‘Free market’ cities give urban fiefdoms some competition – Pacific Research Institute

‘Free market’ cities give urban fiefdoms some competition

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Startup cities offer “a chance for people who care about good government from the private sector … (to) bring good government to their people,” says Chapman University law professor Tom W. Bell. The “governing” model is both “a cooperative residential association and at the same time a for-profit corporation.” They empower citizens to make their communities a better place.

A tangle of encrusted bureaucracies and counterproductive regulations has made it inordinately difficult for urban residents to live productive and affluent lives. Rent control. Zoning. Central planning. ​​Tenant boards. Parking minimums. Most urban problems, from decrepit housing to street crime, are largely solvable, but politics is typically the enemy of improvement.

City dwellers need a course correction – one that unleashes their inherent creativity and enables the efficient provision of municipal services. There’s an interesting alternative to change-resistant and bureaucratic cities: new towns, which are startups that are privately owned and managed, or independently “governed.”

The motivating factors behind startup cities include promoting economic opportunity, competitive governance, better lifestyles and technological experimentation. The Startup Cities Institute calls these developments “special jurisdictions that can be used to create inclusive economic growth, combat corruption and insecurity, and test public policy innovations in transparency, public services and environmental stewardship.”

Some simply call them “free-market cities.”

Simply put, startup cities offer “a chance for people who care about good government from the private sector … (to) bring good government to their people,” says Chapman University law professor Tom W. Bell. The “governing” model is both “a cooperative residential association and at the same time a for-profit corporation.” They empower citizens to make their communities a better place.

Maybe the best-known startup city is Prospera, Honduras, described by Bell as “a unique kind of special development region.” It is located on the island of Roatán, just off that nation’s coast. Bloomberg News describes it as “a private tech city,” which has “its own set of laws and governing system.”

The city’s 3,500-page legal code disputes any idea that this is a lawless or anarchic alternative. That code specifies everything from the level of political representation to the resolution of legal disputes. It requires income taxes, which are, as Bloomberg adds, lower than in the surrounding nation. It even mandates that employers pay a minimum wage.

“We believe that when individuals have the freedom to build and government is a stable partner in prosperity, wages will rise, economic opportunities will multiply, our communities will be safer and a new social contract will be born,” according to Prospera’s city fathers. They hope to build an island of stability amid Latin America’s tumultuous political seas.

Many years in planning, Prospera is not yet fully functional. But its advocates believe its future holds promise, even though the Honduran congress recently reversed the law and constitutional amendment that allowed the creation of “zones for employment and economic development,” known as ZEDEs. The repeals are part of “a resurgent socialist radicalism lately” in Latin America “that has had ZEDEs in their sights,” says Reason’s Brian Doherty.

Maybe the best example of a startup city in the United States is Sandy Springs, Georgia, at one time an unincorporated community north of Atlanta. In 2005, voters approved a referendum with 94-percent support creating its incorporation as a largely free-market city. The population grew from about 90,000 at the time of the vote to roughly 108,000 today, making it the seventh-largest city in the state.

Imagine starting a new city,” says Oliver Porter, a principal architect of the project, “with only two employees. We did it. Imagine improved employee attitude, less cost, more responsive government, decreased long-term liabilities and happier citizens. We did it. Now imagine the application of this model to your existing city. You can do it.”

At the time of the vote, Sandy Springs residents said they were fed up with the inadequate services provided by Fulton County. They didn’t believe they were getting sufficient value for the taxes they paid. They resented subsidizing other parts of the county. Heavy-handed zoning was another frequent complaint. Based on reporting at the time, voters wanted to create a streamlined government that was closer to the people and responsive to their concerns.

Unfortunately, Sandy Springs is now less a public-private partnership than it was in its earliest days. Once-outsourced services are in some instances delivered by the city, and contracted jobs increasingly have become city-held positions. This backslide reflects of the difficulty in keeping these experiments going given the natural tendencies of government to expand.

In 2010, when ​​Sandy Springs operated under the public-private partnership model, it was a national runner-up in the Pioneer Institute’s Better Government Competition. It is now more of a hybrid, but it still offers lessons for adding competition in the provision of public services. At least local residents realize that there’s a private-oriented alternative – and that realization will perhaps keep the new model from becoming too bureaucratic.

While dissatisfaction with a perceived out-of-touch government can drive people to take matters more locally, startup cities can also cater to people who share a common interest. A master-planned community near Phoenix called Culdesac Tempe “touts itself as America’s first car-free development,” says Catalyst, where “residents are explicitly forbidden from parking within a quarter-mile radius of the project” and are able “to live practically and comfortably” without automobiles.

That’s not for everyone, of course, but that’s the point. Just as different businesses cater to different tastes, why shouldn’t different governing models cater to different lifestyles? Competition can improve everyone’s chosen models.

Developers are creating a city in Guatemala, Michatoya Pacífico, as a business hub, where companies and businesses “can exchange, collaborate and share to improve their productivity and competitiveness” while providing residents with opportunities for “commerce, education, health and recreation,” according to its founders.

Then there’s Co-op City in the Bronx, which Bell calls a “very attractive model” for startup cities. It is, he says, “solidly middle-class.” It claims to be “the largest single residential development in the United States with a population of approximately 50,000 residents and its own zip code, 10475.”

That city features 35 high-rise buildings and “seven townhouse clusters consisting of garden and duplex apartments,” adding up to 15,000 units on 320 acres. “Only 20 percent of the land is developed, leaving a majority of the community’s natural beauty undisturbed and lots of green spaces in a serene, park-like environment,” according to its website.

Co-op City has its own power plant, its own garbage removal service and a public safety department. It is also the nation’s largest naturally occurring retirement community given the number of older people who have chosen to move there. The Bronx is one of urban America’s most dysfunctional areas, a breeding ground for crime and urban decay.

By creating a well-managed island, its supporters recognize that the main problem in the Bronx isn’t its residents – but its poorly run government, which has led to the collapse of the area’s social fabric. It offers a competitive alternative in the same way that charter schools offer an alternative for urban residents stuck in poor school districts.

No one thinks that startup cities are the perfect remedy for immediately solving the ills afflicting many municipalities. But maybe the trend, as modest as it is, can create enough competition to force established cities to improve their governance. The politicians and bureaucrats who run our urban areas need to have their tired, ineffective and counterproductive ideas challenged.

Kerry Jackson is an independent journalist and a fellow with the Center for California Reform at the Pacific Research Institute.


Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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