MODELS OF GOVERNMENT The concentration or proximity of people and STRUCTURE AT THE LOCAL firms in cities increases social and economic LEVEL1 interaction and results in the exchange of ideas among people working in different fields in the By same location. This exchange of ideas is essential for innovation. Enid Slack Enid Slack Consulting Inc. To attract businesses, cities not only have to ([email protected]) ensure access to skilled labour and transportation and communications INTRODUCTION infrastructure but they also have to provide those services that attract and retain highly trained Interest in cities around the world has 4 increased significantly over the last decade. This human capital. According to Richard Florida, interest has arisen in part because more and the knowledge workers are attracted by quality more people are living in cities and, in part, of life factors such as diversity, tolerance, a because it is increasingly understood that large lively arts scene, recreational opportunities, high cities and city-regions2 are the major drivers of quality public schools, strong neighbourhoods, economic prosperity for the countries in which and safety from crime. As Savitch and Kantor they are located. note: “where you live and work matters more than ever in accessing jobs, income, public 5 Globalization has fundamentally changed amenities, schools, and green space.” the role of cities. In the new knowledge-based economy, knowledge and learning are key In this context, local governments have an determinants of economic success. Firms are no important role to play. Not only do they have to longer competing only on the basis of achieving ensure access to skilled labour and the lowest cost, but they also are competing on transportation and communications the basis of their ability to innovate: to come up infrastructure but they also have to provide those with new products and to deliver them in a services that attract and retain highly trained timely manner.3 Cities are key to innovation – human capital. This means that cities need the they are places where workers, capital, financial resources that will enable them to build institutions and infrastructure come together to and maintain the infrastructure and to deliver the provide the foundation for economic activity. services that will attract skilled individuals and firms. The appropriate local government structure will help them to do this. 1 This paper was first prepared under the auspices of The Consortium for Economic Policy Research and Good local governance also has a role to Advice (CEPRA) in October 2003 -- a project of play. The main contribution of local governance cooperation and technical assistance sponsored by the is to the livability of cities in terms of health and Canadian International Development Agency safety, recreational opportunities, environmental (CIDA). The project is being carried out by the Association of Universities and Colleges of Canada health other factors that contribute to the quality (AUCC), working in conjunction with experts in of life. The type of government structure for academia, government and the non-governmental cities will have an effect on the efficiency with sector in both Canada and the Russian Federation. which services are provided and on the ability to share the costs throughout the entire region in a 2 City-regions generally refer to a defined urban fair and efficient way. Governing structure also centre with smaller adjacent urban and rural areas. 3 See Gertler, Meric S., Richard Florida, Gary Gates, 4 Florida, Richard, The Rise of the Creative Class. and Tara Vinodrai. “Competing on Creativity: New York: Basic Books, 2002. Placing Ontario’s Cities in North American Context.” A report prepared for the Ontario Ministry of 5 Savitch, H.V. and Paul Kantor, Cities in the Enterprise, Opportunity and Innovation and the International Marketplace: The Political Economy of Institute for Competitiveness and Prosperity, Urban Development in North America and Western Toronto, 2002. Europe, Princeton, New Jersey: Princeton University Press, 2002, p. 16. Working Paper 2004(4) © 2004 IIGR, Queen’s University Enid Slack, Models of Government Structure at the Local Level has an impact on citizen access and government now way intended to be comprehensive, accountability for the expenditure and taxing they do illustrate some interesting decisions it makes. experiments with different types of structures. The purpose of this study is to compare • The fifth part draws some general different models of government structure at the conclusions about governing structures local level and to evaluate their advantages and around the world. disadvantages. The study will focus mainly on government structures in large cities but will It should be noted at the outset that the also look at governance in smaller, remote discussion of government structure around the communities. Examples of different cities world makes clear that different structures have around the world will be used to illustrate how worked in different places at different times. different government structures work in practice. Indeed, individual cities have tried different structures at different times. It is thus very The outline of the paper is as follows: difficult to generalize from the examples provided because there is not one model that • The first part sets out the standard public stands above the rest. The appropriate governing finance criteria for designing government structure in any one municipality will depend on structure: subsidiarity and local its specific characteristics – the nature of the responsiveness, economies of scale, services it provides, the revenue sources externalities, equity, access and available to it, the size and location of the accountability. Some of these criteria call municipality, the size of the municipality for large government units to deliver relative to the state/province or country as a services; others suggest small government whole, the nature of intergovernmental relations, units would work better. the history of cooperation with neighbouring municipalities, and other factors. • The second part discusses the application of the above criteria to communities of CRITERIA TO EVALUATE DIFFERENT different size and location. In particular, MODELS OF GOVERNMENT the circumstances of large metropolitan STRUCTURE areas on the one hand and small remote In terms of economic theory, the major role communities on the other hand are assigned to regional or local governments is to considered. provide goods and services within a particular geographic area to residents who are willing to • The third part describes and reviews the pay for them.6 If the benefits of particular advantages and disadvantages of four services are confined to local jurisdictions (in models of government structure: two-tier other words, the benefits do not spill over into governments, one-tier governments, neighbouring jurisdictions), efficiency is voluntary cooperation (including inter- enhanced because the mix and level of services municipal agreements) and special can vary according to local preferences. Local purpose districts. It also considers the role officials are in a better position to respond to of senior levels of government. As part of local tastes and preferences than are officials of the discussion, examples are provided senior levels of government.7 from different cities around the world. 6 • The fourth part provides more in-depth Bird, Richard M. and Enid Slack, Urban Public descriptions of how different models work Finance in Canada, Toronto: John Wiley and Sons, 1993, p. 16. in four cities: Toronto (Canada), Vancouver (Canada), London (England), 7 The provision of local services does not mean that and Minneapolis-Saint Paul (USA). It also the municipality has to produce the goods and provides one example of governing services themselves, however. Rather, the role of communities in remote areas: Ontario local government is to make decisions about which (Canada). Although these examples are in services to provide and how to provide them. Municipalities could, for example, contract out Working Paper 2004(4) © 2004 IIGR, Queen’s University 2 Enid Slack, Models of Government Structure at the Local Level public services should be provided at the local According to this theory, the main objective level with local policy-makers making decisions in designing the optimal government structure is about what services to provide, how much to to maximize the welfare of individuals. The provide, and who should pay for them. welfare of individuals is assumed to depend, at least in part, on the satisfaction they receive Public choice theory argues that small-scale, from local public goods and services. The fragmented local governments have special optimal level of government is that which advantages for local democracy because they provides the desired level of local public goods maintain a quasi-market. The proliferation of and services at the least cost. Within this general small government units in a metropolitan area framework, several criteria can be used to design results in competition among them. Tiebout, for government structure: subsidiarity and local example, suggested that people "vote with their responsiveness, economies of scale, feet," meaning that they move to the jurisdiction externalities, equity, access, and accountability. with the tax and expenditure package that most closely resembles what they want.9 This Subsidiarity Principle and Local competition benefits