metro governance6 (00000002)

Metropolitan Governance

Shanghai, China, November 1, 2015

Abhas K. Jha, Practice Manager & Head of Singapore Urban Hub, WB

Key Messages

1. Metro areas are economic powerhouses but face diseconomies of scale from fragmentation

1. Good metropolitan governance is challenging

1. An effective metropolitan governance body requires a clearly defined scope, financing capacity, consensus-building– and often times help from upper levels of government

I. METROPOLITAN SIGNIFICANCE

Metropolitan Areas as Economic Powerhouses

Metropolitan areas continue to power national economic growth

- most registered faster GDP per capita or employment growth in 2014 than their respective countries.

Metropolitan Areas as Economic Powerhouses

Compared to their national economy:

• In 2014, 60% of metro areas outperformed in employment creation

• 1/3 of world’s 300 largest metro economies outpaced in GDP per capita and employment growth rates

Fastest Growing Metro Economies

Source: Brookings Institution

¾ fastest growing metro economies of the 300 largest metro economies are in…

Metro GDP per capita & employment

growth rates by region

China: Rise of Second-Tier Cities = Dispersion

In China:• Second-tier metro

economies are the fastest growing over the past 5 years, signaling economic dispersion

• largest metro areas lagged in growth

Benefits of Agglomeration Economies

• Agglomeration economies have a large effect on a city’s growth rate, as productivity and wages usually increase with city size.


Recent studies suggest that for each doubling in population size, the productivity level of a city increases by 2-5%.


Benefits of an agglomerated economy spillover onto well connected, nearby populous cities

Studies suggest that if the population within 300 km doubles, the productivity of a city increases by 1-2%.

II. CHALLENGES OF METRO GOVERNANCE

WB report identifies Shanghai urban area as including several districts of Shanghai, along with Suzhou city and the counties of Kunshan, Taicangand Wujiang.

Metropolitan Fragmentation

• Political administrative fragmentation may affect economic growth

• City’s administrative boundary does not encompass functions and flows of a metropolitan area

Fragmentation = Lower Levels of Productivity

Studies suggest that for a given population size, a metro area with 2x the number of municipalities is associated with around 6% lower productivity.

mitigated by almost half with metro governance

Metro Governance Addresses Fragmentation

• Metropolitan governance body can be an effective tools for coordination within metro areas

Majority have Metro Governance in OECD

68% of OECD’s surveyed 263 metro areas have a metropolitan governance body

Benefits of Metro Governance Bodies in OECD

Cities w/ metro governance body: decline in sprawl from 2000-2006; those without: increase in sprawl.

Work of Metro Governance Bodies in OECD

Most metropolitan governance bodies in OECD countries work on regional development (80%), transport (70%), and spatial planning (60%). 50% active in all three fields

Why is metropolitan governance so hard?

• Horizontal and vertical coordination challenges

• Lack of trust: among public, other municipalities, etc.

• Political agendas of each city and politicians

• Constitutional legal complications

• Unreliable financial resources for metro governance body– Cities do not want to share funds (wealthy cities do not want to

transfer resources)

– A new revenue source may not be an option

Context of Shanghai Governance

Shanghai

• Municipality of Shanghai is a special status “province-level municipality”

• (On same administrative level as “province”)

• Lots of responsibility to provide urban and social services


Shanghai Metropolitan Fragmentation

• Municipality of Shanghai includes 16 districts, 1 county -- a “metropolitan city”

• One-tier government

• Metro Shanghai Area could also include City of Suzhou and the counties of Kunshan, Taicang and Wujiang


Shanghai Metropolitan Fragmentation

• Financial incentives are required to enhance coordination and build a metro strategy

• Currently, metro area is parceled out among numerous local governments

• No tradition of spending and borrowing for large metro area

Regional Economic Coordination in YRD

Yangtze River Delta (YRD) could benefit from Regional Economy

• Polycentric regional economy with Shanghai as core

• Major cities are within 300 km, benefitting from agglomeration

Challenge of Horizontal Coordination

Chinese administrative system works as a nested hierarchy:

• each level of government interacts with only the next level up or down

Provinces Zhejiang Anhui Jiangsu Shanghai

SubprovincialCity

-Hangzhou-Ningbo

-Nanjing

Prefecture-Level City

-Hefei -Suzhou

Regional Economic Coordination in YRD

Yangtze River Delta (YRD) nodes require multi-level government coordination

Financial incentives or coordination vehicle are required

Fiscal Constraints for Chinese Subnational Govt

• Though China is a unitary government system, service provision and fiscal finances are highly decentralized similar to USA

– ¾ of public investments are undertaken by local governments, mostly at municipal and county levels

– Central transfers are not significant

• Subnational Governments (SNGs) are not allowed to levy taxes or borrow money from banks.

– SNGs need new revenue sources, i.e. property taxes, central transfers, or new funding mechanisms, e.g. PPPs

Fiscal Constraints for Chinese Subnational Govt

• Fiscal constraints for SNGs will affect efficacy of creating a metro governance body

• Lots of responsibilities for SNGs: County-level governments are responsible for pensions, unemployment, and income support schemes

Fiscal Constraints and Chinese Metro Governance

• Municipal finances constrain metropolitan governance: Lack of financing at municipal level makes it difficult for creation of overall metro strategy for spending, taxing and borrowing.

• No special transfers for metro coordination with municipalities of different sizes

• Similar challenges at regional level

III. KEY PRINCIPLES OF EFFECTIVE METRO GOVERNANCE

Key Aspects of Effective Metro Governance Bodies

• Reliable resources of metropolitan financing. Degree of institutional capacity depends on a metro governance body’s financial autonomy. e.g. federal transfers, financial incentives, bond issuance, other sources of revenues.

• Motivate collaboration by identifying concrete metro projects, yet ensure adaptability to context and needs of region/metro

• Clear authority yet some level of consensus-building and local participation

• Incentives and compensations for metropolitan compromises are set at upper levels of government

Financial Capacity + Metro Johannesburg

City of Johannesburg Metropolitan Municipality

• A “metropolitan city”

• Polycentric area: Sandton, Rosebank, Soweto…

• Single-tier metro govt

• Has financial capacity: Improved city’s finances to fund city projects in infrastructure, food security etc. Have issued bonds and collects property taxes

Financial Capacity + Metro Johannesburg

City of Johannesburg Metropolitan Municipality

Metro governance framework shaped by:

• Need to create a single tax base, regardless of race and spatial distribution

• Need to improve service delivery to informal settlements

• Avoid duplication of budgets and taxes for city/metro

• Legal and constitutional framework limiting extent of cross-subsidization across municipal jurisdictions

Metro Montreal: Lack of Incentives + Consensus

Montreal Metropolitan Community (CMM)

• In charge of land use, affordable housing, and transport, economic development, etc.

• Metro Land Use and Development Plan (2011) supersedes local planning took 11 years to pass due to lack of consensus-building/civic involvement and little financial incentives

City of Montreal

GREATER MONTREAL

Metro Montreal: Limited Financial Capacity


• Limited financial capacity– No taxing power

– 2/3 financing from municipal contributions, but no min. required amount

– The rest from conditional transfers from the provincial government, loans, and other revenues

City of Montreal

GREATER MONTREAL

Affordable Housing: Incentives + Finances


• Affordable housing fund was more successful:– Incorporated,

prohibiting reductions in municipal contributions

– Incentive: Ensuredsome level of local control cities retain right of affordable housing project review

City of Montreal

GREATER MONTREAL

USA: Metropolitan Planning Organizations (MPO)


• Created for planning and programming federal transport funds

• Federally mandated to produce long-term transport based plans based on regional analysis and propose improvements



• Clear authority: approves/denies state and local applications for transportation aid

• Requirement for federal transfers

• Some local control: Committee = usually representatives from local govts and state agencies



• Adaptable to needs & context:

responsibilities can expand: e.g. air quality conformity planning, review of land use and transportation plans of local jurisdictions, etc.

Flexible funds for other projects: bike and pedestrian paths, mass transit, air quality, etc.



• Adaptable to needs & context – MPO’s functions

can be embedded in other governmental structures: i.e. in regional level governments, such as in Twin Cities

USA: Port Authority New York/New Jersey

USA: Port Authority New York/ New Jersey

• Joint venture; Board appointed by governors of NY/NJ

• Manages infrastructure critical to NY/NJ region’s trade & transport network: 5 airports, seaport, rail transit, etc.

USA: Port Authority New York/ New Jersey

• Financial autonomy: Can issue bonds, charge user fees, collect rent

• Adaptable: Broad enough mandate to be applicable to region’s changing transport needs: covers any transport mode

USA: Port Authority New York/New Jersey

Metro Belo Horizonte & Waste Management

• 43 of 50 local govtsshare management of the shipment, treatment and disposal of urban solid waste

• Upper level govtset incentives for cooperation: Minais Gerais State initiated cooperation among municipalities

Metro Belo Horizonte & Waste Management

• State govt in charge of contracting a PPP local govts, state and private sector PPP signed in 2014

• State pays 80% of contribution of PPP operation funds, municipality pays 20%. Private sector paid per ton of garbage collected.

Metro Governance in China: Key Points

• Subnational governments (SNG) are responsible for the provision of a lot of basic services (utilities, infrastructure, social services)

– Nested hierarchies of government levels complicates coordination and interactions among SNGs

– Local governments are limited in their ability to raise revenue complicate metro coordination (property taxes as possible metro resource?)

• Central government could incentivize cooperation through transfers e.g. USA and MPOs for transport planning

• Metro initiatives should not just focus on infrastructure provision, but also on social redistributive policies (social services, education, health, housing, and migrant workers), given the heavy burden on SNGs. (possible central government role?)

Sources for More Information

• NASA, Image of Shanghai at nighttime, Earth Observatory

• NASA, Nighttime lights of world, Earth Observatory

• World Bank, “East Asia’s Changing Urban Landscape,” 2015

• Brookings Institution, Global Metro Monitor, 2014

• OECD, “Governing the City,” 2015

• OECD, “The Metropolitan Century,” 2015

• OECD, “Urban Policy Review: China 2015.”

• Taubenböck, H. and Esch, T., “Remote Sensing– An effective data source for urban monitoring,” Earthzine, 2011 for image of Manila

• Travis S., Image of Mexico City aerial, Flickr

• Image of Valley of Mexico City, http://www.metropolismag.com/Point-of-View/July-2012/Urban-Microcenters/

• Wilson, Robert. “Metropolitan Governance Systems in the Global South: Forms and Effectiveness.” 2012

• Image of development plan in Mexico City: http://dedesign.tumblr.com/post/15582292105/invasive-densities

• http://www.oecd.org/gov/budgeting/48140003.pdf

• http://www.china-briefing.com/news/2011/01/28/chongqing-and-shanghai-introduce-new-property-tax.html

• http://www.wsj.com/articles/SB10001424052702303755504579205453028052262

• https://people.hofstra.edu/geotrans/eng/ch4en/appl4en/ch4a2en.html

• Du Debin and Huang Li, “Shanghai in 2050: Its development challenges and strategy choices” (presentation)

• http://policytransfer.metropolis.org/case-studies/urban-solid-waste-management-in-mrbh

http://www.metropolismag.com/Point-of-View/July-2012/Urban-Microcenters/

http://dedesign.tumblr.com/post/15582292105/invasive-densities

http://www.oecd.org/gov/budgeting/48140003.pdf

http://www.china-briefing.com/news/2011/01/28/chongqing-and-shanghai-introduce-new-property-tax.html

http://www.wsj.com/articles/SB10001424052702303755504579205453028052262

https://people.hofstra.edu/geotrans/eng/ch4en/appl4en/ch4a2en.html

Thank you!

metro governance6 (00000002)

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