Welfare indicators for public facility investments in urban renewal areas

Socio-Econ.Plan. Sci. Vol. 3, pp. 291-314(1969).Pergamon Press.Printedin Great Britain

WELFARE

INDICATORS

INVESTMENTS

FOR PUBLIC FACILITY

IN URBAN PHILIP

H.

RENEWAL

AREAS*

FRIEDLY

Office of the Assistant

Secretary for Research and Technology, U.S. Department Housing and Urban Development, Washington, D.C. 20410.

of

(Received 16 May 1969)

To evaluate the effects of alternative public investment policies in terms of the welfare status of human beings thereby affected, we must have a clear delineation of social, economic, or other roles that such investment is intended to play. This paper defines a role for public facility investment in urban renewal areas that is based on analysis of both the intrinsic characteristics of these investments and the policy environment-defmed by a set of renewal objectives-in which they are made. Benefits and costs are seen to accrue to societyindividuals, households, business, or the community-at-large-from appropriately defined categories of public facility investment impact. A set of welfare indicators, comprised of benefit-cost measurements related to the categories of investment impact, emerges from our a:alysis to provide a basis for re-evaluation of certain aspects of renewal policy. THE ROLE of public facility investments that occur in the context of urban renewal activity has remained obscure throughout the life of this Federal program aimed at changing the character of slum populations and blighted areas. Little conscious thought appears to have gone into planning the role of public facility investments in urban renewal areas in such a manner that they could materially contribute to improving the welfare of slum families and businesses. Yet the Federal subsidy for construction or rehabilitation of local public facilities in or near renewal projects takes on significant proportions in the form of local non-cash grants-in-aid provided to local governments in the Urban Renewal Program.?_ Little previous research has been conducted in order to understand and explain conceivable parts that public facility investments might play in social and economic redevelopment in general; and virtually none has been conducted with regard to the single major Federal program aimed at such redevelopment in urban areas. The research evidenced in this paper structures a role for public facility investments in urban renewal areas in terms of the functional attributes of such investments and evaluates their impacts and effectiveness in terms of specific urban renewal objectives. A set of welfare measurement categories or “indicators”, comprised of various potentially applicable quantitative indices of change occurring in social and economic conditions in the face of alternative lines of renewal policy action, has emerged from our study. The orientation of the present analysis hopefully focuses our study of urban renewal (and now model city) implications on the welfare

* The research on which this paper is based was supported under U.S. Department of Housing and Urban Development Contract No. H-826 with Resource Management Corporation to study the feasibility of conducting benefit-cast evaluations of selected aspects of urban renewal. I want to thank Jon Burkhardt for helpful suggestions and Jerome Rothenberg for thoughtful review and criticism of an earlier draft of this material. t The details of legal and administrative provisions governing acceptability of a public facility outlay by a local government for inclusion as a local non-cash grant-in-aid are covered in [I]. 291

292

PHILIP H. FRIEDLY

status of the presumed slum dwellers.

direct beneficiaries

INTERACTIONS

of the main thrust of such a program,

BETWEEN

PROGRAM

WELFARE

INDICATORS

OBJECTIVES

i.e., urban

AND

The policy environment in which public facility investments are considered for renewal purposes is partially revealed by the overall objectives of the Urban Renewal Program and the interaction among these objectives that occurs in the process of program implementation. The three fundamental goals of the program and their respective subsumed sets of specific objectives are set forth in Table 1.* These objectives relate to the full range of urban renewal activity and not just the public facility investment dimension. TABLE1. URBAN RENEWALPROGRAMGOALS I.

Slum Elimination 1. Improved life opportunities for slum dwellers (employment, education, health, recreation, etc.) 2. Increase in low-income housing 3. Removal of physical blight (increase in productivity of land use) 4. Inducement of private investment into renewal 5. Decrease in the social costs of slum living 6. Increased efficiency (i.e., reduced costs) of public renewal investments

II.

Enhancement of the Central City vis-a-vis the Suburbs 1. Enticement of middle-income households into central city 2. Attraction of “clean” industry into central city and job creation 3. Revitalization of commercial core (CBD) 4. Expansion and support of universities and hospitals in central city 5. Increased efficiency (i.e., reduced cost) of public renewal investments.

III.

Strengthening of Fiscal Capacity of the Central City 1. Increase in central-city tax base and fiscal capacity 2. Decrease in the social costs of slum living 3. Increased efficiency (i.e., reduced cost) of public renewal investments

It is instructive also to realize the extent of either conflicting or mutually supportive interaction that exists among given objectives of the Urban Renewal Program. The matrix presented in Fig. 1 displays interactive elements ranging from strong positive ones to strong negative ones. A glance at the matrix reveals axes of strong negative interaction reflected in the cells cross-referencing the newly reemphasized social objectives of improved life opportunities for shun dwellers and increased low-income housing versus the traditionally emphasized objectives of commercial, industrial, and institutional redevelopment and municipal fiscal improvement. Elsewhere in the matrix we find generally supportive interaction among objectives of the renewal program. It should be noted, though, that renewal’s prospective relationship to model city types of projects will require continued effort toward veering away from old commitments to downtown business and civic groups. Otherwise, a serious conflict of interest might arise in regard to the revitalized Federal policy thrust toward mitigation of slum living conditions. * This statement of goals and objectives draws widely on the literature of urban renewal as well as legal and administrative documents pertaining to authorities for the Federal program. Also reflected here, however, is the actual course the program has taken over the years after having been shaped by local recipients of assistance as well as Federal policy makers.

Welfare Indicators for Public Facility Investments

in Urban Renewal Areas

Program objectives

Improved life opportunities for slum dwellers Increase nousing

in low-income

?emovat of physical

blight

[nducement of private investnent into renewal Iecrease in social If slum living

costs

fncreose in centml-city tax ,ase and fiscal capacity Inticement of middle-income rouseholds into central city Utraction of “clean” industry nto central city ond job :reotion ?evitatization zare (MD)

of commercial

Expansion and support of miversities and hospitals in xntral city ncreased efficiency (i.e., ,educed cost) of public ,enewal investments

Strong positive

Strong negative

Weak positive

Weak negative

Type of interaction

FIG. 1. Interaction

between urban renewal objectives.

A complete welfare evaluation of urban renewal activity must account for all significant effects on all relevant strata of the population-relevancy being defined in terms of the previously enumerated program objectives. The eleven welfare measurement categories listed in Table 2 were felt to have exhausted the welfare implications of renewal impacts within the context of the larger study from which the public facility analysis in this paper is derived.* The relevant subset of indicators for welfare evaluation of public facility investments-neighbourhood externalities, private investment response, resource costs, slum program

* For consideration

PI. B

of several major aspects of urban renewal from a welfare evaluation viewpoint, see

294

PHILIP H. FRIEDLY

social cost changes, and overall intrametropolitan redistributions-are included subsequent discussions of public facility resource cost and net benefit determination.

in our

TABLE 2. WELFARE MEASUREMENT CATEGORIES

I.

Economic impacts of project variables on the housing submarket and construction industry 1. Price-quantity changes from the renewal impacts on the various housing submarkets

2. 3. 4. 5. II.

Social impacts of project variables on slum dwellers 1.

2. 3. 4. III.

Index of level of and change in housing quality Neighbourhood externalities (land value and use impacts) from renewal Private sector investment response to public investments in renewal areas Economic cost functions for all project variables Impact of a given relocation burden on slum population living conditions Loss of sociopsychological capital invested in prerenewal neighborhood by relocatees Aggregate social cost of neighborhood dispersal Impact of public renewal investments on the social costs of slum living

Overall intrametropolitan redistribution effects 1.

2.

Economic: project impacts on altering comparative locational advantage between suburbs and central city Social: project impacts on altering population distribution by income class, ethnic group, and race (qualified by the degree of social consensus on various kinds of integration goals)

The interactions between renewal objectives and the welfare indicators are displayed by the matrix in Fig. 2. The areas wherein the measurements of particular welfare indicators have either direct, indirect, or no benefit and cost implications with regard to given objectives are clearly shown. This welfare evaluation of public facility investments in renewal areas offers a modified form of benefit-cost analysis. We later treat public facility resource costs in a thorough manner, but one that is familiar in traditional benefit-cost literature. Subsequently, however, we describe the positive (beneficial) and negative (cost) effects of renewal program outputs. The impacts of renewal program variables, i.e., public facility investments, could be expressed as quantitative magnitudes in the welfare measurement categories and assigned positive or negative signs according to whether or not they further renewal objectives. In a formal benefit-cost schema, net benefits would be compared with resource costs for given policy choices. There are numerous alternatives for handling computation and display of benefits and costs in a systematic and formal approach to such analysis. There are also an equal number of problems that arise in the process. We do not have space to deal with such matters here, though they are of great significance to an ultimately unambiguous evaluation. *

PUBLlC

FACILITIES

IN THE

URBAN

RENEWAL

PROGRAM

The public facilities that are eligible for Federal financial support under the Urban Renewal Program constitute a fairly representative array of such public investments. In Table 3 the eligible public facility items are grouped into nine functional categories in order to make their roles in the program easier to delimit. * Morris Hill, in his informative article, [3] deals directly with such problems as objective setting and weighting, validity of employing various measurement scales in quantifications of characteristics of phenomena, and so on.

Welfare Indicators for Public Facility Investments in Urban Renewal Areas

295

Progrom objectives

\ Welfare indicators

\I

=i, .c

XE

bl I :P

slum living

neighborhood dispersal

Ovsrall population redistribulion effects

I I

No indicator Indirect Direct

FIG.

2. Interactions

of Welfare

indicator indicator

‘chai&

of Welfare of

Welfare

change change

between urban renewal objectives and welfare indicators.

Some of these facilities relate to services or goods that may be purchased by particular client groups in the community and in roughly the quantities and qualities desired by these subgroups. On the other hand, the facilities categorized in other functional groupings relate to services whose consumption is of such a diffuse nature over the population that they may be consumed only by the entire community and only after the critical population mass or threshold level of service offering is attained. Table 4 may serve as at least a rough guide for classifying our functional groupings from Table 3 by the degree of diffuseness present in the consumption conditions. Not all of these public facility groupings fall neatly into one or the other category in Table 4. Dual classifications arise for the public health, distribution/disposal/protective, and aesthetic categories. The criteria of classification here arise from Musgrave’s distinction

F'HILIPH. FRIEDLY

296

TABLE 3. URBAN RENEWALPROGRAMPUBLIC FACILITIES Functional

Group

Public Education Public Safety Public Health General/Administrative Civic/Social Culture/Recreation Transportation

Distribution/Disposal/Protective

Aesthetic

Specific Eligible Items Elementary and junior and senior high school buildings Police and fire headquarters buildings (i.e., public safety buildings) and neighbourhood stations, fallout shelters Public university medical research and hospital buildings City Hall buildings Meeting halls, auditoriums, exhibition halls, and neighborhood center buildings Concert halls, museums, theaters, art galleries, and central and branch library buildings; band-shell structures; historic site settings City streets with necessary connections to other road types; vehicular and pedestrian grade separation structures; offstreet parking structures ; railroad spurs Water, electric, and gas distribution structures and equipment; sanitary sewer waste and water disposal structures and equipment; flood control and protection structures and equipment Finished grading and landscaping work that constitutes an integral part of any eligible facility

TABLE 4. PUBLIC FACILITIESORIENTEDTO CLIENTSOR COMMUNITIES Functional

Group

Public Education Public Safety Public Health* General/Administrative Civic/Social Culture/Recreation Transportation Distribution/Disposal/Protective* Aesthetic

Community-Oriented

Client-Oriented

x

X X X

X X

X

X

X

X

X

X

* In certain cases there are elements of both community-and and so it is entered under both headings.

client-orientation

for the functional

grouping

between social and merit goods in his multiple theory of the public sector. [4]. All of the facilities listed in Table 3 are related to the production of public goods that are jointly consumed. But in the case of certain of these goods, fees can be charged, different amounts can be consumed by various individuals, and the service can also be provided by private market action. For other goods or services, joint consumption is combined with the inability to exclude anyone in the community from consuming the good or service, regardless of whether he pays or not. An example of the latter, or community-oriented, good or service would be the provision of pure air in a metropolitan region. Either everyone partakes of the product or no one receives it. The important client groups existing among renewal area populations (both pre- and post-project area populations) will be identified and related to the various eligible public amenity items later in the paper. Traditional Urban Renewul Orient&ion

The Federal subsidy for provision of eligible public facilities by local governments in or around urban renewal projects relates closely to several expressed and implied goals of

Welfare Indicators for Public Facility Investments

in Urban Renewal Areas

291

the program. The eligible items from Table 3 constitute a set of publicly provided environmental amenity improvements for project areas and surrounding neighbourhoods. More precisely, they engender “external economies” to be appropriated by the residents and businesses of the renewal area in the course of their own activities. The various public facility improvements, each in a different way, make possible an improved style of living in a formerly blighted or slum neighborhood (for post-renewal occupants). The public facility outlays by local goverments that are eligible for Federal subsidy through the program vary greatly in terms of their effectiveness in furthering any one of these enumerated urban renewal goals. A much more precise understanding of the numerous relationships existing between the important variables of public facility investment and the dependent variables of the urban social, economic, and physical environment must be established. Identification of these variables and tentative hypotheses pertaining to forms of relationship are offered later. There are two complicating questions that arise: (1) what rates, levels, and types of public facility provision are needed to meet existing and anticipated renewal area demands? and (2) what are economically efficient (least-cost) scales of local public facility provision? The existing evaluative criteria offer too simplistic definitions of the conditions of consumption and production of public facilities; they cannot provide a degree of understanding adequate to evaluate the role of public facilities in the program. This conclusion leads us to offer a structure for a more complete and systematic analysis of public facilities.

A STRUCTURE

FOR

PUBLIC

FACILITY

ANALYSIS

The critical set of public facilities for a project area will vary with the character (social economic, and cultural composition) and size (absolute number and area1 density) of the target population, and with the attributes of its physical environment (degree of blight and the existing and proposed uses of land). Under these conditions, each decision about investing in a public facility would have to be decided on its merits, given existing knowledge about prevailing relationships between the various kinds of public facility outlay and their differential effects on the above dimensions of the target populations and areas. Therefore, the analysis looks towards offering some indices of net benefit resulting from these multidimensional differential effects. This permits a more aggregated and therefore feasible form of analytical application. It should be noted that the terms “target population” and “physical environment” are intended to define the total blighted and slum area of a metropolitan area and the population residing in such an area. Such total area may be comprised of numerous noncontiguous subareas scattered throughout a region. A project area and its prerenewal population will normally constitute but a small segment of what is defined as the total target area and population of a community for renewal purposes. A complication arises to the extent that prerenewal residents are relocated from a project area and their place taken by people and businesses migrating in from perhaps outside the central city who were not previously defined as part of the target population. When renewal has occurred in a project area, the geographic extent of the original target area will have been diminished, at least in the very short run. This does not necessarily mean that the members of the original target population have benefited significantly from the renewal action. If the public facilities subsidized through the project itself are oriented mainly to use by middle- and upper income

PHILIP H. FRIEDLY

298

postrenewal project occupants, then there may even exist certain regard to the original slum or other prerenewal population.

regressive

effects with

The Dual Role of Public Facilities The discussion of public facilities and renewal target areas and populations has thus far carried with it the implication of a dual role for public facilities in such a program. One role with regard to physical renewal of blighted areas that contain inefficient structures and land use patterns; and a second role pertaining to the broader economic and social renewal of slum populations that contain disadvantaged and disaffected people.* These related but distinct roles call forth the need for a more precise classification of particular public facility items and functional groups in order to better tie the latter into the renewal process, as set forth in Table 5.

TABLE5. PHYSICALAND SOCIAL SUPPORTROLESOF PUBLICFACILITIES Building-Connected

Facilities

Distribution-Disposal Facilities Water supply Gas supply Electric and light supply Sanitary sewer (liquid) waste Solid waste Water disposal-flood control Transport Facilities Streets and access ways Sidewalks Vehicular and pedestrian grade separations Offstreet parking lots and garages

Population-Oriented Education Facilities Elementary, intermediate,

Facilities

and high schools

Public Safety Facilities Police and fire stations Public Health Facilities Hospitals, clinics, research buildings General Administration Facilities City halls and public safety buildings Civic-Social Facilities Meetings and exhibit halls and auditoriums Culture-Recreation Facilities Concert halls, museums, theaters, art galleries, libraries, band shells, and historic site settings Aesthetic Facilities Finished grading work and landscaping

Certain kinds of public facility improvements are related to service functions that are Technical engineering relationships are directly connected to private building activity. suitable to explaining much of the connection between the public and the private investments. There are, of course, underlying behavioral determinants affecting these building-connected public facility investments, but these factors may be viewed as being inherent in the physical design performance standards specified for buildings. The remaining types of public facility improvements are related to service functions that offer various kinds of direct or indirect support to people. They are oriented to the socio-economic, physical, psychological, and cultural well-being of individuals and households. Human behavioral variables are directly responsible for explaining the relationships * Our distinction between physical and social support roles for public facilities is based on a useful one made between house-connected (electric light, gas, sewer, etc.) and household-oriented (educational, health, recreation, etc.) facilities [5].

Welfare Indicators for Public Facility Investments

in Urban Renewal Areas

299

of these population-oriented facility investments to any particular population group in society. Such relationships may be inherently difficult to sort out and predict. This taxonomic exercise includes certain value judgments about the evaluation goals of the following analysis and is offered in the spirit of sorting out operationally significant policy variables. For example, the so-called aesthetic facilities (finished grading and landscaping work) could easily be classified as a building-connected policy variable since, by narrow definition, they might refer to that minimal amount of site embellishment required by local law to accompany any building construction. In terms of program purposes, though, it seems more realistic to treat the aesthetic factor as a critical quality variable in the physical environment of slum dwellers. It is the human behavioral response to improved physical appearance that is relevant here. On the other hand, there are certain levels of power supply, sanitation, and accessibility that are required in an extremely diffuse form to render any urbanized area livable. These kinds of facilities are better viewed as linked to buildings. In this manner the latter facility items can be related to the populations they serve ultimately through technical coefficients relating them to building activity. Public Facility Ben&t-Cost Dimensions

The greater the number of dimensions in which public facility benefits and costs must be measured (if they can be measured at all), the more difficult is the task of welfare evaluation. If public facility investment impacts could be collapsed to the single measurement dimension of monetary value, a clearcut judgment of net benefit to society could be made. This would assume that the monetary values derived were equivalent to those resulting from competitive market forces that reflected true economic cost to producers and utility to consumers. Although there are problems of direct measurement, the costs of economic resources used up in the production of public facilities and their service outputs can be largely expressed in monetary terms. This permits a fairly clear and unambiguous measure of the inputs of public facility investment. To get at the benefit implications of any given public facility policy mix requires a more tedious and indirect route than that of cost analysis. There is little hope of placing monetary values on most, or even a majority, of the output dimensions relating to public facility investment. This means that the analysis must determine the relevant target variables on the basis of society’s political preferences and eplicitly stated program goals. Further, the desirable (beneficial) direction and order of magnitude of change in each variable effect dimension must be derived from societal political preference. The more overwhelming the degree of consensus with regard to any efficiency or redistributional goal, the less uncertain is the benefit implication of a target variable change. In Table 6 we classify the subset of welfare indicators relevant to public facility evaluation according to the type of impact experienced. There are three possible kinds of impact that could result from renewal program action. (1) income level (i.e., growth) changes; (2) consensual income or other redistributions; or (3) nonconsensual income or .other redistributions. In a relatively fully employed economy, as assumed in this paper, short-run income level changes (growth of the aggregate level of output in the national economy) can come only through productivity gains or, conversely, from efficiency gains (cost reductions). Since few members of society are opposed to having more rather than the same amount or less of any good or service, other things remaining equal, growth per se is seen to be a consensual impact. Certain redistributions of income among groups in society,

300

PHILIP

H. FRIEDLY

e.g., improvement of the living conditions of the poor, are seen as having a strong degree o f societal approval. Other kinds of redistribution may be considered nonconsensual either because they are opposed by a majority of individuals in society or because there is no clear-cut mandate for change in that direction; racial and ethnic redistribution of population leading to some greater degree of human integration is an examp le of the latter.

TABLE 6. WELFARE INDICATORSBY IMPACTTYPE Types of Impact Welfare Indicators

Neighborhood externalities Private investment response Resource costs Slum social cost changes from public investments Overall intrametropolitan redistributions

Nonconsensual Income Redistribution

Income Level (Growth)

Consensual Income Redistribution

X X X

X X

X

X

X

X

The welfare evaluation calls for public facility policy models pertaining to input cost and output impact or effectiveness. Statistical cost functions must be derived in order to predict resource implications of alternative policy mixes. Social and economic impact or response models must be developed to trace out the efficiency and redistributional effects and private market reactions across population groups and localities within a metropolitan area. The evaluation of public facility components of the Urban Renewal Program requires systematic accounting of the total economic cost of resources serving as inputs to any alternative policy package. These input costs are the total real resource costs to society, which are to be compared with the total net benefits deriving from public facility outputs. On the output side there are positive and negative effects (gains and losses in welfare that are equivalent to benefits and costs) such that our interest lies only in the algebraic sum of these effects. Since most of the resources employed in renewal could find productive employment elsewhere in the economy, their value as program inputs is based on their value in their next best alternative use as indicated by bids in the private market. Such a statement of cost has incomplete welfare implications until the return flow of net benefits has been compared with cost to yield some kind of rate of return on the policy alternative. The development of cost functions for various types of public facility investments is a prerequisite for PXante evaluation of proposed public facility policy alternatives for renewal projects or model neighbourhoods. The development of statistical relationships between independent policy and other variables and unit construction or operating costs of public facilities permits prediction of probable future costs. The complete and systematic accounting of costs not yet incurred can then be presented. Future costs would, of course, also be discounted to a present value at an appropriate rate of interest.* * The problem of discounting,

WI.

and time preference uncertainty

in general, is treated in literature

survey

Welfare Indicators for Public Facility Investments PUBLIC

FACILITY

COST

in Urban Renewal Areas

301

FUNCTIONS

As an urban area grows larger in size, the scope of the public economy should tend to enlarge at some rate. The rate of growth of public facility provision is conditioned by certain “critical mass” phenomena relating to public service threshold levels of population and economic size or density. The threshold levels themselves are likely to be differentially defined for each kind of public service facility according to the cost conditions governing its supply schedule. * Evaluation of a public facility improvement in terms of inclusion of a portion of its costs in a local non-cash grant-in-aid credit uses existing political jurisdictional boundaries as underlying data. This is a significant bias in such evaluation because public facility service areas often arbitrarily coincide with these political decision-making unit boundaries. The size of a particular political subdivision may prove critical because political fragmentation in urban areas often leads to an economic fragmentation in the production of water supplies, sewage disposal, school services, and so forth. The geographic area and population size and density of a municipality may prevent certain public facilities from attaining an efficient scale of operation. In terms of present program policy, this means that certain kinds of public facility items (e.g., schools, libraries, and utility and waste distribution facilities) may be “underdesigned” for the purpose of attaining program goals in an economically efficient (least cost) manner. The facilities also may not prove as effective in providing service to the overall target area because numerous undersized units may lead to higher total cost for given levels of service. Certain kinds of cost advantages that exist should not be viewed as compelling arguments for particular physical forms of public facility development. It may be a matter of indifference to service consumers whether or not sewers and disposal plants are constructed and controlled on a scale sufficient to be cost minimizing. But it may be a matter of supreme importance that educational or cultural facilities not exceed a certain size in slum (or perhaps other) areas because of reduced effectiveness in reaching and changing the life opportunities of slum dwellers in positive (beneficial) ways. The problems of effectiveness and benefits are taken up later, but the point is that the cost analysis merely allows us to “cost out” the various policy alternatives and not to make final judgments about what the controlling policy factors may be. In the final analysis, the amount of incremental benefit derived from any less efficient form of public facility construction and operation may be the deciding force. The production functions associated with various urban public service facilities are such that lower unit costs may depend on either or both the absolute size of a facility (internal scale economies) and the proportion of the optimum service area that is unified under a single decision-making authority (the degree to which external economies are internalized). The various public facilities should be analyzed by functional grouping. For example, sewage and drainage facilities experience considerable internal scale economies and even more significant external scale economies, so that there is great incentive for large physical plant and unified central control in urban areas; on the other hand, neighborhood playgrounds and parks exhibit little, if any, of either of these scale economies. * For some empirical indications of threshold service sizes for a variety of local public facilities, and for the efficient size of a particular public service, see [8].

see 171

302

PHILIP H. FRIEDLY

Developing Cost Functions by Facility Type

The independent factors or variables to which unit capital or operating costs are sensitive depend on the type of public facility under consideration. There are both general factors that affect costs for several different kinds of facilities and unique factors that are related to costs for only one or a few facility types. For example, one class of eligible facilities (both building-connected and population-oriented) can be identified that is particularly cost sensitive to changes in the scale (physical size) variable, while other classes of facilities can be identified that are more significantly cost sensitive to various socioeconomic or institutional variables. A hypothetical set of dependent and independent variables that might enter into a public facility resource cost analysis is identified in Table 7.” Some of the variables such as scale and quality are rather broadly defined here and actually would decompose into several more narrowly defined variables for given types of public facilities. The quality characteristic of service output (Q) for example would depend on the kind of public service under consideration. Also, a change in scale (S) could refer to alteration in physical size of plant, total area served, number and density of service customers, or other similar scale variables. What is important here is that there may exist certain economies or diseconomies (per unit cost effects) associated with variation in some public facility size dimension. The threshold variable (T) refers to the fact that for certain public service functions (especially the community-oriented facilities identified in Table 4), a minimum level of service phenomenon may have significant explanatory value for cost variation. TABLE 7. CANDIDATE VARIABLES FOR PUBLIC FACILITYCOST FUNCTIONS C=operating/construction

cost per unit of output, facility

Size Variables =scale (physical size of facility ouput, area S

T

served, etc.) = threshold size

Categorical Variables Q = service quality indexes Physical

Environment

Variables

L = distribution of land use BD =density of buildings BA =age distribution of buildings P~~=daytime population size P~T=nighttime population size

(plant) size, area served, etc. Income and Wealth

V IP

ID

Variables

= average property value = per-capita income =distribution of income

Social and Demographic

Vuriables

Ps = size of population PA =age distribution of population P~,~=ethnic/racial distribution of population PO =occupational distribution of population PD =population/client density

The other groups of variables presented in Table 7 relate to sociodemographic, economic and physical structure characteristics of the urban environment that may have different degrees of bearing on the costs of providing various public facilities. Great care must be taken to ensure that these (and the previously discussed) variables are properly identified as * The reader can be referred to several definitive studies aimed at identifying variables for public facility cost estimation and prediction. For example, see [I]-[12]. There appear to be few sound cost analyses being applied at the local level, but for an exception, see Planning Commission, Howard County 1985. General Plan Technical Report No. 1, Howard County, Maryland, April 1967. Their cost analysis encompasses: water and sewer installation; residential roads; public schools; and parks and open spaces. The report produces a set of estimating equations for use in predicting public facility costs and that reflect scale economies or other significant cost phenomena.

Welfare Indicators for Public Facility Investments

in Urban Renewal Areas

303

independent factors in explaining cost variation and not as predictors of demand variation for public services. This is not a simple task because these factors may have partial bearings on explaining both cost differences and taste or preference differentials across population groups and geographic areas, as well as over time.*

Cost Measurement There is not sufficient space here to expand into the particulars of empirical application. Nonetheless, a few words are in order on the degree of directness that any selected metric may have for monitoring changes in a cost variable. Fairly direct and unambiguous measurement of most of the environmental, economic, and sociodemographic variables is possible. Of course some of these variables themselves serve as proxies for others that have particular relevance for a given type of public facility. But these generalized variable definitions are offered here in order to provide an overview of the basic independent factors entering into public facility cost determination. The quality variable (Q) and scale variable (S) offer the best opportunity to illustrate the important kinds of measurement difficulties encountered during empirical investigation. Because more intensive investment per unit of building area or client served may accompany increases in size of building or number of people served, it is usually necessary to account for these qualitative changes in service, i.e., to hold quality constant while size is permitted to vary. The analysis might then establish two or three categories of service quality (low, medium, and high) and observe cost changes with respect to size changes for each category separately. Then, in some sense, per-unit cost variations would be made comparable from a quality viewpoint. The development of quality indexes for direct “deflation” of per-unit cost changes with respect to other independent variable changes constitutes a major area of research effort that should accompany any further empirical study of cost. Finally, two underlying assumptions of the above cost analysis formulation should be made explicit. These are the assumptions of constant managerial efficiency and technology across facility types and locations and through time. Unless, from first-hand knowledge, an inefficient management of public services is suspected, the only practical course seems to be one of assuming that there is little dispersion from an average level of managerial ability. Handling the problem of anticipating technological change over time requires a large and ongoing research effort that would certainly be beyond the scope of any particular urban renewal empirical study. Nonetheless, such a research effort would be extremely valuable to draw on for knowledge of probable shifts in the technical parameters of public facility supply and, thereby, possible changes in the cost coefficients.

Total Life-Cycle Public Facility Costs The final output of a resource cost analysis consists of a complete time-phased display of the total life-cycle costs incurred from any alternative renewal or model neighborhood public facility policy alternative. Cost functions constitute the analytical core of any such prediction effort. Such functions would account for the capital investment (land, construction, etc.) costs, operating costs, and maintenance and replacement costs over the useful service life (as determined by the output requirements under the following benefits section) of any public facility. * For studies that specifically attempt to identify variables explaining public facility demand, see [13]-[15]

304

PHILIPH. FRIEDLY

The life-cycle cost implications of public facility investment policies are likely to differ between localities where new development is occurring and those where redevelopment and rehabilitation are taking place. There are at least two important reasons: (I) the facility mix between these areas is likely to be different as a result of unlike socio-economic conditions; and (2) there exist varying amounts and kinds of inherited public facility and related assets in renewal areas that are not found in newly developing localities. The unique socio-economic conditions of renewal area slum populations lead to differences from middle-class populations in current expressed preferences for public services (public facility demands); also, these conditions stimulate special political program goals for giving socio-economic support to disadvantaged people whose life opportunities can be improved. The impact of inherited assets on costs will depend largely on the age and historic public investment policies prevailing in the renewal target area. There often exist, though, many opportunities to utilize existing buildings in rehabilitation areas for a wide range of population-oriented social service facilities. The amounts of new construction and renovation of existing structures would vary then depending on the locality. OUTPUT

EFFECTS

AND

PUBLIC

FACILITY

BENEFITS

We now treat the problem of the appropriate composition and form of public facility provision in the less affluent areas of an urban community. The local non-cash grant-inaid represents one of a number of Federal policy instruments leading to an income redistribution between the more and less affluent areas of an urban community and to an equalization of tax base and locational attractiveness within an urban area. The task of raising the income levels and the qualities of environment for slum dwellers in currently blighted sections of urban communities is intertwined with such problems as inducing a return flow of middle-class families and private business investment into these sections. The concept of neighborhood here is relevant to the fact that persons and business investors consider their surroundings when deciding to buy or rent some piece of urban property. This means that externalities are present in individual utility functions, so that a decision to purchase or rent depends in part on the external economies generated by public facilities, as well as on the characteristics of the individual property. Any judgment about the optimal mix and scale of public facility subsidy in a renewal area should include an understanding of potential demands that may be created from rising per-capita income and the income redistributive effects of urban renewal and other Federal goverment programs. Public services that tend to be highly income-elastic include the following eligible urban renewal categories: education, culture/recreation, civic/social, health, and aesthetic facilities. This is not to imply that these kinds of facilities have greater intrinsic merit than such kinds as, for example, sanitary amenities, but merely that the demand for an increase in their supply should be expected from the population of an area whose so&o-economic character is being radically altered upwards. Anticipatory types of analyses that might relate changes in consumer tastes and preferences (demand) for various public services to independent variables such as income, age, race, ethnic group, political jurisdictional fragmentation, population density, regional differences, and so on, would provide useful background information for planning and long-range composition of public facility investments in renewal areas and model neighbourhoods. The presumption here is that the tastes and preferences, coupled with the willingness and ability to pay (effective demand), of middle. or upper-income families who do not suffer discrimination provide a standard of public service quantity and quality against which existing service conditions in

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slum or blighted areas can be assessed to determine normative policy prescriptions for eliminating any service “gaps” that may exist. Criteria of Public Facility Benefit

Such demand analysis of the kinds and amounts of public facilities demanded by all socio-economic strata of the urban population is a necessary but not sufficient analytical input to program evaluation; it begs the question. It is insufficient merely to compare levels or changes in levels of per-capita public expenditure rates associated with different socioeconomic strata of the urban population. This merely measures the differential levels or rates of expenditure on public facility inputs as explained by various socio-economic characteristics of the total population. The real question, for purposes of the present analysis, is that of public facility effectiveness in bringing about the desired (beneficial) physical, economic, and social changes in slum dwellers’ well-being in blighted areas. Because model city goals reflect Federal response to the most crucial public issues currently being faced, they are considered as controlling for purposes of evaluation of urban renewal, which is the largest existing program input to model cities. Key public facility investments for renewal areas, then, are defined in terms of bringing about desired changes in the socio-economic conditions of that slum population. The key facilities would be those that are most effective in creating an environment of equal opportunity for the present generation and-perhaps more significantlythe potential next generation of deprived individuals (the schools, libraries, museums, concert halls, theaters, art galleries, parks, playgrounds, and aesthetic amenities, which can enrich lives and open minds). Most official public policy relevant to this subject implies that accessibility to these kinds of facilities should not vary much from area to area within or between given political jurisdictions on the sole basis of existing differences in parent’s education, income, or taste patterns. In viewing the multitude of effects generated by a set of public facility policies, how does one consistently determine that some constitute benefits while others constitute costs? This must be done to arrive at a determination of net benefits that can be compared to resource input costs. Because urban renewal is a national program applied to local areas, the preferences of both the national electorate (on whose behalf the program is ultimately being conducted) and metropolitan area residents (who are directly affected by the program) must be accounted for in establishing criteria for benefit determination. In general, a benefit frcm a public good or service can be defined as anything that pushes outward the utility possibility frontier for society. Thus, benefits would include such policy effects as those that increase the productivity of capital or people, decrease social costs of maintaining a viable society, or increase welfare possibilities directly by developing citizens’ public-spiritedness or social consciousness. The following public facility benefit analysis utilizes the amalgam of urban renewal and model city goals, as stated earlier, for the purpose of identifying the direction and estimating the strength of any benefit streams emanating from changes occurring in any effect dimension. Changes in effect dimensions are labeled desirable or undesirable depending on whether or not they improve slum and blight situations with respect to stated program objectives. The value judgments made in this paper about what are good or bad effects are more clearly justified, the stronger are society’s stated preferences for or against particular social changes. For example, at one end of the spectrum there seems to be pervasive and strong support for the overall goal of growth (i.e., pushing ever outward the production possibilities

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frontier). At the other end of the spectrum there is a pervasive controversy-widespread strong support confronted by tenacious opposition-over the goal of human integration whether of income groups, ethnic groups, races, or some combination of these. The program goals, as stated, have led to the identification of three broad welfare categories under which public facility net benefit impacts can be measured: (1) the impact of public facility investments on the social costs of slum living; (2) the neighborhood externalities created through public facility investments (e.g., land value impacts); and (3) the private sector investment response to public facility investments and the attendant intra-metropolitan redistribution impact from the changing of comparative locational advantage between suburbs and central city. BeneJitsfrom Reducing the Social Costs oj’Slum Living A major goal of model cities is that of enhancing the life opportunities of those who have been cut off from the mainstream of economic and social opportunity in our society. This goal is to be attained partly through the provision of public social, cultural, and other services that aim toward changing the milieu of the slum dweller and, ultimately, his total life opportunities. Urban renewal also aims at changing the social character of slum areas, partly by infusing the residential composition of the central city with middle- and higherincome families. This geographic redistribution by income group could also be accompanied by dispersion of slum dwellers to outlying metropolitan neighborhoods, thereby effecting an income redistribution to slum dwellers in the form of higher levels of public service available in suburban communities. This might serve as a substitute for higher levels of public social facility investment in the central city aimed particularly at lower-income and minority racial and ethnic groups. The extent to which such intra-metropolitan social redistribution should occur seems to be a controversial issue. In any event, higher levels of public social services can be brought to slum populations either through increasing the rates of public facility investment in the existing blighted areas or by dispersing the slum residents to outlying areas with existing adequate public service environments. The question of increasing the general level of public services in the city to accommodate any middle-income family or business relocations to the central city from the suburbs is still another question and will not be ignored in the course of our analysis. The problem at issue, however, is that of providing key public facility items that are critical in sparking beneficial changes in the lives of slum dwellers (who form a very special and unique population sub group in our society) and in reducing social costs arising from slum living patterns. We can conceive of three sets of variables that enter the analysis of societal welfare change and that pertain to three levels of evaluation. These sets of variables are defined in Table 8. The set of output variables merely defines the quantities of public goods and services of various types and qualities that are being produced for public consumption. The set of effectiveness variables defines the extent of use penetration for any alternative pattern and form of public facility investment among target groups in the population-for example, at what rate are museums being visited on the average by blacks with low incomes, compared to visits by middle-class whites? The set of benefit variables defines the direction and amount of welfare change occurring among the target groups in slum areas. These are the most difficult variables for which to find adequate numerical indices. For example, a rise in the intellectual curiosity of racial minority poor children (or adults) leading to higher motivation and an effective will to further their education and lead productive and positive

Welfare Indicators for Public Facility Investments in Urban Renewal Areas lives would be significant benefits that conceivably facility investments in a renewal area.

301

could result at least partly from public

TABLE 8. PUBLIC FACILITYOUTPUT, EFFECTIVENESS,AND BENEFIT VARIABLES

Output Variables These

variables

define

the

amounts and qualities of publit goods and services produced and available for consumption by public facility type.

Effectiveness Variables

Benefit Variables

These variables define the rates

These variables define the alterations in the characteristics and behavior patterns of the target population groups associated with use of given public facilities.

of use public sumed groups

and amounts of given goods and services conby particular population in given localities.

Ideally, one would desire to develop a set of benefit functions similar in nature to the resource cost functions of the preceding section. In such a case, certain identified independent variables (presumably including some types of public facility investments) would enter the functions in specified ways, and numerical coefficients could be calculated (data permitting) to estimate the constants of relationship between public facility outputs and benefits to society. There is no such clear-cut evidence of relationship between items of public facility investment and output and the kinds of ultimate societal benefit that are of concern to this evaluation. The underlying causes and processes bringing about motivational changes among disadvantaged populations operate in extremely diffuse fashion over relatively long periods of time. Therefore, it is often virtually impossible to establish unqualified causeeffect linkages between such variables, especially for short-run analytical time spans. Behavioral quantification efforts relating to the population-oriented facilities enumerated in Table 5, especially the culture-recreation, health, and education facility groups, would be useful in making benefit inferences directly from output and effectiveness measurement efforts. The probability of some order-of-magnitude benefit attainment from, say, more intensive investment in physical school facilities in slum areas could be estimated for any number of particular cases if it were known, in general, what the behavioral response was likely to be from people (of similar native capacity) living in various disadvantaged environments. There are a number of more or less desirable proxy variables that can serve to indirectly monitor changes in ultimate societal benefit from various public facility investments in renewal areas.* The lifetime income level benefits accruing to an individual slum dweller may act as an index of the social benefit resulting from a decrease in the social costs of slum living. When the potential lifetime earning capacity of a person is significantly increased from a relatively low base, we might infer a change in his lifetime activities from an underemployed or unemployed status to a more productive and fully occupied life circumstance. This, in turn, may indicate less potential idle and unstructured time spent in a slum environment that presents numerous incentives for antisocial behavior. When individual energies are redirected away from socially undesirable acts that must be policed, public safety resources are released for other, and, perhaps, more productive uses in society. In addition, * One generalized measure of improved life opportunity for an individual or family is that of potential lifetime earnings. An attempt to predict changes in such earnings is offered in [16].

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PHILIP H. FRIEDLY

there is a direct increase in welfare from the more productive and presumably more satisfying life activities of the slum dwellers themselves. Empirical evidence [16] does give some indication that years of schooling, adjusted for quality, are a strong explanatory factor of the amount of expected lifetime income of an individual or family. No particular degree of causation is implied for any one of the independent variables indicated below since several might be eliminated as separate causative factors were tests for multicollinearity to be conducted. This type of benefit function can be stated as: BI=B

PE,R,

Ys,

Q, PO, EL X, K,

AN,

AP, I>,

where BI is expected life earnings, YS is years of schooling, EI is informal education (represented perhaps by father’s occupation), X is experience, K is knowledge (represented perhaps by migration from the deep South) about urban life and jobs, Ax is native ability, Ap is physical ability (stamina and health), I is motivation, and the remaining variables retain their definitions from Table 7. From inspection of the independent variables entering the income benefit function, it is obvious that there are several renewal policy variables, besides education facility investment, that help determine lifetime earning potential. However, YS appears to be the most significant factor in explaining differences in BI. The complex interaction of diffuse and long-acting processes is also apparent here. Such factors as motivation (mentioned earlier), physical and mental health and stamina, and lack of information about opportunities are all severe problems concentrated in slum populations. Even though years of schooling appear nominally to explain most of the variation in BI, probably one or more (or some combination) of these other factors actually produces the bottleneck to individual advancement for slum dwellers. Models of effectiveness need to be constructed to evaluate public facility investment contributions in each of the areas of major environmental deficiency in slum sections. Each of these research efforts would involve a deep investigation. From an a priori viewpoint, the multidimensional social deficiences generated by slum conditions appear to be acting in concert to produce a homogeneously-deprived living environment. It is only through intensive empirical investigation of probable behavioral responses that the breadth and main thrusts of an effective public facility policy assault on slums can be clearly defined. The Creation of Neighborhood Externalities

The second welfare category for public facility net benefit measurement relates to the amenity spillovers in renewal and model neighborhoods resulting from normal site preparation and environmental enhancement. These neighborhood environment spillovers or externalities from emplacement of public facilities are reflected in the enhancement of land and structure values of adjacent and nearby properties. The value changes represent productivity upgrading and an increased level of real income, as well as a redistribution of investment from other sources to public facility investment in the blighted and slum sections of a city. The benefits reflected in land value increases will vary in magnitude depending on the degree to which the public economic and social overhead capital requirements are determined by the existing and proposed future land uses and activities occurring in the area under consideration. For the building-connected facilities, technical coefficients of supply

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can relate their required quantities and composition to varying projected activity levels and mixes occurring in structures related to different land uses. The amounts of populationoriented facility investment required will depend on the level, density, and socio-economic dimensions of the projected area population. These benefit considerations need not be confused with those of reducing the social costs of slum living. In the latter case, the primary consideration guiding public facility investment decisions was that of effectiveness in altering some attributes of a disadvantaged population group-slum dwellers. In the instance of creating neighborhood externalities, the guiding factor is simply that of providing adequate (as defined by some pre-established set of quantity and quality standards) public service to a locality of given existing or proposed land use and population dimensions. In the one instance, benefits AOW from the elimination of negative social spillovers (deviant social behavior) while in the other they emanate from the creation of social and economic externalities that enable a more pleasant and efficient conduct of a multitude of private activities. The public facilities required to accommodate redevelopment or rehabilitation of an area-both the social and economic public overhead requirements-must be carefully determined. A better understanding of a well-balanced public amenity environment that meets the needs of all elements in the population and business cross-section ought to be sought. This might mean study of the activity patterns generated among different elements of the resident (daytime or nighttime) population by buildings associated with various land uses.* Heavily or lightly traveled places as well as places of collection for various population elements would give indication of appropriate levels and locations for given types of public facility investment. A great many land value impact studies have been conducted pertaining to a variety of public facility improvements. Measurement of benefits in the area of externalities does not create the same number or complexity of problems as does measurement of social cost mitigation. Nonetheless, it is often still a difficult empirical task to isolate that component of overall land and structure value change resulting from public facility impact. Some carefully constructed correlation and regression studies do indicate, however, that it is a worthwhile effort to seek out the extent to which public amenity utility is capitalized into private real estate values.? Market

Investment

Response and Intrametropolitan

Redistributions

The third major welfare category for public facility net benefit measurement is actually a composite of two related but distinct categories of such measurement. First, both urban renewal and model cities have the common objective of inducing significant amounts of private investment on the part of homeowners, builders, and the like into redeveloping and rehabilitating the blighted and slum sections of urban communities. Therefore, benefits could be deemed to derive from any such investment, especially of a self-sustaining sort. Second, both programs have at least the implied objective of systematic subsidization of public facility overhead investment in central cities (the areas of greatest blight and slum * The work of F. S. Chapin and his associates at the University of North Carolina is providing a rich conceptual and empirical base from which to consider the relationships between human behavioral patterns and the physical location and arrangement of urban development. For a recent reflection on such research, see [17]. i_ An example of a land value prediction model to be applied at the macro or metropolitan scale is provided in [lg]. Good examples of the manner in which localized value impacts from specific facility improvements can be measured are offered by [19, 201. c

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PHILIP H. FRIEDLY

concentration) in order to redress the imbalance in locational comparative economic advantage existing between central cities and suburbs. To the extent that such systematic redistribution of private investment activity occurs as a result of public facility investments, then further benefit could be said to have accrued to society. Any implied cause-and-effect relationships between public facility investment and private construction investment appear, in the short run, clearer and more pervasive with regard to utility (building-connected) facilities. The spatial and temporal linkages between private construction investment and social (population oriented) facilities appear, apriori, to be more tenuous [5]. With regard to utility facilities, there is strong evidence that such factors as water supply decisions can condition definitively the pattern and direction of city growth [14], [19]. Availability of water (and similar economic overhead amenities) at the perimeter of a city can influence the demand for land in outlying areas and thereby offset measures to increase spatial compactness in the central city. Redirecting private construction and rehabilitation activity inwardly toward the central city may involve a somewhat different composition of public facility investment than that which would hold for suburban development. Assuming an adequate provision (for future desired growth as well as existing activities) of utility facilities in central cities, it may well be investment in social amenities to offset physical and social deterioration of inner city areas that makes the critical difference between success or failure in generating self-sustaining renewal. While it is not possible to develop a comprehensive detailed model of private market response and intrametropolitan redistribution here, a general indication can be given as to form and direction of subsequent empirical study. The hypothesis is that various kinds of public facility investment could serve to generate residential, commercial, and other categories of private new construction and rehabilitation investment in particular locations at given times. In other words, some sort of induced investment relation is postulated to exist between public facility investments and private new construction and rehabilitation investments. It would seem initially that this hypothesis could be tested through formulation of a multiple regression and correlation model accompanied by tests of significance of the estimated coefficients. The candidate variables entering such a model are identified in Table 9. TABLE 9. CANDIDATEVARIABLESIN A MARKETRESPONSEMODEL C=Private construction investment C, = New buildings C,=Rehabilitation P=Public facility investment pI =Streets, parking, etc. pz =Sanitary sewer and water p3 =Electric light & power and gas p4 = Schools ps =Police stations ps = Fire stations p, = Hospitals ps = General administrative buildings ps =Civic or social centers p10= Cultural or recreational centers p,,=Aesthetic improvements

Welfare Indicators for Public Facility Investments

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The model states that : c

= C(P)

and

c1 = G(P), c, = C,(P)

where

C = C,+ Cz

and

P &. i=l

The marginal rate of change in private construction investment in the face of specified public facility investments is denoted by the derivative: dC dP

dC(P) dP

lim

AC

AP+Oap

-

lim C(P + AP) - C(P) AP-+O AP ’

Expressed as a regression model, these formulations produce:

$ b,p,

c=a+ or

C=a

i=l $’

(linear model assumption)

(nonlinear model assumption)

(2)

(loglinear transformation).

(3)

i=O

and log C=a

f bi logpi i=l

(1)

Where dC/dp,=bi, i.e., the set of regression coefficients, b, defines the changes in the two categories of private construction investment that are associated with changes in the eleven categories of public facility investment (in the linear model).* The functional relationships postulated above may be well represented by a linear equational form such as (1). In that event, the b,, coefficients would show constant absolute amounts of change in C with respect to a unit change in P. There is a distinct possibility, however, that a nonlinear relationship, as represented in (2) may exist. The bi coefficients would show a constant percentage change in (3); i.e., a unit percentage change in P would call forth some constant percentage change in C. In this case, the bi coefficients are measures of the private construction investment elasticity with respect to public facility investment variation. The log linear functional relationship of (3) would be represented by a constant elasticity-induced investment demand function. The advantage of a direct measure of private investment demand elasticity (constant or otherwise) lies in the fact that its sensitivity or responsiveness to changes in public facility investment policies becomes immediately clear. Because other independent factors were excluded from the functional relationships hypothesized above, this is not an indication that nothing but public facility investment policies have bearing on the timing and locating of new construction and rehabilitation activity. That, of course, would be patently untrue. The market response model formulated here is merely aimed at emphasizing the need to measure the degree of association between * The marginal rates of change in either C, or C, with respect to a change in anypi could be calculated by taking the appropriate partial derivatives. This procedure would give indication of the strength of the contribution that any pi makes toward generating private construction investment.

public facility policy variables and the volume of private resources flowing into renewal areas and model neighborhoods. It could be that public facility policies are the most critical factur inducing a return fxovyof private investment from other sectors and locations to the central city. It does seem likely, though, that the present formulation is destined to become a component of a more comprehensive effort at explaining market respouses to urban renewal policies.* The public facility market response model measures potential redistributive effects and perhaps, but not necessarily, income level benefits. Assuming a relatively fully empIoyed economy, virtually all benefits are seen as flowing from a geographic aud sectoral reallocation of private investment resources, occurring because of consciously pIarmed policies of public facility investment. Unless these resources are utilized more efficiently at their new geographic 1ocaIe or otherwise increase productivity of resource use or enjoyment, there appears no reason to believe that significant income-level benefits are likely to exist. SOME

POLfCY

OBSERVATEONS

The implications for the Urban Renewal Program’s local non-cash grant-in-aid credit policies and the Model Cities supplemental non-categoricaI grants may be significant with reference to the strategic locating of public facilities in the blighted and slum areas occupied by d~~dvantaged populations. Renewal project eligibility requirements of prop~~~~it~ for public facility items (i.e.? either within, adjacent totca, or within one-quarter-miie radius of a project area) may lead to an unhealthy bias toward spatial concentration of facilities into a small number of clusters within the renewal target area of a community. The project orientation of the program, it has been charged, 1191was at least partially responsible for the building of the Lincoln Center in a single location, rather than the spreading of equivalent ~mponents about New York City to reinforce existing or incipient artistic nuclei of varying character. Accessibility to an equivalent set of geographically dispersed cultural facilities might have been greatly increased for many families in the overall renewal target population living in relatively remote neighbourhoods, which may themselves be potential future project sites. The living role of cultural facilities in the cities is vividly portrayed by one author who states that, “People must live there, go there, eat there, politic there, because there is a t&zre there, unique, local and d~s~ngnis~ed~ Let the museums and auditoria and university be there also, but as workshops of life and the intellect rather than as set pieces, so that culture is not a self-conscious establishment, but an ordinary everyday artifact of citizens.“” [20] The policy issue being raised is to contrast the desirability of current project propinquity requirements for eligibility with a policy leading toward greater ubiquity of public facility loeatian within overall blighted and slum areas containing renewal target populations. If such a comparison should favor the latter policy afternative, it could lead to a concfusion that either: (1) public facilities be tied to projects through the non-cash local grant-in-aid credit according to different requirements of spatial relationship (more liberal locational constraints within the geographic area occupied by a slum population); or (2) certain public facilities are better subsidized through policy instruments of other programs because of * %z IZl,pp. 63-66, Rothenberg fo~~lates a model of private ~~bi~ita~io~ response wherein the core of the model is. the conceptualization of the private property owner as being faced with two major alternatives-to rehabilitate or not-and a larger set of subalternatives, which are the various degrees of rehabilitation it is possible to undertake. Choice is made on the basis of the relative profitability of the respective alternatives. Public facility investment enters as an exogenous term in the model that conditions the profit environment.

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institutional intlexibilities that make it infeasible for the Urban Renewal Program to overcome any possible undesirable project concentration bias. There is the opposing objective of recreating a “growth center” or focus in central cities to bring about the aforementioned favorable intrametropolitan economic and population redistributions. In this case, public policies may tend to favor, and perhaps correctly so, the spatial concentration of such investments. In this sense, the slum population-oriented missions of the program may prove at odds with some of the economic developmental kinds of objectives. The role of public facility policies within the Urban Renewal Program and, in turn, as a policy component of the overall renewal input to Model Cities, remains largely to be determined. The structuring of an analytical evaluation of public facilities offered in this paper is intended merely as an initial step toward clearer policy formulation.

REFERENCES 1. Urban Renewal Manual, Section 17, U.S. Department of Housing and Urban Development, Washington, D.C. 2. P. H. FRIEDLY,J. ROTHENBERG, J. E. BURKHARDT,J. L. HEDRICK.Benefit-Cost Applications in Urban Renewal: A Feasibility Study, Resource Management Corporation Report prepared for the U.S. Department of Housing and Urban Development (1968). Matrix for Evaluating Alternative Plans.” J. Am. 3. MORRISHILL, “A Goals-Achievement Inst. Plums. 19-29 (1968). 4. RICHARD MUSGRAVE,The Theory of Public Finance. McGraw-Hill, New York, 9-14 (1959). 5. J. N. MATTILAand W. R. THOMPSON,“Residential Service Construction: A Study of Induced Investment,” Rev. Econ. Stats. 456413 (1956). 6. A. R. PREST and R. TURVEY“Cost-Benefit Analysis: A Survey”, Surveys of Economic Theory: Resource Analysis. St. Martins Press: New York, 155-207, (1966). I. W. Z. HIRSCH, “Expenditure Implications of Metropolitan Growth and Consolidation”. Rev. Econ. Stats., 232-241 (1959). 8. JOHN R.IEW, “Economies of Scale in High School Operation, Rev. Econ. Stats., 280-287 (1966). 9. W. Z. HIRSCH, “Cost Functions of an Urban Government Service: Refuse Collection,” Rev. Econ. Stats., 87-92 (1965). 10. W. ISARDand R. E. COUGHLM,Municipal Costs and Revenues Resulting from Community Growth, Chandler-Davis Publishing Company, Wellesley, Massachusetts, (1957). 11. W. IULO, “The Relative Performance of Individual Electric Utilities”, LarzdEcon. 315-326 (1962). 12. W. L. C. WHEATONand M. J. SCHUSSHEIM, The Cost of Manicipal Services in Residential Areas. U.S. Housing and Home Finance Agency and U.S. Department of Commerce, Washington D.C. (1955). 13. R. F. ADAMS, “On the Variation in the Consumption of Public Services”. Rev.’ Econ. Stats. 400-105 (1965). 14. M. GOTTL~EB, “Urban Domestic Demand for Water: A Kansas Case Study”, Land Econ. 204-210 (1963). 15. H. J. SCHMANDTand R. G. STEPHENS,“Local Government Expenditure Patterns in the United States”, Land Econ. 397-406 (1963). ‘%&emental Income Benefits of Public Education” 16. W. 2. H~SCH and E. W. SEGELHORST, Rev. Econ. Stats. 392-399 (1965). 17. F. S. CHAPIN, “Activity Systems and Urban Structure: A Working Schema,” J. Am. Zrzsf. Planrs. 11-18 (1968). 18. S. CZAMANSKI,“Effects of Public Investments on Urban Land Values,” J. Am. Inst. Planrs. 204-216 (1966).

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PHILIP H. FRIEDLY 19. S. F. WEISS,T. G. DONNELLYand E. S. KAISER,“Land Value and Land Development

Influence Factors: An Analytical Approach for Examining Policy Alternatives,” Land Econ. 230-233 (1966). 20. J. W. KITCHENand W. S. HENDON,“Land Values Adjacent to an Urban Neighborhood Park”, Land Econ. 357-360 (1967). 21. C. ABRAMS,The City is t/ze Frontier, Harper and Row, New York, p. 162 (1965). 22. FREDERKK M. LOGAN, “Cultural Patterns and Institutions: Will Suburbia Support or Ignore them?” Arts in Society. Special Issue: The Geography and Psychology of Urban Cultural Centres, p. 459 (1967).