regional tax base sharing
The following material is excerpted with written permission from How Smart Growth Can Stop Sprawl, a briefing guide for funders by David Bollier. (Washington, D.C.:Essential Books), 1998.

As long as different towns in a metro region have widely disparate property tax rates-- and thus disparate levels of public services-  municipalities will continue to compete among themselves for businesses and residents. Racial and socio-economic polarization will remain entrenched, and pressures for low-density sprawl will continue unabated.  "Any town that can increase its tax base and limit its local social responsibilities and costs by exclusive zoning [such as large lot sizes] will use it,"  writes Minnesota state legislator, Myron Orfield.

     The most effective way to sever the pernicious link between local property taxes and local services (and thus the competition that fuels sprawl) is through regional tax-base sharing. Such a reform may not necessarily stop sprawl, but it can set the stage for complementary reforms (such as growth boundaries) that can change land-use patterns. Orfield explains how tax-base sharing creates equity in the provision of public services; break[s] the mismatch between social needs and property tax base resources; undermine[s] local fiscal incentives supporting exclusive zoning and sprawl; and decrease[s] incentives for intra-metropolitan competition for tax base.... People of moderate means should not have inferior public services because they cannot afford to live in property-rich communities.1

     Tax-base sharing also has an important tactical advantage over other regional issues such as fair housing and land use planning. The latter issues involve long-term, structural change, for which it is notoriously difficult to mobilize political support. By contrast, tax-base sharing, as Orfield points out,  "means (for most of the region) what everyone always promises in American politics but almost never can deliver: immediate lower taxes and better services. This combination builds firm coalitions quickly." 

Tax Base Sharing in Minneapolis
     At the moment, of course, tax-base sharing is highly controversial and politically ambitious. The only significant metropolitan tax-base sharing experiment in the nation is one enacted by the Minnesota legislature in 1971, which has pooled 40 percent of the increase in commercial-industrial property valuation in the 188 municipalities of the seven-county Twin Cities area. The money collected in this way-- some $241 million of the region's $906 million in valuations in 1995 -- is distributed to all 188 municipalities based on their estimated populations and per capita market value of property, compared to the metrowide average.2  This program has dramatically reduced the fiscal disparities among towns-- from 17 to 1 in property valuation between the richest and poorest towns, to 4 to 1. This, in turn, has incrementally reduced the pressures that drive sprawl.

1 Myron Orfield, Metropolitics: A Regional Agenda for Community and Stability (Washington, D.C.: Brookings Institution Press, 1997)
David Rusk, Cities Without Suburbs, 2d Edition (Washington, D.C.: Woodrow Wilson Center Press, 1995)