Sponsors: A collaboration of The Richmond-First Club and the Virginia Commonwealth University's Library and Department of Urban Studies held on April 22, 1997.

 Participants:
Stuart Meck - American Planning Association
Dr. Roger Richmond - Professor of Urban Studies and Public Administration, Old Dominion University
Neal Barber - Director of Virginia's River Country
Cole Henricks - Associate Vice-President of Community Relations, UVA Health Sciences Center
Viola Baskerville - Moderator

 Background. The 19th century Independent City Experiment unique to Virginia has failed. Cities were created as self-supporting, autonomous units without shared employment bases, schooling or medical resources. The property tax served as the source of revenues for city services. Today, cities house large public institutions such as VCU and its medical college that are tax exempt. Growth occurs in the suburbs (edge cities) thanks to the creation of highway systems by the state. The economic disparities that arise often lead to financial disparities that increase with the lapse of time.

 Findings and conclusions. Revenue Sharing can be viewed rightfully as a tool to both promote regional growth and the health of the core city. Revenue sharing depends on mutual financial incentives for the participating jurisdictions. Commercial and industrial growth beneficial to a region often stems from decisions made by private industry following joint municipal investments in public infrastructure.

 Wealthier jurisdictions are moved not by charity but mutual financial interests. Revenue Sharing favors communities with high residential concentrations, as the revenues are generated on new commercial and industrial growth. It promises to reduce but not eliminate competition between jurisdictions. Revenue sharing is a palliative in the absence of the right to annex, insofar as it does not address social issues, such as a low income housing mix, nor does it mean better planning. The model. In 1971, the Twin Cities of Minneapolis and St. Paul in a sector with seven counties and 187 jurisdictions entered an agreement triggered by a state legislator who could not support the creation of a public power plant on a nearby scenic river unless his community participated in the revenues. The resulting agreement called for 40% of the taxes from that and future commercial ventures to be pooled for distribution on a per capita of wealth formula. Today 20% of all property taxes collected in that region go into the pool. Disparities continue, but they have been reduced. Without revenue sharing the difference between the tax base per capita of the wealthiest and poorest would be 22 to 1; with the Fiscal Disparities Act, which was the enabling legislation, the difference is 4 to 1.

 Other devices. Contracts and agreements offer less dramatic alternatives, but - in Virginia - they have arisen from the right to annex. The City of Franklin and Isle of Wight County agreed that 20% of the revenue generated by a Union Camp paper plant would be shared on a fiscal stress index. Also, an agreement negotiated 15 years ago between Albemarle County and the City of Charlottesville results in a net gain now of $5,500,000 per year to the city. High Performance Areas. Studies have been undertaken in the Southeast to analyze the characteristics of the healthiest regions. They were identified as (1) transportation and location, (2) education, (3) job mix, and (4) regional cooperation. Raleigh was ranked first. In that community with the most "liberal annexation law in the country," the business, university, and political communities work together to work out problems of growth and economic disparity. Federal Incentives. The Intermodal Service Transportation Act integrating modes of transportation was complimented for its effectiveness by a member of the audience and subsequently named the most feasible, contemporary tool for regional cooperation by a panelist. Moderator Baskerville said an integrated system of transportation had been ranked among the leading issues by Richmond City Council, but not so in the adjoining counties. Another audience member suggested pooling the entitlement grants from HUD to address regional issues of community development, but this idea was met with skepticism because of the minuscule size of the grants.

 State initiative. An audience member asked if shifting the burden of collecting and distributing revenues in the region might be more productively undertaken by the state than engaging in the establishment of divisive measures of revenue sharing at the local level.

 Special thanks from The Richmond-First Club to Jim Doherty for this summary. The full text of Revenue Sharing Forum follows.

Michael Brooks: I think there are a couple of banners up here for these organizations. I do want to join Barbara in welcoming you this evening to what we hope will entrust will be a lively and useful discussion. This event, by the way, represents a convergence of two historical strands. The Richmond First Club has a 78 year history of study and action aimed at studying and promoting sound governance for the Richmond metropolitan area. Last year the club sponsored a debate on regional cooperation which was attended by some 300 people and out of that debate came a general sense that we should look more closely at the concept of regional revenue sharing and find out a little more about it and it whether it might be or might not be appropriate for this region. Meanwhile, for the past six years VCU's library and more specifically its Richmond Area Development Archives Program has been cooperating with the Department of Urban Studies and Planning and the College of Humanities and Sciences in putting on programs annually dealing with key urban problems for the Richmond area such as transportation, downtown development, and other problems. So it seemed a sort of natural collaboration this year to get all of these groups together to focus on the issues surrounding regional revenue sharing and that's what occurred and it's been a great partnership.

Events like this don't just happen, of course, and I would like to say a few words of thanks to those who made it possible. The program, itself, was planned by the Richmond First Club Committee on Regional Revenue Sharing which is chaired by Delores Frazier. She is deputy to the executive director of the Richmond Redevelopment and Housing Authority and I know that Delores' committee work was helped immensely by two of her staff members, Kim Alston and Doris Doyle, who are also in the center. Tim Veith, Don Fell and Davis Wrinkle, in particular, were hard working members of that committee, and the Richmond First Club made it possible for tonight's speakers to be here. The library, by the way, handled the production and mailing of some 5,500 fliers for this event. Our thanks go to Barbara Ford, Betsy Pittman, and Luvella Luster of the library staff. Susan Kennedy, who is interim dean of the College of Humanities and Sciences, provided the refreshments for the evening. Now under the program, I am pleased to introduce out moderator for the evening, Viola Baskerville, who is Vice Mayor for the City of Richmond, representing the third district of Richmond City Council.

 Viola Baskerville: I just have an opening, brief statement I'd like to make. It has been said no law of nature says older cities must decline. The 1990 census numbers show that Richmond City has experienced an approximate 18% decrease in population in the years between 1970 and 1990. Of our city's total assessed real estate values, 25% of that amount cannot be taxed because it's tax exempt. Our real estate property tax rates, although they have decreased over the past three years are still higher than our surrounding neighbors. Social service demands are greater than those of surrounding counties, which have lower tax rates and more available square miles of taxable real estate yet our tax base to support schools and other public services is not expanding at the rate it needs to provide those services at an equal level. Seventeen percent of our city's population is or at below the poverty level with economic disparity concentrated in distinct neighborhoods. This concentration of poverty destabilizes our schools and neighborhoods. Coupled with middle class white and business flight, economic polarization is apparent. However, basic public service such as police and fire, local infrastructure, parks and schools should not exhibit such severe disparity. Socioeconomic polarization must be addressed. Most recently, the Virginia General Assembly passed the Regional Competitiveness Act, which is an attempt to provide financial incentives for Virginia counties, cities, and towns to compete as a region for purposes of becoming more economically competitive. This act does this by bringing together business, government, education, and civic leaders to identify regional solutions and strategies to increase job creation and family income throughout the area. The act also provides incentive funding for those localities that join together to plan for regional economic development and purpose to carry out services such as education, job economic development, transportation and the like. Perhaps, Mr. Neal Barber, one of our panelists will share some of his insights and experiences with that when he speaks tonight.

 By many, this attempt was seen as a carrot. It was a carrot approach to addressing economic disparity in the Commonwealth. Prior discussions and such approaches such as annexation and regional government have not been necessarily warmly received by all segments of our community. Tonight's discussion will focus on the concept of regional revenue sharing, its promise and politics as a plausible solution to the area search for economic development and lessening of economic disparity in the metropolitan area will be put forward tonight. To that end I would like to introduce our guest panelists.

From a national prospective we have here with us tonight, Mr. Stuart Meck. Mr. Meck is principal investigator for the American Planning Association Growing Smart Project. This is a long term effort to draft the next generation of model planning and zoning legislation for the United States. The project is based at the association's Chicago office in the research department and is funded by the Henry M. Jackson Foundation, the Annie E. Casey Foundation, the U.S. Department of Housing and Urban Development, the U.S. Environmental Protection Agency, the Federal Emergency Management Agency, the Federal Highway Administration, the Federal Transit Administration, the U.S. Department of Agricultural, Rural and Economic Community Development Administration of the Seimens Corporation as well as the APA. A former APA national president, Mr. Meck was also a commissioner on the American Institute of Certified Planners Commission, the Professional Testing and Credentialling Affiliate within APA. He was a founding member of APA's Amicus Curiae Committee which intervenes in federal and state land use and planning litigation. He holds a BA and MA in Journalism and a Masters of City Planning from Ohio State University. He also holds a Masters of Business Administration from Wright State University. He is a registered professional community planner from the state of Michigan and a licensed professional planner from the state of New Jersey. Mr. Meck has 26 years of professional experience. He has served as Assistant City Manager and Planning Director of Oxford, Ohio and on the staffs of the Miami Valley Regional Planning Commission in Dayton, Ohio and of the Memphis and Shelby County Planning Commission in Memphis, Tennessee. He has also been a planning consultant who has published widely.

 Next, Dr. Roger Richmond will address us again from a national prospective, his thoughts on revenue sharing. Dr. Richmond is professor of Urban Studies and Public Administration in the College of Business and Public Administration at Old Dominion University in Norfolk, Virginia. Dr. Richmond initiated the practice of mediating intergovernmental annexation and consolidation negotiations in Virginia serving as state appointed mediator in 15 boundary disputes since 1979. A number of settlements he mediated involved the development of interjurisdictional revenue sharing arrangements. Dr. Richmond is senior author of Intergovernmental Mediation, a book on negotiating local government boundary disputes. He co-author a position document on interlocal revenue sharing prepared for the National League of Cities. Dr. Richmond is the author of numerous publications on law and public administration including articles on local government dispute resolution practice, metropolitan organization, interlocal revenue sharing and on the Supreme Court and public service. His Ph.D. is from New York University in Public Administration and Dr. Richmond has been on the faculty of Old Dominion University since 1976.

 Mr. Neal Barber will give his prospective on revenue sharing from a state prospective. Neal Barber is the director of Virginia's River Country, a rural economic development organization serving the ten counties of the Middle Peninsula and Northern Neck. Virginia's River Country is a outgrowth of the Governor's Regional Economic Advisory Council Fourteen. It is dedicated to establishing a strategic plan and organization that promotes compatible development and harmony with the natural and cultural resources of the region. Prior to assuming this position, Mr. Barber was the project director for the Urban Partnership, an unprecedented alliance between 18 of Virginia's major urban areas and the Virginia Chamber of Commerce. The Urban Partnership was created to seek solutions and legislation addressing those urban conditions that negatively impact Virginia's competitiveness. Mr. Barber was also the director of the Virginia Department of Housing and Urban and Community Development for 9 years, the executive director of the Middle Peninsula Planning District Commission, the regional planner or the planning district commission and the regional planner for the Tennessee Valley Authority. Mr. Barber received a Bachelor in Arts degree from Virginia Polytech Institute and a Bachelor's in Urban and Regional Planning from the University of Tennessee.

 Our last panelist is Mr. Cole Hendricks. He will be addressing revenue sharing from a local perspective. Mr. Cole Hendricks is the Associate Vice President of Community Relations of the University of Virginia Health Sciences Center located in Charlottesville, Virginia. Prior to coming to the University of Virginia Health Sciences Center, Mr. Hendricks was the City Manager of Charlottesville, Virginia, the Executive Director of the Northwest Missouri Law Enforcement Assistance Council and the metropolitan Kansas City area, the Assistant City Manager of Kansas City, Missouri and the City Manager of Gladstone and Marsalene. Mr. Hendricks is currently the chairman of the Virginia Innovation Group and member of the American Society for Public Administration, the former president of Virginia City Manager's Association and the former vice president and board member of the International City Management Association. He is also the chairman of the University of Virginia Medical Center Advisory Board, the Charlottesville Albemarle Airport Authority Board, the vice chairman of the Rivanna Water and Sewer Authority Board of Directors. Mr. Hendricks, of course, received a Bachelor's of Arts in Political Science from the University of Kansas and a Master's of Public Arts in City Management from the University of Kansas and that is our panel as introduced to you for tonight and I would like each of the gentleman to come forward to speak in the order in which they were introduced.

 Afterwards there will be period of questioning and answering for about 40 minutes and then a wrap-up. Thank you.

 Stuart Meck: Perhaps, more than locally imposed zoning and subdivision controls and decisions of state and regional and local authorities on facilities like water and sewer lines and freeway interchanges, the local property tax in the United States has some very powerful impacts on how land is developed. What I would like to talk about over the next few minutes is to discuss some of those impacts and talk about several of the mechanisms that have been enacted by the various states to moderate the consequences of reliance on the property tax by local governments to fund their services. The basic concept that I'm going to use (let me turn on the overhead here so that you can follow me) is the concept of fiscal disparity. Now what does that term mean? Fiscal disparity means that there are pronounced differences in revenue raising capacity between local governments and the same metropolitan area. And fiscal disparity also means that it is hard for similarly situated local governments to offer the same bundle of services and to maintain their infrastructure. If you have a community with very high value property and low population, it's going to find it a lot easier to provide services than a community with very low value property or property that is declining in value in a large population. The latter community, the community with what we would call low fiscal capacity is simply going to have to work a lot harder on a per capita basis to provide services. Now I would have to say that competition among local governments is good. It keeps them on their toes. It provides for better services but how do you get these sharp conflicts in revenue raising capacity on a metropolitan basis. I would argue that there are really four elements to this. First of all, because of the forces of metropolitan change that we experience such as state investment decisions on highways for one, some local governments are going to be favored locationally. These are the edge cities of the nation. These are the suburbs that are either benefited by luck or the draw. The typically captured, high value residences and the high value businesses and you usually find them on the periphery of metropolitan areas. They are benefited by decisions that quite often state agencies are making about where things go and as a consequence of that they grow very rapidly. Secondly, in many parts of the nation, although this doesn't apply uniformly, many local governments in the nation rely on the property tax to a great degree, as well, I might add sales tax and local income taxes to finance basic services. Consequently as a reaction to this, each local government rationally tries to zone very large tracks of land for industrial purposes.

 In parts of the country like Illinois where there are different categories of land use and there can be separate tax rates for each of those categories, commercial and industrial land use may foot the entire property tax bill and residences contribute nothing. In the Chicago area where I live, we have a suburb called Schaumberg which has one of the largest shopping malls that I've ever seen. To go there is like a whole day experience and this shopping mall along with the associated commercial and office development produce such phenomenal amounts of revenue for the community that the property owners there pay no local property tax. Third, local governments also try often for reasons other than fiscal reasons to keep out quality affordable housing by underzoning, simply not providing for it all, because of the belief that affordable housing doesn't pay for itself and finally competition for tax base often results in very pitched intergovernmental conflicts, battles over annexations, bidding wars between local governments for businesses that have already decided to locate in the region.

 Knowing this, what the businesses do rationally is they asked for subsidies and they ask for relaxation of land use standards from individual communities. They basically go around and shop for subsidies. This is after they have made the decision to locate in the region. The result of these four factors that I have talked about and my experience is that planning does not occur on a level playing field in metropolitan areas. Unless we come to grips with this dominant concern for high ratables for commercial and industrial property taxes as they are called, we can't make a substantial change in the planning system of the United States and in the way in works in practice as opposed the theory behind it. There are two approaches that have emerged over the past 25 years to address this problem. The first of them and we have material in the back on this is regional tax base sharing. Since 1971, the seven county Twin Cities region in Minnesota has had a form of tax sharing among the 187 jurisdictions in that area and here's how it works. Forty percent of the growth, I want to emphasize the growth, the growth and the commercial and industrial tax base on a metropolitan basis goes into a regional pool and revenues from that pool are redistributed back to the 187 local governments on the basis of an allocation formula that takes into account the local government's ability to raise revenue, it fiscal capacity. This system in Minnesota has survived an appeal to both the Minnesota Supreme Court and the United States Supreme Court and over the years the impact of that has been such that the disparity between the wealthiest local government in the Twin Cities area and the poorest local government has changed from 47:1 to 11:1. This act has been in effect since 1971. As of about two years ago, the regional pool in the Twin Cities area had about $393 million dollars in it or 20% of all the property taxes collected in the region. The other place in the United States that has regional tax base sharing is less well-known. It is the Hackensack Meadowlands area. I don't know if any of you know the Hackensack Meadowlands area but this is a big sports coliseum and it's where Bruce Springstein plays when he goes to New Jersey and in the Hackensack Meadows there are fourteen jurisdictions that are part of this region authority. They benefit from what is called an intergovernmental transfer mechanism that is intended to compensate the fourteen local governments that have property that's either wholly or partially in the district. For example, under the plan for the area, the local government's absent the sharing system would be winners from commercial and industrial property development or losers because of restrictions on the land. Well what this does is it takes all of the growth in the area and ensures that all of the jurisdictions in this 14 jurisdiction area will benefit entirely from the growth and won't get hurt by property being removed from development either through purchase or very severe restrictions on development. The tax base sharing concept in Hackensack Meadowlands which is a fairly specialized district is intended to balance the burdens and the benefits among all 14 jurisdictions that are part of the district.

Now what does tax based sharing do in theory? Well, primarily what tax based sharing is a redistribution mechanism. It redistributes part of the future or prospective property related wealth of a region and in doing so it creates an incentive for local governments to work together. I want to emphasize that it reduces but it does not completely eliminate competition by local government simply because of the way the growth is distributed. Communities with lower than average fiscal capacity, which tend to be central cities, the entering suburbs, as well as free-standing small towns, tend to benefit from the system. Indeed, my view is that regional tax based sharing is intended to help out communities at various phases of their life cycle when the commercial and property tax base ceases to grow, when it begins to mature, when all the land in the community begins to get developed and they even begin to decline. The nature of the tax based sharing system also means that communities with very high value residences and little commercial development also benefit. So if you have a community that has no commercial, office, and industrial development and very expensive homes, it will also benefit from a regional tax based sharing the way the formulas have been developed so far. Now communities with higher than average commercial industrial tax bases are the edge cities of the world, places with tremendous property tax evaluation and very small populations, which tend to actually contribute to the system and get less out of it.

 Now, what doesn't tax based sharing do? Well it doesn't completely level the playing field. As I noted that in the Twin Cities area, fiscal disparity has not completely gone away. It's still there. There is still competition between local governments. I would also argue that tax based sharing by itself does not produce better planning. I was up in the Twin Cities a couple of weeks ago with my daughter, a skater, for a competition in Bloomington. Have any of you ever been to the Mall of America? It is an amazing place. I only saw half of it and I was there a whole day. The area in the suburbs of the Twin Cities is not what I would call pedestrian friendly. There is tremendous traffic congestion there and this was just on a weekend. You can say that the presence of tax based sharing has made for better planning in the Twin Cities area on the basis of what I saw. That doesn't necessarily mean that it couldn't happen. It's just that my first hand experience meant I traipsed around the Mall of America for about a half hour until I could get into the site. So it doesn't necessarily translate into better planning.

The other mechanism that we've seen to deal with property tax related issues is something called the Joint Intergovernmental Agreement, Virginia, Kentucky, Colorado, Michigan and Ohio are examples of states that have such legislation. Basically, what this approach does is it permits local governments to enter into agreements for a specific development or an area or a zone where development might occur. In other words, several government units might get together and say we want to benefit jointly from developing in this area. The agreement is much like a contract. It describes what individual local governments will contribute in terms of service, in terms of infrastructure, and what kind of revenues they will receive from the development and often in lieu of annexation. As part of APA's Growing Smart Project which is an effort that was noted to draft the next generation of model planning and zoning enabling legislation. We prepared two models and one of them a regional tax based sharing statue which is based on part on the Twin Cities model. What we drafted was a little something different because it tried to take into account other tax bases that might be included in the regional pool. We also drafted a very simple model joint economic development zone statute, in part based on an Ohio law which allows the use of intergovernmental agreements between individual local governments. We believe that both of these models are worth examination by state legislators and by local government officials. Let me try and sum up my views on this. My own view is that regional tax based sharing is a good approach but it should be used only when there is wide spread agreement in a region of the state that communities need to work together to support sensible development patterns and reduce fiscal disparity among local units of government. Everybody has got to participate in a regional tax based sharing scheme. You can't have people opt out. It is probably more appropriate for metropolitan regions than rural areas because fiscal disparities tend to be more pronounced in metropolitan areas than they are in rural areas. As you might guess, it involves a fair degree of education, sort of what we're doing here this evening, and simulation of the results of various allocation formulas so elected and appointed officials can see how these formulas actually work. The other approach, the joint intergovernmental agreement , is more appropriate when local government don't want a regional approach. They don't want a single solution but instead prefer flexibility to negotiate special arrangement with terms and conditions that are specific to their own sets of problems for that subset of the region. The agreements, however, are very individualized and they are very tough to negotiate. Often they involve the collective egos of local governments and their officials. They require a lot of tact and diplomacy to bring about. There is a fair degree of experience with these agreements here in Virginia and I'm sure that my colleagues on the panel are going to address some of those and in the next few minutes I turn this over to them. Thank you.

 Roger Richmond: We've got perhaps five to three, city of Richmond to county, and maybe we should have all the county people go on one side and the city people go on the other side. The conventional way, of course not, but it does bring up a point. Of all the 50 states, Virginia, in our wisdom, has maintained the separation of city and county so that there is no overlap. Take Chicago, for example, where the schools overlap city and county. You may pay a percentage to the county and an additional percentage to the school board. Virginia, with clear structures for our local government, has a down side in that it locks us in when it comes to sharing the benefits of economic growth and economic development. The property tax, the most important local tax throughout America, is essentially, as administered today, a 19th century idea. That used to be where the local governments relied for 90% of their income. That has gone down to about a 1/3 today. The model, the 19th century model, is the one for individual autonomous local units of governments, not next to each other in a metropolitan community, nor interdependent with common labor markets, as exist in the Richmond metropolitan area. Housing prices are related through a residential market that is a regional phenomenon. We have education markets. Students coming to VCU from the suburbs. We have healthcare markets. People go to the Medical College of Virginia from the suburbs. We are, of course, an interdependent, large scale urban system, but our local government and taxing structures are 19th century structures. Now the question is can we do well in the future with those kind of structures? Well the answer of the suburbs might think is sure, we can do great! Until the suburbs start to age and new growth is on the fringe as development will continue. The fundamental reasons for tax based sharing or revenue sharing have to do not with redistribution of wealth but rather with dealing with the economic effects of the location of growth on a metropolitan region. Let me try to work that a little bit.

 Imagine, if you will, two communities right next to each other, the same population, the same income distribution, middle class, middle income, dominant communities and the same tax rates and one community is lucky enough to get a $3 billion ship manufacturing plant, perhaps. This is theory. What would happen, of course, to the property tax that is received as that plant was built and was taxable and the machinery inside was taxable, what would happen to tax receipts in Community A that had the plant and, of course, the governors of the community would be able to lower taxes. What would happen to Community B is there would be no ability to lower taxes. Now did that plant decide to locate because solely of the quality of the environment in Community A or was it because of the amenities offered including the quality of the labor force that was both in Community A and Community B. The quality of the water supply which might be in Community B. The quality of the educational institution, the location of the golf course for the CEO might be in Community B. The fact is, of course, is that it is the area that provides the incentive for the new facility to come in by the private sector. What the benefits, the direct economic benefits that is, of the new development will fall predominantly in Community A and Community A's tax payers will benefit tremendously relative to Community B's tax payers. Now is that rational? Does that make sense? If you live in Community A, sure. It makes a lot of sense. But if you realize that public investment, the location of highway interchange, the location of public infrastructure of other kinds is a key factor in that location decision. Not simply Community A's public investment but everybody's public investment. You realize that there is more going on here than simply what's good for Community A in terms of its narrow view of its own self-interest. The region will succeed or not succeed based on some sense of well-being across the region.

Revenue sharing or tax based sharing is one element of that model of bringing the regional community together. It is not per se a government redistribution scheme. I'm suggesting as Stuart did before me that the basic rationale for some form of revenue sharing or tax based sharing has to do with economic development and its location by the private sector in conjunction with the public sector and the recognition that we live in a metropolitan world. The linkages are there and real, I went through them before, you heard me. The linkages between the cities and suburbs are real, if sometimes we don't chose to see them. So, that's an argument for revenue sharing.

The Minnesota Plan, the Minneapolis St. Paul metropolitan region, revenue sharing or tax based sharing program, is the longest running and by far the most significant one in the country -- which is why we refer to it. It's now some 25 years old. It began because one community located on a wild and scenic river -- back in the early days of the environmental movement, -- was approached by a utility company that had purchased some land and wanted to build its power plant on this wild and scenic river. Of course, the community was delighted because it was going to get all the tax ratables from that plant. A member of the state legislature argued that he could not support locating that plant in any place but his own community unless he could get a share of the tax revenues. That led to a discussion that wound up with the most comprehensive program in the country. The Minnesota Program was originally enacted in 1971, went through court tests from 1971 to 1975, and was re-authorized by the legislature in 1993 or 1994. All municipalities in the Minneapolis St. Paul region of seven counties around it share a portion of the growth, in their commercial and industrial tax bases, not residential. They put 40% of the growth from 1971 forward into a common fund, which is disbursed based on per true capita and property values. Communities with lower per capita property values get higher payments and communities with higher per capita property values get lower payments, so it's called the Fiscal Disparity Act, and I think you can see why.

Forty percent of each municipality's net growth in its commercial and industrial tax base is contributed to this fund, and then total contributions establish the area-wide tax base. The distribution index is based on a formula averaging per capita fiscal capacity based on real property assessed values. Add up all the assessed value and divide it by the number of people in the community as a rough measure of wealth that is sometimes called fiscal capacity, sometimes revenue capacity, but the idea is to get some kind of measure of community well-being in dollar terms.

 Now I'm going to switch gears and go to an agreement we negotiated in Virginia between the small city of Franklin, and Isle of Wight county. One-third of all the property value in the rural Isle of Wight county is right next to Franklin and that is the Union Camp's paper processing plant. Franklin said "Gee, why don't we simply annex the Union Camp plant. We only want 1/100 of 1% of the county but we want that plant." That gave Isle of Wight county the incentive to negotiate. The negotiation wound up with an agreement that marked out an area of the county that included the Union Camp plant and another 100ñ acres -- very small part of the county that had joined the city of Franklin. 20% of the revenue generated from that area would be shared. The agreement is very innovative because we set up a process to use fiscal stress indicators in each community and to compare them and to recalculate them every decade. Revenue sharing may increase or decrease. If conditions changed, the flow of funds could go the other way. The two communities joined in a common program.

I think some form of revenue sharing, tax based sharing is essential and inevitable in Virginia if we maintain our program of city/county separation. You can use revenue capacity, fiscal stress indicators, population, tax base, or tax effort. There are all kinds of variables which will favor one community's interest or another. For example, when we calculated a fiscal stress indicator for Isle of Wight and for Franklin, we decided that we could agree on using the state's composite index for state aid to schools which the legislature had fashioned as the basic measure of relative wealth of each community. The system _______ adjusted gross income (50%), real property taxes (40%), and taxable retail sales (10%) for the community.

To explain, the city of Franklin takes each year its budget to operate the city and service debt service as the numerator in the equation. The denominator would be Franklin's gross income, property values and taxable retail sales, which is the formula for school aid.

The revenue sharing formula, which is even-handed, might go up to 22% or 23% or if Isle of Wight county is doing relatively less well compared to Franklin.

Neal Barber: One thing that Roger did not ask in the group, how many are from Goochland and Powhatan? Anybody, not a single person. I guess one thing I would like to say about some of the discussion on that and why I ask is in a revenue sharing agreement, often times Goochland and Powhatan would like to be at the table, at least initially in the early years because they could benefit from a revenue share or tax based sharing system, often times because their fiscal condition and economic condition is more in line, not quite as in line, but more in line with the city than with some of the growing urban counties. But before I get into some of that, I would like to say that this is almost like deja vu for me. Up at the table we have Roger Richmond and Cole Hendricks. Both of them were very active in the Urban Partnership and Vice Mayor, Viola Baskerville, was one of our most active elected members in the Urban Partnership during my tenure and I applaud all of their commitment to the two years that I was involved with it because it was a somewhat of an arduous and sometime a kind of extended process of discussion. But as the Vice Mayor has indicated that economic disparity often leads to fiscal disparity and as that occurs, the fiscal problems become worse and worse and more difficult. With the economic flight of business and higher income people from our central cities we have into the suburbs the ability of the central cities to deal with the problems that they have all become less and less because they have fewer resources and often times as the Vice Mayor has indicated, the tax base is not as productive in the central city because you have an abundance of tax exempt properties. This university is a fine contribution to the regional economy but pays very little taxes and contributes very little to the tax base of the city even though it's located here.

Given that the cities in Virginia particularly, on most any social economic measure that you compare them on, underperform the counties and that was sort of the premise that the Richmond Mayor, Norfolk Mayor and Roanoke Mayor got together and said "What are we going to do about this" and that was back in 1993. That was sort of the genesis of the Urban Partnership and as they met and as they talked, they said "Well, we not going to be able to solve our problems as mayors of big cities by ourselves because if we go talk to our political leaders in the General Assembly they're just going to think that we are whining. So lets bring to the table some of the business people because we believe that our economic plight impacts the plight, not only of the region but of the state as a whole." So they invited the Virginia Chamber of Commerce to join to the table and test that premise and see if they could do something about it. In 1994 they got together, initially three cities, then it got to be six, and Cole was invited and then a few others around the state and then ultimately it ended up be 18 of our major urban areas, 14 cities and 4 counties. Well, the premise was that the plight of the urban areas had a definite impact upon the economy of the State as a whole. We started scratching our heads and we went to Charlottesville, that fine university in Charlottesville, the University of Virginia and as two noted professors, Dr. Lucy and Dr. Phillips to test the premise and look at Virginia's economic progress, particularly our metropolitan area and compare it with all of the metropolitan areas around the Southeast and we even looked at some elsewhere in the country. Well, no surprise to anybody, we found out that our metropolitan areas were just performing average. Virginia's metropolitan areas were definitely better than West Virginia but when you looked at the high performance rates, and the two that were most notable were North Carolina and Georgia. When looking at earnings for private sector jobs, North Carolina out pays Virginia 6:1. Georgia out pays Virginia 11:1. They were beating our socks off. Next question is "Why". Why were they doing so much better than we were? Well, again we turn to our noted professors from Charlottesville and said can you look at that question. So they analyzed, I don't know how many variables, but it was like 110 or more variables.

There were four major characteristics that were apparent in the high performance regions. One, was their location and their transportation. If you happened to be a state capital, if you happened to be located at the intersection of multiple interstates and your airline departures were a large number of airline departures per capita, you tended to do very well. So, location and transportation were central. The second one was the education of your population. If you had a high education and a large number of people that graduated from college, a very well educated work force tended to do very well economically. The third factor was the job mix was in the economy. If you had high paying jobs or high skilled jobs you tended to do very well over a period of time. The last factor is the one that we really chose to dwell on and that was the governmental capacity of a region. What we found was those regions that were able to work together cooperatively and address regional problems around the table were able to do much better economically than those that had put up barriers. We even did some site studies and I remember going down to Raleigh, North Carolina and they had just made the number one area in the country. Sitting down with their city manager and saying "What is it about your community that makes you successful?" He said, "Basically, it is that we sit down with our business community and our universities here in Raleigh and our county government and we talk through our problems. We've had a long history of doing this over a period of time. In addition, our governmental structure, they have the most liberal annexation law in the country allows us to work out problems of growth and economic disparity relatively easy." So we came back and scratched our heads and said "This is a tremendous model, we should look at it, but how can we do that in Virginia.." We have a moratorium on annexation. We haven't had any consolidations in government since back in the 1970's. This reversion issue is just being tested in South Boston, it's new, nobody is not sure what to make of it yet, what can we do. There was a debate in the Urban Partnership where we should ask the General Assembly to force something on local government or whether we should use the incentive approach. One camp said that the local governments are not going to get together by themselves so we need the state to impose a solution. The other camp said that is just political suicide to say that we need more state mandates in this Commonwealth and we need an incentive approach. So that what I think came about out of that was the incentive approach and that was the Regional Competitiveness Act that the Vice Mayor had mentioned earlier. As former Governor Holton says, "We might not be able to mandate things except in very unusual circumstances but we sure can bribe folks into things, so that was we did. We proposed a piece of legislation that would have sufficient funds, roughly $200 million of what we originally proposed that would bring localities to the table in earnest. That they would sit down and discuss the real issues that are affecting their regional competitiveness around the table and decide how to address them. And so we proposed legislation that would encourage government and the private sector to sit down at the table to devise a strategic plan and then propose regional activities that addressed competitiveness issues. The number one issue that we gave points to was revenue sharing, and secondarily to education and economic development. Now why did we do that? One is to address the fiscal disparities. If you really want collaboration in a region so that you are beginning to think and act regionally, you got to have a stake in each other's future. Chesterfield County has got to have a stake in the economic future of the downtown and the city of Richmond. The City of Richmond has got to have a stake in what happens out in the counties. If you do revenue sharing for fiscal reasons alone, you may exacerbate your problem, because what you doing is basically saying here is some money, solve your own problems, and usually it goes one way. From the high income area to the lower income area, so it becomes a pay off. So it's got to be a part of a broader solution. Yet either revenue sharing or reversion are two important things because they create a stake in each other's future. Paraphrasing Richard Tighlman, "If you want to understand the economy, follow the money." I think that's the case. How the money flows is very important to understanding the economy. If all the money flows to Goochland County with Motorola over there, that is where the economy is going. Under that premise, probably in this state we're not going to get broad tax based sharing. But there is promise on the very specific targeted revenue sharing opportunities.

 When the localities can sit together to establish a major business corridor or development in a certain location, and they are going to put in a $20 million infrastructure that is too costly for a single locality, then the parties can join together, chip in equally, and share the revenues. That's politically doable. If you start at that low level, then you build over time to a greater level.

 Cole Hendricks: One reason that we are talking about revenue sharing tonight is because the noble experiment of the independent city has failed in Virginia. The original concept was the urban area would be in the city and the rest of the county would be rural. As long as we maintained that concept, the independent cities seem to work pretty well. But somewhere along the line, whether it was in the late 50's or early 60's that began to change as counties were given more and more urban kinds of powers and responsibilities. Counties began to build their own cities around the independent cities where they were located. As a result, some of us turned to see what revenue sharing would do because we found that annexations were very expensive, took a long time, and were very painful, taking many years to heal the wounds, the General Assembly often put moratoriums on annexations, and all sorts of things happened on both sides of the city and county line during those periods of time. The ability to annex waned. So we find ourselves today with a very noble experiment that hasn't worked too well.

 In 1980 the city of Charlottesville found itself in that situation. The political will to annex major parts of Albemarle County was absent. Yet something had to be done to address the city's financial situation and other urban problems the city experienced. So the City Council made a proposal to the county. To annex 10 square miles, which meant doubling the size of city. The area sought was urban in character. the Council proposal offered 20 years of immunity from any further annexations a revenue sharing agreement based on growth in the real property, sales, other growth related taxes. After six months of discussion, the county countered with an offer of 2 square miles, of uninhabited and the possibility of some transfer of revenue. Over the next year a revenue sharing agreement was hammered out. Both jurisdictions put 37 cents (rather than the 40 cents in the St. Paul-Minneapolis area) into a fund and then divided the pool based on a formula with a population and tax base element in it.

Only real property is involved. The city and the county share in their growth after the agreement was signed. Though each party contributes to the fund the county always has paid something to the city based on the formula. The contract was so designed. A cap was put on so that the county's share never exceeded 1/10 of 1 percent of its tax base. The agreement was subject to a vote. The county Board of Supervisors supported it, and the population of the county overwhelming voted for a 10 cent tax increase to support this revenue sharing agreement. As part of the agreement, the city gave up its right to annex forever unless the law changed to permit it. There was an anti-commuter tax provision that said unless both jurisdictions had the right to enact a commuter tax neither would do so. There was to be a study of consolidation, either of both jurisdictions together or of individual services or departments within the jurisdictions. In the first year the city received $1,000,300 from the county. The amount has grown to $5,500,000 with annual increments of $600,000 to $1,000,000 a year. Over the 15 year period of this agreement the formula would have generated almost $50,000,000. But the city has only collected $45,000,000. Because of the cap, which has kicked in all but two years. As the county's tax base grows, the revenue sharing agreement produces more money for the city. The question is "Does it solve the problem?" and my response would be that it doesn't solve all problems. It does raise $5,500,000 for the city, which can use that money however it desires.

 But dollars alone will not solve all the urban problems of the city from my perspective and so as you enter into discussions about a revenue sharing agreement, one has to ask "What is that you want to achieve?" If you are only looking for dollars, a revenue sharing agreement will provide that and may provide that in a very positive sort of way. But if you want to achieve other things such as diversity of population, redistribution of low income housing, some change or redistribution in the educational systems, that won't happen through a revenue sharing agreement like that negotiated in Charlottesville and Albemarle. It only provides the funds from one jurisdiction to the other and is only a piece of an overall undertaking to try to solve urban problems. To solve our urban problems look beyond revenue sharing.

 The city of Charlottesville and Albemarle County have had a long history of doing services together. There are probably 15 or 20 joint kinds of projects or programs that the city and county have operated together so there's never been animosity but still the problem of urban blight, concentration of low income families, and a high demand for social services in the city. Those conditions do not exist in the county.

 Viola Baskerville: I want to thank each one of the gentleman for their presentations. The reason I gave such a lengthy description and introduction at the beginning was for you to have an idea of how in depth the panel is in their expertise and so that when you are formulating questions, you would have that as a backdrop. So is there a first question? Please come to the microphone sir so that others can hear you.

 Audience: It seems to me that the original concept of revenue sharing perhaps could favor the City but provoke a lot of controversy in the suburbs. Would it not be better in terms of trying to heal the problem of fiscal disparities to give much more thought to the impact of state aid as a way of dealing with fiscal disparities?

 Should we perhaps give more thought to the state or the commonwealth picking up more of the cost of basic services like police and basic recreation. Might that be a better way to go than raising the issue of revenue sharing in a metropolitan area? That is just a general question and then to Mr. Hendricks I would like to ask a question. As you know, there is a serious effort underway in Charlottesville in terms of reverting the city of Charlottesville back into Albemarle County and I was just wondering what you attitude is on the reversion movement in Charlottesville?

Cole Hendricks: Well, the reversion movement in Charlottesville is obviously a very controversial one today. It's one that the City Council so far has not taken a stand on even though a citizens' group has petitioned the court to enter into those discussions. As I have looked at the reversion statutes and the way it will apparently work in Virginia, I think it solves some of the city's problems and does not solve others. I think that a major issue for most urban areas is one of schools and often times a reversion does not solve that problem to the satisfaction of those people who live in the urban area. If you follow those statutes pretty closely and the urban area school system gets absorbed in the county school system, then you have to see what's left to change. A town can then go out and annex half the county in a much easier fashion than it can today. I'm not sure that helps the urban problems that the town then sees. The other issue is that it changes the whole local political picture in terms of the power. That as much as anything else may be the thing that brings down the curtain on reversion in places like Charlottesville. Once that's sorted out by people, they may decide the redistribution of power is not worth it.

 Viola Baskerville: Thank you, Mr. Hendricks. Mr. Barber.

 Neal Barber: I will try to address the state aid issue. I would agree that part of the solution to some of the urban fiscal ills would be for greater state aid or state assumption of social services particularly and I think that you can make a strong argument for additional funding for education particularly in the urban areas. One thing that revenue sharing tries to address is the competition among local governments. If you do the state aid formula routine you're still going to have competition for economic development and high valued land use among the localities within the area, so you haven't addressed the issue of collaboration and cooperation relative to land use and economic development.

 Viola Baskerville: Would any of the other panel members like to take a stab at that general question?

 Stuart Meck: I haven't really seen a clear connection between the tax based sharing system and better planning in the Twin Cities area. The Twin Cities look exactly like every other metropolitan area in the United States except perhaps some the metropolitan areas in Oregon and Washington, which are getting dense as of a consequence of some of the state planning initiatives.

 Viola Baskerville: One thing about the Twin Cities, it is the metropolitan area of the state so that complicates the planning issue.

 Audience: My question is, do you know of any experience here in the nation that somebody has gone back to the drawing board and started from scratch rather than doing patchwork-like revenue sharing or that sort of thing? You'd have to start at the General Assembly here in Virginia?

 Stuart Meck: I served on the Grayson Commission for several years. It was a commission of the General Assembly which was searching for a solution to the urban problems in Virginia and the thought was debated as to whether in Virginia we could go back to ground zero and start all over again. The conclusion was that the problems of doing that were so overwhelming that it would be virtually impossible.

 Panelist: New Zealand did a total restructure of their local government system and it would be interesting to take a look at how the success of that has been.

 Audience: I'm from the Twin Cities and they are spending a lot of their money on transportation which gets the buses out into the neighborhoods, far out into the suburbs. Also, they spend a lot on snow removal, and to getting people to work regardless of weather. Since I've lived there has been a significant clean up of the metropolitan parks and other public spaces within a five mile radius. Most of the pathways are open for bicycles as well as walking. Panelist: That is a good point. Obviously, they have different priorities in Minneapolis and St. Paul than they do in the rest of the United States. One of the reinforcement points I made earlier is that regional tax based sharing does not necessarily result in a better urban form. It results in more equity but there are a lot of other little things that you have to do and you've identified some of them. I mean better cultural facilities to make a difference in the way a metropolitan area operates.

 Roger Richmond: One little technical thing from that Minnesota experience, without revenue sharing and the tax based sharing program, the difference between the tax base per capita of the most wealthy community and the least wealthy community in that area was 22:1. With the Fiscal Disparities Act in place actual difference is 4:1. But that is a traumatic effect of that program in lessening the fiscal disparities between the jurisdictions. Ultimately, to have a healthy metropolitan area you cannot have the most extreme disparities between communities. One of the functions of revenue sharing is to lessen the disparities in order to contribute to a better quality of life throughout the metropolitan area, then everybody benefits. But I think the most important thing you get out of this thing is Cole's statement, "that revenue sharing by itself is not a sufficient answer to anything."

 Mr. Ellis: I've heard your remarks which I agree with that revenue sharing will help, but it is not an answer. I don't believe the Urban Partnership organization and legislation that they introduced to get funds for the Regional Competitiveness Act will do much good, because it is not enough and because I think the legislature will not put up additional funds to support it. Thus far there is only a few million dollars and the formula of distribution of that money was scattered all over the state and small localities and very little will hit the critical areas such as Richmond because the bill requires an allocation. "What do you think we really can do? How are we going to solve the problems, for example, of the Richmond area?"

 Neal Barber: So there has been tremendous progress over the years there and the Richmond First Club has been a strong advocate of regional cooperation. I think that you need to step up the pace in regional cooperation but I don't that is the only issue. Look at the distressed neighborhoods in our urban areas and these are just not in the city.

 Panelist: The academic among the panel will suggest that as Americans we're impatient. We want to fix things. City building takes more than our lifetimes. We are, in fact, in the process of building a metropolitan region here, in Tidewater, and in other parts of the state, and right now we're trying to change the direction from autonomy to community on a regional scale. Your question might be asked "How do fight racism?". You don't do it in ten years. You don't fix it in ten years. These are deep kinds of feelings that as we all know with racism that is true with region building will take long periods of time. More than anything we need a legal structure that will enhance experimentation. The Regional Competitiveness Act does that so you're going to get one approach from Richmond, another in Tidewater, and so forth. That's all for the good. If we can get some state support for these experiments I think that's really good.

 Audience: Since the 1990 census all of the three big jurisdictions, Richmond, Henrico, and Chesterfield all have populations that merit reward of an entitlement grant from U.S. Housing and Urban Development. Significant sums of money to address entity development and redevelopment programs. If those moneys were pooled and allocated to a board to address regional issues of community redevelopment?

 Panelist: If you introduce enough dollars and you make people adhere to certain common themes in order to get those dollars, you may begin to move people in that direction. But I think the dollars have got to be significant and they can't be distributed a little bit to everybody to make everybody.

Audience Member: A lot of people in this area are comfortable with the status quo. Say a $3 billion plant does open up in Goochland and it provides jobs and it increases the tax base of Goochland, what happens when you don't have the required workers that Motorola needs and all those people that get those jobs come from out of state and nobody in the Richmond community really benefits from that job growth.

 Panelist: That situation can highlight the issues. I think that we have cases now in the state in an area that I work in right now, the Northern Neck, a portion of that. There are foreign workers coming in and taking jobs and we have some of the highest unemployment in the state when you look at Northumberland and Lancaster counties. But it still hasn't created the crisis to move people to action.

 Audience: I'm representing the Virginia Association of [Railway Promoters] Citizen Advocacy Organization. This Association promotes mass transit and the overall quality of life for urban areas. This past Sunday I was in Raleigh, Durham, Chapel Hill triangle for the unveiling of their Regional Transit Plan, a triangle circuit plan. They are bringing in a train-like vehicle which will become hopefully the core of the regional transit system that will serve and do that throughout entire region. One of the proposed goals is to support work first which is essential to welfare reform programs providing lots of transportation to the blighted areas. Last week I attended a seminar on CSX's major investment study for the area from Newport News, Hampton and Williamsburg. Again, we have a region that is proposing to link itself together with the transportation infrastructure to get people out of their automobiles and provide mobility without the increased expense of maintaining and building more roads. We're blessed by having a peninsula that limits sprawl so they have to seek other solutions. Other localities which are getting their act together before we realize it we also have to cooperate and pool our resources and become cohesive or we're going to get left in the dust. To reiterate what you have said earlier, is leadership, that it is leadership among all of us and the hardest thing about a democracy is that it takes place everyday, it's not just only a problem in Richmond. We have a stake in this. We just can't elect a few officers and politician to do everything while we just sit back watch the future pass us by. Those are my comments.

 Panelist: I would like to respond to that. About six years ago, Congress enacted something called the Intermodal Service Transportation Efficiency Act, an amazing piece of legislation, because it was a fundamental shift in federal highway policy to plan for modal transportation and to do this deliberately. This act, by the way, is currently under consideration for reenactment. We've traditionally used in the United States a single mode. Delaware is doing a pretty good job and what this involves doing is not simply being concerned with big infrastructure projects like more highway interchanges but sweating out the details of how people use transportation and commute across the region so everything hooks up together. Apart from restructuring government thinking through how the regional transportation system works and making sure people can commute around the region without having to use a car all the time is probably the best thing that can happen. If a region wanted to think about something that it could do that was very important and significant over the long run and take ten or twenty years to make a change, rethinking the transportation system and how it hooks together is probably the highest priority.

 Viola Baskerville: We are now in the process of Richmond looking at intermodal transportation and looking at how our old train station works and we're going to get that back on line. About two and a half years ago a survey was put out for members of City Council and the Boards of Supervisors to list the top twenty regional concerns and priorities to be addressed. To a person on City Council, the number one or two issue was transportation. Among our colleagues in the surrounding counties, transportation did not come up until much further on the list as one of the twenty items. There is disparity in thinking.

 Ruby Turner: When Charlottesville agreed not to seek annexation forever, was there a howling protest from the voters against the plan for preventing land expansion for Charlottesville for eternity and did that particular council fair well in the next council election and further is there now an undercurrent being felt as a result of receiving only two and ten miles?

 Cole Hendricks: Interestingly enough the city population did not respond particularly one way or the other as I recall. The county leaders told people in the county that you've got to vote for this or we're going to have annexation and there was an overwhelming vote in the county at the likes of which have not been seen since.

 Viola Baskerville: Without your attendance this would not have been a public forum. I would like to thank the Richmond First Club, the Commonwealth's University Library Services, the Department of Urban Studies and Planning and the College of Humanities and Science for hosting this event. The Richmond First Club has announced that a transcript of this discussion tonight will be eventually on their worldwide web site. So if you have any questions about that and you want information about this transaction, this panel discussion this evening please contact the Richmond First Club and with that good night. Thank you.