"A city with a balanced budget may be a fine business," says Donna Shalala, the president of New York's Hunter College, looking out over Park Avenue, "but a good business is not necessarily a good city."
Shalala, a former member of New York's Municipal Assistance Corporation, the agency that pulled the city out of default, sees a town that is out of the billion-dollar default of 1975 but that, as a result, has dirtier streets, more crime, fewer social services and less money to educate the many poor children in the increasingly bad public schools. Now even the glamour of Park Avenue faces the threat of being carried to the gutter with the dilapidated neighborhoods as New York's financial problems stymie efforts at revival.
Those financial problems, here and in other northeastern and midwestern cities, were caused by city governments that grew to monstrous size in the '60s and '70s with employees and programs used to help -- and even employ -- the poor people clustered there. Those espenses rose as inflation, the recession and the loss of industry sucked the life-blood from city treasuries.
"Manhattan," says Felix Rohatyn, who heads MAC, "has the best tax base you'll find in any American city. But even Manhattan is not a strong enough locomotive to pull the rest of this city."
A recent report by the Presidential Commission for the Eighties said that not even the federal government is a big enough locomotive to pull the cities out of decay and urged the federal government simply to help people in the cities to move to more prosperous areas of the country.
So what is the future of the American city? Does it have one?
In a word: yes. The northeastern and midwestern cities in financial crisis still have most of the nation's manufacturing businesses, still house many of the main institutions of American business and cultural life. The question today is how American cities will survive -- with the glory of the old days.
The cities have no choice but to cut spending or face massive deficits, but they can choose how much, and what, they cut. How they will survive also depends on who is there. To survive with style, the cities will have to keep the middle-class blacks and whites who have been leaving in record numbers for the suburbs and, more recently, the Sun Belt.
Gone with them are supermarkets, fruit stands, department stores, city neighborhoods with the mom-and-pop stores and the professional sports teams are gone. New York's Giants play in New Jersey. Detroit's Lions play in suburban Pontiac.
Worst of all, the economy appears to have left with the middle class, the markets and the sports teams; gone past even the suburbs, moving clear to the Southwest. "People prefer sunshine," says Rohatyn. "That's what has happened to cities."
As the people leave, city land values go down, reducing the property tax revenues traditionally the backbone of every city's treasury. The new emphasis in city finance is on increasing the income tax to make up the loss.
In New York, where city officials may be designing the model for urban finances of the future, the rise in property taxes is only a part of a larger scheme of overall reduced taxes. To make New York competitive to business again, officials say, the city has cut its real estate tax, its corporation tax, its commercial rent tax, its stock transfer tax and its tax on the sale of business equipment. r
The results? Where the city had lost about 600,000 private sector jobs between 1969 and 1977, it has gained about 100,000 jobs since the tax relief package was implemented two years ago. Retail sales are rising again.
What New York has not done is to try to get manufacturing industries to return, the solution now being tried in most cities on the federal government's theory that, say, aid to Chrysler is aid to Detroit. Instead, New York has concentrated on changing the support for its tax base from manufacturing to service industries like insurance, real estate and advertising. Service industries may be where the future of American cities is to be found.
But just as important as the transition to service industries is the cities' ability to hold populations of the skilled middle classes. Cities inhabited only by the extremes of wealth and poverty will not work, socially or economically.
Every big city's mayor would love to see more of the process of gentrification -- middle-class rehabilitation -- so often said to be sweeping over cities. But gentrification is more myth than reality at present. In "The Prospect for Urban Revival," James W. Fossett and Richard P. Nathan found that "in spite of optimistic reports and physical evidence of construction . . . [the scale of rehabilitation] apparently [is] still too small to boost the aggregate level of prosperity in any of these cities." So far.
But there are profound changes already overtaking American life that promise to work to the advantage of the cities, northwestern as well as southwestern. There are going to be many more working women. There are going to be more elderly people. High fuel costs will discourage big houses and long commutes from home to office. Another great wave of immigrants has entered the country, most of them drawn to the cities -- a process visble, for example, in the numbers of Koreans running
"Cities are ideally organized for a working women," says Donna Shalala. "As more women come into the work force. I think you'll find a move away from the suburbs and back to the city." Similarly, the convenience and accressibility of urban neighborhoods attract elderly people who no longer want to be dependent on cars.
But the process of restoring fiscal and social balance to the cities is not going to be automatic.
Over the past 15 years, most of the elder cities tested the limits of their ability to help their people. Some of them -- most spectacularly New York -- ran the costs up so high that the taxpayers began to flee. Now they have come into a period in which the federal government is going to be a less reliably open-handed ally and benefactor than in the 1970s. The long-term trends in population and the economy promise to help even the cities of a passing industrial era. But the question for each of them is whether it can retrench fast enough to escape the immediate threat of bankruptcy, before the revival gets solidly under way.