cases off-loading of certain responsibilities, and limited powers at the municipal level. A further objective is to re-balance population growth and the patterns of social structure within metropolitan areas. Pro-amalgamations argued that this formulae can reduce duplication, produce economies of scale and scope for service provision, improve accountability, enable a more equitable sharing of the burden of taxation, and contribute to improved spatial planning capacity.
The recent amalgamations experiences in Canada have produced mixed results (Box 1). The main problem is that they did not have the support of all the hitherto independent urban or suburban municipalities. Cost reduction or quality increases cannot, as yet, be detected. Moreover, while the amalgamation process could probably lead to reduced fiscal competition and less social segregation along geographical boundaries, many of the objectives could have been achieved through voluntary inter-municipal collaboration on functional grounds. Merging financially stressed municipalities does not necessarily create one single strong city. In other countries, voluntary or horizontal collaboration has been successful to enhance a more direct participation. Finally, amalgamation in new large cities might, in the long-run, reduce the influence of the citizen at the municipal level. A positive aspect, nonetheless is that amalgamation help to increase awareness of urban problems at the upper levels of government.
3 Box 1. Main reasons for amalgamations of municipalities in Canada
Canada is the OECD country which has the most advanced experience with regards to the amalgamation of municipalities in metropolitan areas (e.g. Halifax Regional Municipality in 1996, the new City of Toronto in 1998, and the Greater Montreal municipality in 2002). There, a long-term structural trend has led to significant change in geography. Today, over 85% of the Canadian population live along the US border, predominantly in urban and intermediate settings and in a limited number of metropolitan regions and their surroundings. Like in most OECD countries, Canadian cities are emerging as key players in the national economy: in Ontario, Quebec, British Columbia and Manitoba, half or more of the provinces’ GDP is now generated by one single metropolitan area (respectively Toronto, Montreal, Vancouver and Winnipeg). In the meantime, they have been affected by several troubling trends in the 1990s: the persistence of poverty even during the recent economic recovery, the increase in the number of very poor neighbourhoods, the increase in homelessness. This has taken place in a context of federal cutbacks in transfer payments to the provinces, and the decentralisation of some social and infrastructure expenditures by certain provinces to the municipal level, in some cases with unfunded mandates. Municipalities and notably large city municipalities, created under provincial legislation, operate in a tightly controlled fiscal framework, derived from provincial legislation. With few exceptions, municipal taxing powers are limited to property taxes, which accounted for 55% of all municipal revenues in 1999.
While some countries favour amalgamations of local authorities with stronger metropolitan governments, others reject the introduction of another level of government and favour more fragmented systems, tempered by technical planning structures (often dominated by central government) to achieve area-wide objectives. This is particularly the case of American metropolitan areas, except for some experiences of creation of a metropolitan tier in some cities like Minneapolis or Portland. In Helsinki–Finland, public authorities now are thinking about reforming their metropolitan governance (Box 2). The proposal for the amalgamation of the four main municipalities of the area was rejected as the proposal runs directly counters to the country’s strong tradition of local autonomy. The main problem in Helsinki is the lack of co-operation between the municipalities in a context where interdependence of problems within the metropolitan region is on the rise (from immigration to economic development and housing). It could be argued that this may be a positive development allowing more competition and more diversity within the area that could contribute to the overall competitiveness of the area and that may provide incentives for municipalities to provide services cost-efficiently. Experiences in Western Europe or North America show however that this sort of dynamism has most of the time led to declining services, wasteful competition between areas and increased fragmentation making public policy less efficient.
Box 2. The need to rethink metropolitan governance in Helsinki
The Greater Helsinki Region consists of four regions, Uusimaa, Itä-Uusimaa, Häme (former Kanta-Häme) and Päijät-Häme. The 1 757 000 inhabitants living in these regions constitute approximately one-third of Finland’s entire population. With its 560 000 inhabitants, the capital city Helsinki is the largest city in Finland. The relevant municipalities can be divided into three groups: the core metropolitan area, which includes the four cities of Helsinki, Espoo, Vantaa, and Kauniainen (965 000 inhabitants); the rest of the Helsinki Region which includes eight surrounding municipalities from which many people commute to work in the core area; and the Greater Helsinki Region, which includes an additional 50 municipalities, among which are the cities of Hämeenlinna, Lahti, and Porvoo.
Greater Helsinki is well known for having developed a competitive cluster in ICT. In Helsinki alone, the information sector employed 56 000 people in 1998 and the estimate for 2000 is 59 000. The specialisation of the Finnish ICT cluster has been favourable for growth, contributing to significant agglomeration economies and territorial capital, while enabling the key locations to become more competitive and thereby attracting more firms. However, this specialisation has introduced considerable vulnerability, as it is dependent on a single sector rather than several sectors. Although size is far from being an obvious factor of economic success, Helsinki with its 560 000 inhabitants is commonly perceived as an intermediate urban centre in European or international comparison. It fears marginalisation on the North East corner of the EU and wants to address competition from, for instance, neighbouring Scandinavian countries as illustrated by the bridge between Copenhagen and Malmö, and the new region of Öresund, or the growth of Stockholm. A well-managed and better co-ordinated GHR of more than 1.5 million could be a response to the question of size within the so-called competition between urban
4 regions. In particular, in order to organise and sustain growth, the Helsinki region needs financial support to make major investments in terms of infrastructure and housing. Also, uncontrolled, dispersed urban sprawl requires co-operation between planning authorities (regional councils and municipalities) within the GHR in a context of long established autonomy of municipalities that may prevent it.
The success that the region has enjoyed and the absence of any imminent crises provides little incentive for prospective thinking on the ability of the current system to sustain advantages indefinitely. However, maintaining the status quo – i.e. the present principles and policies, such as spatial integration, municipal sovereignty and voluntary regional co-operation would apply – raises concerns over the long-term prospects of integrated governance of the region. Projected social outcomes based on the emerging socio-economic differences are not desirable, as the city of Helsinki would end up with a disproportionately large share of the region’s poor and needy households. Although the trends are not yet dramatic, they are clear enough to cause concern given the large role that local governments play in providing social services. Immigrants dependent on social support and other allowances would tend to be concentrated, with attendant social problems in the city, although they would be spread throughout its neighbourhoods, without any distinctive ethnic area or subculture emerging. Espoo and Kauniainen and some other parts of the region would become progressively wealthier and more entrenched enclaves for the affluent, especially highly-paid workers in the IT economy. Despite the perceived advantages of scale to marketing the GHR, municipalities continue to compete among themselves to attract FDI. This reflects the relative weakness of co-ordinated regional marketing in contrast to the vigorous competition between municipalities, classically between Espoo (which was very successful) and Helsinki, but with Vantaa increasingly involved in the game.
Besides amalgamation, there is a range of possibilities for greater municipal co-operation mechanisms. One possibility is voluntary co-operation which unfortunately is often difficult to set up. An alternative is to develop more institutionalised forms of collaborative mechanisms, i.e. a system of programme contracts. New governance systems, involving a wide range of partners which act as networks, are likely in the future to replace the hierarchical structures actually in operation using contractual relationships such as partnerships between the central state and local government (and possibly the intermediate level). France has developed such mechanisms called “agglomeration contract” (see Mr Francis Ampe’s paper). In Canada, the federal government has set up the Urban Development Agreements in the Western provinces, which are tri-partite agreements, involving the federal, the provinces and the municipalities. However, their success has been limited by the fact they were generally unfunded.
More generally, urban partnerships have been widely used in two areas: to attack the multi- faceted problems of “distressed” urban areas and to redevelop urban brownfield sites. Now, it is increasingly agreed that such partnerships should be part of a more comprehensive process, i.e. included in a multi-sectoral and metropolitan area-wide contract that should meet the following criteria:
x They should be multi-sectoral, involve an integrated approach (public-public and public- private) to achieve desired outcomes (for example, more sustainable forms of urban development, regeneration of urban brownfields or distressed urban areas) and be handled at the metropolitan level even if they encompass neighbourhood or city-based partnerships.
x They should rise from a negotiated planning process among different levels of government.
x They need to be promoted via incentives.
x They require a structured round of negotiations, with clear objectives and a precise calendar, and with monitoring and assessment components.
5 x They should be binding and elaborated on a pluri-annual basis.
x They should be tailored to local needs.
Another possibility which is not mutually exclusive with the previous ones is the creation of a super-agency or metropolitan authority whose functions will depend on issues faced by respective metropolitan areas. The idea is that there are some functions which must managed at the regional level, i.e. at the level of the economic functional area. The amalgamation of the municipalities in Montreal gave birth to the New City of Montreal whose boundaries still does not coincide with the functional area as defined by commuting and regional clusters patterns. Thus, a new regional body called the Montreal Metropolitan Community (CMM) was created to handle responsibilities in areas of spatial planning, economic development, housing and transport, environment and waste disposal. It has rather a planning and co-ordinating than executives functions which are left to lower tiers. It is funded by the members municipalities (75%) and the provinces (25%) and is managed by a Board of Directors represented by the mayors of the several municipalities belonging to the Greater Montreal. The members municipalities have agreed to share half of the increase in total municipal property tax revenue with the CMM, which has also the possibility to impose tipping fees on new development of property. Helsinki is now thinking about creating such regional authority which would provide the opportunity to constitute more formal mechanisms to govern, and articulate the networks within an integrated perspective.
Many national governments are concerned about metropolitan governance. Some are thinking as well on how to set up a national law so as to strenghten the metropolitan level by introducing incentives. This was done by France which set up the “1999 Law relating to the strengthening and simplification of inter commune cooperation” (see Mr Francis Ampe’s paper). National governments in many countries also recognise the need to focus upon the problem of co-ordination and integration of national sectoral policies . Cross-departmental teams of politicians and/or officials have been created to mobilise support for a range of area-based urban policies. Ireland initially placed responsibility in the Taoiseach’s office to give it political weight; the Netherlands appointed a Secretary of State responsible for urban affairs; France created an inter-ministerial and inter- departmental committee; and Denmark created an Urban Commission with senior ministers involved to attempt achieve a cross-departmental collective response. The federal government of Canada, which dismantled the Ministry of Urban Affairs in the 1970s, is now thinking on how to reinforce its role in cities matters and intends to create an interministerial body to co-ordinate sectoral policies in urban areas. The idea is that central government still has a key role to play as the guarantor of national solidarity, although its role is changing from an interventionist conception of public power towards a new role as facilitator, strategist and regulator and as the leader of partnerships.
Finally, improving governance in metropolitan areas is not just about reforming institutions and finance, it is also about changing attitudes and the culture of governance. More “inclusive” and participatory forms of governance are replacing traditional “top-down” rule-driven systems. Achieving change in the culture of governance requires opening up the process to new actors or “stakeholders” who have a legitimate concern about their role and “place” in the urban area. The actors in the governance process now comprise a more socially and culturally diverse population, the business sector, associations, and all levels of the public administration intervening in the urban area. Any type of metropolitan reform should be supported by the citizens. The forced amalgamations in Canada were made possible in Canada, because there, municipal governments have no constitutional status. Their existence derives from provincial legislatures that have exclusive control over municipal institutions. As a result, a municipality is the “creature” of a provincial government and the structure of its institutions as well as the scope of its responsibilities are determined by provincial legislation. The absence of citizens support in Montreal has weakened the reform and since the election of a new
6 liberal provincial government, there has been a debate on how to desamalgamate the new city. This uncertainty and the lack of mobilisation around a common institutional project are detrimental to the competitiveness of the metropolitan area. A key requirement of any metropolitan reform is therefore recognition by local people of the “legitimacy” of the new institutional structures. Whether concerning new metropolitan level governments or inter-municipal co-ordination bodies, it is preferable to involve referenda or new political management structures, such as a directly elected mayor.
Concluding remarks
In conclusion, while there is no doubt that metropolitan governance matters, especially for economic competitiveness objectives, it should always be kept in mind that there is not one optimal governance structure. Co-operation is not a good as such, it depends on what it facilitates, how it is realised and who benefits. The governance structure of each large city must be tailored to its specific situation and national context. The challenge is to produce appropriate forms of governance which optimize the potential of a given urban region. These must be flexible enough to adapt to rapid economic and social change. Therefore, analysis and exchange of information nationally and internationally can clarify the policy debate on metropolitan governance. This is one of the mandate of the OECD Territorial Development Policy Committee which has launched an ambitious programme on metropolitan areas that include a series of reviews ( Busan is the first Asian metropolitan study), seminars and worshops as well as high-level international conferences and meetings.
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