Splitting the Pot Instead of Racing to the Bottom

The Atlantic has a piece looking at what makes the Twin Cities an anomaly amongst metropolitan areas, and included this interesting description of the economic development arrangement there:

And how has the city stayed so affordable despite its wealth and success? The answers appear to involve a highly unusual approach to regional governance, one that encourages high-income communities to share not only their tax revenues but also their real estate with the lower and middle classes.
In the 1960s, local districts and towns in the Twin Cities region offered competing tax breaks to lure in new businesses, diminishing their revenues and depleting their social services in an effort to steal jobs from elsewhere within the area. In 1971, the region came up with an ingenious plan that would help halt this race to the bottom, and also address widening inequality. The Minnesota state legislature passed a law requiring all of the region’s local governments—in Minneapolis and St. Paul and throughout their ring of suburbs—to contribute almost half of the growth in their commercial tax revenues to a regional pool, from which the money would be distributed to tax-poor areas. Today, business taxes are used to enrich some of the region’s poorest communities.
Never before had such a plan—known as “fiscal equalization”—been tried at the metropolitan level. “In a typical U.S. metro, the disparities between the poor and rich areas are dramatic, because well-off suburbs don’t share the wealth they build,” says Bruce Katz, the director of the Metropolitan Policy Program at the Brookings Institution. But for generations now, the Twin Cities’ downtown area, inner-ring neighborhoods, and tony suburbs have shared in the metro’s commercial success. By spreading the wealth to its poorest neighborhoods, the metro area provides more-equal services in low-income places, and keeps quality of life high just about everywhere.

Such an arrangement would auger well for every municipality, especially amongst Rust Belt cities.  Too often, the suburbs poach all the jobs and leave the central core to rot and die.  Many midwestern cities have begun to revitalize their downtowns, but 50 years of white flight, sprawl and lack of investment are extremely hard to overcome.  The whole article on the Twin Cities is interesting, because the case is made that for a region to succeed, everyone has to share in the work, and the benefits.