What Minneapolis Does Right

In the March issue of The Atlantic, Derek Thompson writes that young people can find, according to a study published by economists from Harvard and Berkeley, upward mobility in “rich coastal metropolises, including San Francisco, San Jose, Los Angeles, San Diego, and New York City.” One major problem: These cities have also been found to be the least affordable in the country. But in these studies, one metropolitan area stands out as landing in the top 10 in the Harvard-Berkeley mobility study and being generally affordable: Minneapolis–St. Paul.

Thompson wonders: Instead of asking what’s wrong with the wealthy coastal cities, why not look at what Minneapolis is doing right? Unlike other cities, like Atlanta, where Fortune 500 companies were lured there, Minneapolis has built 40 businesses that have made it onto Fortune’s list in the last 60 years alone. College graduates flock to those Minneapolis-based businesses upon graduation instead of migrating elsewhere in search of work. But the city has remained affordable due to what Thompson describes as a “high unusual approach to regional governance, one that encourages high-income communities to share not only their tax revenues but also their real estate with the lower and middle classes.” He goes on:

In the 1960s, local districts and towns in the Twin Cities region offered competing tax breaks to lure in new businesses, diminishing their revenues and depleting their social services in an effort to steal jobs from elsewhere within the area. In 1971, the region came up with an ingenious plan that would help halt this race to the bottom, and also address widening inequality. The Minnesota state legislature passed a law requiring all of the region’s local governments — in Minneapolis and St. Paul and throughout their ring of suburbs — to contribute almost half of the growth in their commercial tax revenues to a regional pool, from which the money would be distributed to tax-poor areas. Today, business taxes are used to enrich some of the region’s poorest communities.

Never before had such a plan — known as “fiscal equalization” — been tried at the metropolitan level. “In a typical U.S. metro, the disparities between the poor and rich areas are dramatic, because well-off suburbs don’t share the wealth they build,” says Bruce Katz, the director of the Metropolitan Policy Program at the Brookings Institution. But for generations now, the Twin Cities’ downtown area, inner-ring neighborhoods, and tony suburbs have shared in the metro’s commercial success. By spreading the wealth to its poorest neighborhoods, the metro area provides more-equal services in low-income places, and keeps quality of life high just about everywhere.

Socialism, some may whisper. This is not that: Using tax revenues to support the areas of a city most in need and maintain a good quality of living for all residents is commonsensical.

Photo: Dustin Gaffke

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