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-7- I I I I i I I I I I I I I City governments seem to b~ much more oonce~u~d about their oc~uetitive . positions today, than ~ were .previcusly.--City governments always have tr~ed m to attract busxness wxthin theLr bozders, to enhance tax b~se, to improve job opportunities, or to make their c~nities m~re attractive. Today, however, they are more cc~petiti~ than ever before, despite the existence of state la~s that insulate them from extraordinary loss of revenu~ if new development locates outside their boz~ers. These laws include state aid to schools, state aid to cities, ar~ metropolitan tax-base sharir~ (also known as fiscal disparities). They are motivated, too, by other object ives . --Some of the motivation behir~ city government in~Dlvement relates to such ':soft': concepts as aesthetics and quality of life, not just their interest in attracting businesses. Quality of life itself is often said to be a fact(m: in attractin~ business. City ~ove~zm~_nts see ~lves as key particilu~nts in the overall beauty and liveability of their areas. ~adership in influencir~ real estate develoloment clearly resides at the level of city 9ovetnment today. Beyor~ the incentives ar~ rewards provided by the U.S. Tax Oode, city governments have beccme the prime mo~ers in public financial assistar~e to real estate develc~m~nt. They rely heavily on federal ar~ state statutes for money to stimulate such development. But city gov~nts az~ left largely on their own in decidin] eligibility. Except for a few national ar~ state programs that target a~istance for distressed areas, national and state purposes make it possible for cities almost everywhere to provide help. As a wkmle, city officials seam satisfied with such policies because they a%Did settin~3 one city against another in a l:oliti~l context and cost them little (x nothin9 directly. The political rewards are enormous. F~wever, implementation of such policies requires more dollars than a targeting approach, because dollars ~ust be provided to the cities whose need is of lower priority to assure that dollars al~o are provided to tlDse in need. Leadership coverin~ an entire urban area is limited--~he TWin Cities metropolitan area has one of the most respected ~rganizations in the nation for attackir~ urban problems: the M~tropolitan (kur~il. The Council is empowered by state law to assure that cities design their cc~prehensive plans to be oonsistent with their assigned capacity in regional infrastructure systems. But no policy of the (ka/ncil speaks to whether federal ar~ state real estate assistar~e should be cor~istent wi th regioI~l plans. Neither the Council nor any other regional or state ager~y in Mirnesota today is advisin9 city officials on wh~ther luotential assistar~e fc~ a gi~_n real estate develo~nent represents a w-ay: (a) to help renew a geographic area ~r (b) to encourage development in one location rather than another within the sam~ state or urban area, with no special renewal effect. Dollars invested have risen very fast.--~he investment of public dollars for real estate assistar~e by cities in g~irnesota has increased 10-fold ewer the past nine years. To illustrate, industrial re~anue bonds approved during a 12-month period by local 9overnments increased from $165 miklic~ in 1974 to ~1.3 billion in 1983. Durir~3 that sam~ time, th~ amount of property taxes captured arnually for deve]&~nt purpo~ under tax-increment financ~ increased from $437,000 to ~46 million. ~nactment of a federal cap on industrial revenu~ bonds is producin] a cutback in the a ~mcunts available for Minnesota cities f(x 1985 ar~ comir~ years. In fact, ii existir~3 federal law is not changed, industrial revenm bonds will be discor~inued by the er~ of 1988.