A Fresh Take on Public Asset Management

An area that I did not understand very well, since I have no real experience with city government, from Bruce Katz and Jeremy Nowak’s book The New Localism has to do with the management of publicly owned assets. According to Katz and Nowak, public infrastructure, public land, and locally owned buildings and spaces are underutilized and the value of these assets is poorly managed. Part of the reason for this is that much of government is split and segmented. One agency has control over a piece of land, and another agency has ownership of another near by asset. This fragmentation makes it hard for the city government to consider unified programs or projects that would utilize both of the nearby assets in a uniform manner.

 

Another issue the authors discuss with public asset management is elected political officials holding veto power over the use of public assets. Daniel Kahneman in his book Thinking Fast and Slow describes our risk avoidance tendencies, and I think these tendencies can easily be viewed in our elected officials and their veto power. Elected officials, like everyone else, is more worried about potential losses than they are excited about potential gains from the use or sale of assets. What is worse with elected officials however is that they ware worried about the loss of an electoral base, and the loss of a job from decisions regarding the use of public assets.

 

The authors write, “The removal of the political class from public asset management has a salutary effect on democracy by transitioning politicians from asset gatekeepers to consumer and citizen advocates on behalf of public asset productivity and quality.”

 

Instead of having elected officials be the ones in control of public assets, the authors suggest transferring ownership to quasi-governmental organizations that blend public, private, and civic actors. The authors envision new forms of port authorities or development organizations that would control public assets with a focus on maximizing public benefit. Elected officials would then be responsible for helping develop innovative uses for public assets rather than being responsible for the failure of projects and programs that use public assets. This is the essence of the point  that the authors make in removing the political class from public asset management. A rational organization that controls such assets can defragment them, and put them to better and more productive uses.

Cities Suffer From Loss Aversion

“Many U.S. cities are, in essence, a fact-free zone when it comes to public assets. They have little knowledge of the assets they own and the market value of those assets, either under current or altered zoning regimes. Ironically, U.S. cities know what they owe (such as pension liabilities) but not what they own. Rectifying that disconnect is the first step toward sane and sensible public finance,” write Bruce Katz and Jeremy Nowak in their book The New Localism.

 

Katz and Nowak highlight the ways that local and regional governments in cities and metropolitan areas are establishing new networks to develop innovative solutions to global problems that have vexed state and national governments since the early 2000’s. Cities are reinventing ideas of governance and finding ways to adjust to the challenges they face in a way that larger governments seem to be unable to do. One area that is holding most city governments back, however, is financing.

 

Local government financing does well when the economy is strong and when people are moving to the area to create and fill jobs. However, when the economy is weak and people are moving away, local governments cannot keep up. Cycles of strong and weak economies have lead to the situation that Katz and Nowak described in the quote I used to open this post. Cities focus on their liabilities and worry about the costs and expenses that pile up and become major obstacles whenever the economy turns south. The authors argue that these pressures can become a singular focus for local government officials, preventing them from thinking clearly about the opportunities they face while limiting their creativity to adjust to new economic conditions and develop innovative solutions.

 

I don’t find it too surprising that city governments are more worried about what they owe than what they own. I am currently reading Daniel Kahneman’s book Thinking Fast and Slow and his descriptions about the way people respond to potential losses seems to be right in line with the behavior that Katz and Nowak describe for our city governments. We feel a loss of $100 as equal in terms of pain as we feel joy from a gain of $200. That means our losses are twice as painful as a gain is joyous. Mayors, city managers, and elected officials have their jobs on the line and can be held responsible for economic forces that are far beyond their control. This is likely a big part of what leads to this risk aversion among our local governments, and why so many of them are focused on what they owe and what could go wrong in a downturn. The narrow focus that this creates for governments, however, is likely to exacerbate any economic shocks that they do experience. By failing to plan and think big, city governments are failing to get the most out of the assets they do have, and are failing to build a buffer of protection for themselves and their residents if an economic shock occurs.

 

The solution that Katz and Nowak provide is a structure of new networked governance, where governments are able to provide the authority and base funding for projects and ideas, but private organizations can manage public assets and capitalize on charitable and foundation giving for more risky projects. This opens an avenue for bold movement that risk averse elected officials and public agencies could not approach. It allows cities to maximize their assets, rather than forget about them altogether.

The Complement of Networked Governance

The last few weeks I have been writing about governance ideas presented in Bruce Katz and Jeremy Nowak’s book The New Localism. One idea I have brought up multiple times is the idea of new institutions at the local level formed from networks of public, private, and civic actors. Katz and Nowak argue that these networks are crucial for the development of plans and strategies to help cities grow, adapt, and thrive in a globalized economy. New institutions include structures and frameworks that bring together public, private, and civic leaders who have the ability to mobilize energy, capital, and people to actually get things done, rather than to just talk about doing things.

 

Katz and Nowak are clear, however, that these new network governance structures are not something they suggest as a replacement to traditional government structures and agencies. In their book they write, “In the end, however, networked governance is a complement to functioning government, not a substitution. As responsibilities shift downward in societies, capable local governments become a necessary component of problem solving and leadership.”

 

I previously wrote about the ways in which our denigration of government in some ways create a self-fulfilling prophecy, where talented and motivated people are afraid of the stigma of government work and chose to work in the private sector, leaving government with less capable and dynamic talent. A lot of rhetoric says that government is the problem and not a solution, but Katz and Nowak show that government has to be part of the solution.

 

City and local governments create the structures that can organize private and civic groups. They create the forums through which stakeholders can deliberate and discuss the problems that people in the region face. Agencies play a role in ensuring that projects and programs taken on with the support of private and civic groups follow legal precedent and sound administrative practices in an equitable manner. Without a competent public sector, the plans from governance networks would have nothing to graft onto, and could not be implemented nor developed.

 

New governance approaches through networks are efficient and effective because they bring in the people who have the expertise in a given area and invite them to be part of a larger solution than just maximizing their bottom line. They engage community members and actors in place-making, helping the region grow in a way that will in turn benefit each member of the network. The network fills the gaps in public action and strengthens the weakest parts of the public sector. Together, a competent local government combined with the nimble and expert private and civic sectors has a great advantage in the field of problem solving.

Cities Building from Strengths

I really like the ideas presented in The New Localism by Bruce Katz and Jeremy Nowak because they provide a road-map for getting stuff done in a local context where our hyper polarized tendencies can be put aside. The ideas presented in the book focus on engaging local community members and groups to take real action against our most pressing challenges. It doesn’t simply present a best case scenario of local policy-making, but demonstrates real examples of local place-making alongside realistic decision-making.

 

Cities have the power to lead on many issues that we face today because of their abilities to create networks to pull people together. It is the strengths of cities that propels them to be the solution engines that they can be in our world today. The authors write, “Cities unveil and tap hidden strengths by aggregating public, corporate, philanthropic, and university stakeholders into networks that work together to tackle hard challenges and leverage distinctive opportunities.”  It is the people, the companies, the groups, and the local environment that allow cities to be diverse, dynamic, and successful in developing real responses to social, economic, and security threats. By understanding and connecting these resources, cities can build coalitions with the power and energy to transform cities in the face of obstacles.

 

Katz and Nowak continue (emphasis in original), “The best networks have a smart recipe:  Build from strength to address needs rather than build from needs to address strength. This enables cities to realize the full value of latent assets, whether they are sector based … or geographic …”

 

Cities cannot identify who they want to be, and then try to engineer the strengths that would help them bring about the transformations they want to see. Cities have to be able to honestly look at themselves and see what they can be. There is plenty or room for imagination and visionary leadership in this model, even if it feels limiting. Cities cannot invent strengths out of no where, but they can identify, coordinate, and combine the resources that produce existing strengths to further develop new industries and sectors, or to capitalize on existing advantages. Building from strengths takes the existing pieces and encourages them to grow, expand, and recombine in novel ways. It requires organic communication and networking along with new institutions to help streamline the decision-making process to implement the programs and policies to help propel cities forward.

Implementation Matters

One party in the United States seems to continually chide any public sector misstep and only seems to be able to complain about the problems and waste of public sector projects and programs when discussing what the government actually does. While there are undoubtedly challenges and problems in public administration, continually complaining about and criticizing any public agency operation can have further costs to society. Good implementation in public policy matters, and one fear that seems reasonable to me, is that the constant denigration of public service will drive out creative and hard-working individuals, and worsen the very situations being criticized.

 

In The New Localism, authors Bruce Katz and Jeremy Nowak write about the importance of implementation, and how they view it differently in their system of New Localism. They write,

 

“At a Brookings Institution forum in 2000, [Richard] Shatten stated that, ‘being right is irrelevant to the growth of cities and metropolitan areas. Good ideas are critical, but they have impact only when they are implemented thoughtfully and effectively. And sound implementation only happens when a community develops a civic, corporate, and political culture that can translate good ideas into action and execute with discipline and imagination.'”

 

Two things really stand out from this quote to me. The first is that good implementation is everything. Public agencies need to think about and study what will make the implementation of a program successful and need to be thoughtful of how they do the things they have been tasked with doing. Poor implementation of the perfect solution can ruin public support for that solution and can create even worse problems and greater barriers to achieving the outcomes society wants to see.

 

Second, good implementation relies on a strong political culture that accepts government action and helps align non-governmental actors to make implementation successful. It is not enough for private sector organizations and thought leaders to say that a policy needs to be put in place or run a certain way, they actually need to use their resources, skills, and expertise to be part of implementation. Good ideas require community efforts to become successful policy, and if a group simply stands apart, refuses to help, and cries foul at every opportunity, then implementation will of course fail, as if it were a self-fulfilling prophecy of ineptitude. There is room for criticism of government and the failures of implementation should be discussed, but we should not hinder the implementation of a program out of a prejudice against public action. Ultimately, the public action on its own, as the quote suggests, is not enough. We can’t just criticize from the sidelines, we actually need to find ways for more organizations and groups to be involved in the implementation of new programs, specifically tailored to meet the local needs of populations, businesses, and environments. Standing apart and criticizing only snowballs problems. Collaboration and cooperation among civic, private, and public organizations is the only way governance and development will be possible in the future.

Culture Busting

In The New Localism Bruce Katz and Jeremy Nowak call for culture busting among city leaders who want to find new solutions to pressing problems. One of the challenges we face is that in general, the public doesn’t understand governance well. We operate with set ideas about what governance is, who sets rules and regulations, and the roles that private companies, local community groups, and formal government agencies play. In the future, as problem solving becomes more local and as we try to tackle major challenges we will need to get beyond these simple models from our high school civics classes.

 

This is what Katz and Nowak call culture busting, “culture busting is a form of risk taking and a fundamental shift in understanding that many responsibilities in a city and metropolis lie with the community broadly rather than with the government narrowly.” The role of government, the role of businesses, and the role of everyday citizens needs to change if we are to truly address the big problems in our societies. If we want to tackle climate change, if we want to reduce healthcare spending, and if we want to spark economic development, we have to realize how interconnected all of the challenges we face are, and we have to develop a community focused action plan to make the necessary changes. Thinking that problem solving is the role of government or that economic development is purely a free market phenomenon will not help us jump to be dynamic leaders in a globalized economy.

 

Part of what culture busting calls for is more education around governance and part of it is a reemergence of community action. A major failure of suburban life is that we drive from our homes to our places of work or commerce, and rarely interact with anyone else along the way. We let others deal with problems unless they happen to be unavoidably right in front of our face. We might get out for a sporting event or a conference, but otherwise we are just as content to watch Disney+ at home. Culture busting replaces this individual isolation with networks that want to see real change and are willing to own part of that change.

 

Culture busting requires that we re-imagine what is possible for governments and redefine the role of businesses and civic organizations. It requires that we think about the challenges our communities face, and ask ourselves what resources and advantages do we have that we can use to make a difference. Rather than waiting for government to make a decision, it requires civic and private energy to clear the path and display a public will for government to direct resources in the direction that the populace already wants to move. It shifts leadership from government back to the people and aligns actors to make the community a better place.

A Complex Interplay

In the United States, we have a myth about the power of private industry. We believe that the private sector is robust, efficient, and always provides the correct and stable equilibrium needed to solve problems and provide us with innovation. We see free-market competition as the only legitimate way to advance and grow, with popular TV characters expressing ideas such as, “Capitalism: God’s way of determining who is smart, and who is poor.

 

Public action, on the other hand, is downplayed and typecast as an incompetent, greedy villain. Accepting aid from a public agency is seen in some ways as a cop out, or only as something that is acceptable for a short period of time as long as you are deserving of assistance by working hard, trying to be smart, and following all the rules that others lay out.

 

For those who have achieved success, this model fits nicely with the worldview that they would like to see and believe. It elevates them while framing poverty or economic distress as a moral failure.

 

As we move forward as a globalized society that is able to adapt to technological changes and new institutions, we will have to realize that this myth does not reflect the reality of public programs or the private sector. In The New Localism Bruce Katz and Jeremy Nowak write the following about their idea of dynamic new approaches to policy and governance,

 

“Successful network governance models show the complex and varied interplay of the public, private, and civic. The models eviscerate the cartoon version of an efficient private sector taking the place of an inept and incompetent public sector. Rather, network governance combines the entrepreneurial capacity and capital of business and philanthropy with the legitimacy and broader concerns of local government.”

 

Government and public institutions have an authority and responsibility that is hard for the private sector to replicate. Because government agencies don’t have a profit motive, they are able to focus on public priorities and concerns in ways that businesses cannot. However, because businesses have private capital available for investment, they can take risky bets and make investments that public sectors could not. Finding ways to merge the strengths and weaknesses of public and private sectors is crucial to develop networks that have the appropriate capacities to invest in the future and implement changes to help regions grow and advance.

 

Simply claiming that the private sector always provides the best outcomes or that the public sector is slow and bloated does not help us think about what is really needed for economic growth and development in the 21st century. Both sides need to be understood clearly and appreciated for their strengths and unique features. Future governance models will combine aspects of both the public and private sectors to get stuff done.

Place-making and Networks

One idea from The New Localism by Bruce Katz and Jeremy Nowak is that states and cities should not be looking to attract companies simply by offering tax breaks and by promising to streamline permitting. Bringing companies that can be enticed by these types of handouts is a good way to generate short-term positive headlines, but it is unlikely (especially on its own) to attract the kinds of companies that will help develop a city or metropolitan region into an attractive hub for other companies. For Katz and Nowak, what is more important than just getting a few companies to move in with tax breaks is engaging the business community that already exists, and working with civic and private sector leaders to invest in place-making.

 

A general problem we have faced in the United States over time is sustained disinvestment in localities. This has taken different forms at different times and has had serious conflicts for people living in disinvested places. For years, urban centers were ignored as people moved to outlying suburbs, and the result was a crack epidemic and a hollowing-out of many great American cities. Today, we are disinvesting in our suburban small towns and in former manufacturing hubs in the Midwest. The result has been an opioid epidemic and a spike in suicides. Simply convincing a company to move to an area that has been disinvested with some tax breaks won’t help solve our underlying problems and won’t help cities and people adapt to a dynamic globalized economy. What we are more likely to see in this strategy is the attraction of companies who are able to implement exploitative labor strategies that burn-out the people who have faced disinvestment and desperately need jobs.

 

“Networks must now ensure that their education and workforce development systems produce locally grown talent with the specialized skills that align with local advantages,” write Katz and Nowak. On its own, this advice is not very helpful. But when you think about what a network is and how cities can invest in existing networks within a region, you see that this advice is actually quite practical and represents a shift from the traditional thoughts of attracting companies to a region to produce jobs. Cities have to consider their advantages, such as ports, transportation lines, physical space, or educational institutions, and find ways to connect local business leaders, engaged civic actors, and other organizations in a way to get stuff done. Engaging to talk about problems and starting action for just a few months is insufficient – leaders need to be engaged in long term place-making – a committed effort to improve the region in a “rising tide lifts all boats” type of approach.

 

Katz and Nowak continue, “And they must also create quality places that not only attract and retain workers and companies with a rich set of amenities, but also provide a platform for the seamless and collaborative exchange of ideas.” The organizations and groups brought together in these networks cannot remain in individual silos. They need to be connected through new co-governing institutions that have the power and authority to make real decisions that generate meaningful investments in the places where businesses operate and where workers live. Without such long-term and permanent planning that gets stuff done, cities will meander along with incremental changes, or worse, will continue on a path of disinvestment that leaves their citizens vulnerable to despair and exploitation.

Cogoverning Within Institutions and Among Leaders

A great myth among the American populace is the myth of compartmentalization. We (or at least people who don’t study a specific area) tend to think that things are separate and distinct. The reality however, is that things are much more connected than we believe. I’m going to approach this idea from the standpoint of public policy, government, and the private sector, however we see this myth of compartmentalization in the way university departments are set up or in the way we want to have sports/entertainment separate from current political and social affairs. In the world of public policy, we like to think that there is government, and then there is business, and they are separate from each other.

 

This myth is slowly being dismantled in the United States at the level of local leadership in cities, businesses, and civic organizations. In The New Localism, Bruce Katz and Jeremy Nowak write about the new transformations we are seeing in local leadership and governance. They write,

 

“The current suite of supersized challenges and de facto devolution of responsibilities demands new models of networked governance and fundamental re-framing and refocusing of the leadership class in cities. The most effective local governance occurs in places that not only deploy the formal and informal powers of government but also create and steward new multi-sectoral networks to advance inclusive, sustainable, and innovative growth.”

 

Governance is no longer simply a government agency separate from the rest of the world. Businesses and public agencies are becoming more connected as the challenges, problems, and complexities of society increase. It is not enough for rules and regulations to be set in a compartmentalized way by a supposedly separate and outside agency.

 

Katz and Nowak continue, “The logic is incontrovertible: if cities are networks of institutions and leaders, then institutions and leaders should co-govern cities.” Leaders from business and civic organizations need to help govern alongside the agencies that set regulations. Government and business cannot be compartmentalized, and different sectors of business and public services cannot be compartmentalized. Cities are interdependent, creating networks that rely on each other to succeed. The risk here is that agencies will be captured by businesses and industry, establishing protectionist policies that help the business at the expense of the larger ambitions of cities and metropolitan regions. Katz and Nowak include suggestions in their book for new forms of quasi-governmental institutions which can translate the desires of businesses into public policy in a way that mediates the concerns of public agencies, businesses, and civic groups, helping further the inclusiveness of the decisions, rules, and regulations being put in place.

City Growth – The Sports Play

I’m a fan of the research and work that comes out of the Brookings Institute, a generally center-left think-tank in Washington DC that I believe does a good job at looking at politics and policy holistically, and is able to get beyond the partisan rhetoric that dominates most of our political landscape. An area of interest for many of the writers and policy experts at Brookings is the area of economic development in metropolitan areas, particularly as related to sports and business retention. Two Brookings experts, Bruce Katz and Jeremy Nowak look at how Indianapolis used sports to help jump-start the city’s economy, but present the information in a way that shows that reliance on sports alone is not sufficient to develop a thriving middle class and robust regional economy.

 

“A sports-based development strategy,” they write, “can take a city only so far. Sports attract tourism and visitors. Game time enhances demand for lodging and restaurants. Name teams may have an intangible effect on the attraction and retention of innovative firms and talented workers. But in the end, the sports industry thrives on low-wage jobs and does not represent a model of economic growth for a city or metropolis. Beer and hot dogs are not the stuff of a sustainable middle class.”

 

In their book The New Localism, the authors talk about the efforts that Indianapolis took to attract and retain an NFL football franchise and also to attract the NCAA headquarters. They go on to further explain how Indianapolis was not content to simply rest on being a sports headquarters and reinvested the energy and revenue from sports to drive and build new sectors. Sports teams can help be a support for a local economy, but they will never be a major driver, and on their own don’t appear to be worth the enormous tax breaks and stadium construction assistance that many cities and states seem eager to provide.

 

As Katz and Nowak stated, sports can have intangible benefits for communities like city pride and can serve as a hub for local events. But cities need to provide other attractions and benefits for their citizens. The people need additional higher paying jobs than can be found in a stadium and need real innovation to keep pace in our globalized world. If cities and states over-invest on the sports side, they may miss out on developing and investing in the factors that can make cities dynamic and competitive in the long run. Ultimately, sports teams can be a good attraction and can serve as a spark for energy and investment in making a city a good place to live and do business.