Metropolitan Initiative
Twin Cities Metropolitan Area
Briefing Paper
Prepared by:
Citizens League
Janet Dudrow, Research Associate
August 22, 1997

Overview

PHYSICAL DESCRIPTION

The Twin Cities metropolitan area is a sprawling, dual-centered metropolis of 2.45 million people. The terrain of the region was sculpted by Pleistocene glacial activity that left behind rolling hills and more than 1,000 deep, clear lakes. Minneapolis and Saint Paul lie on flat areas of sand and gravel, surrounded by gently rolling areas left when the glaciers were stationary or retreating rapidly. Many of those areas have become the 600,000 acres of cropland now found in the seven-county region.

The Mississippi River has cut a deep, rock-walled gorge through this terrain. The cities share the river equally; following a 65-foot drop at Saint Anthony Falls, the Mississippi turns to flow northeastward through downtown Saint Paul before turning southward again to continue its thousand-mile journey to the Gulf of Mexico.

The Twin Cities endure the coldest winters of any major North American metropolis, with average high January temperatures hovering around 13º. Summers are pleasant and usually without tropical heat and humidity; summer skies are fair 73 percent of the time, and up to 85 percent of the time during the last three weeks of July.

HISTORICAL GROWTH PATTERNS

The Twin Cities region is unusual in serving as the commercial center for a large multi-state region stretching from Michigan's Upper Peninsula to the Rocky Mountains in Montana. The wealth and population of this Upper Midwest region has long been concentrated in a 35-county core based in the Twin Cities metropolitan area.

The railroads defined the economic geography of the Upper Midwest. The modern steel rail era began in 1870 and within a decade, the U.S. had laid the entire network of railroads east of the Mississippi and north of the Mason-Dixon line. One of the transcontinental rail system's major corridors ran from Minneapolis and Saint Paul westward.

European immigration helped swell the population of the Upper Midwest from 400,000 in 1870 to five million in 1920. As American settlement expanded westward, no major city was established west of the Twin Cities to challenge their domination of the Upper Midwest.

Today this multi-state regionÄwhose boundaries roughly correspond to the Ninth Federal Reserve DistrictÄshares with parts of Australia and western Siberia the distinction of being one of the developed world's most sparsely populated areas. The Ninth District's population density of just 18.5 people per square mile is easily the lowest for any of the Federal Reserve's 12 districts.

Like other major U.S. cities, the Twin Cities metropolitan area has developed since World War II in concentric rings of suburbs around the central cities, with each arc generally having lower density than the one inside it. Perhaps because of the absence of physical boundariesÄa coastline or mountain rangeÄthe metropolitan area is distinguished by very low population density and rapid geographic expansion. The seven-county Twin Cities region is the third least denseÄor most sprawlingÄof the 25 largest metropolitan areas in the U.S., behind only Atlanta and Kansas City, and there are signs that the region's overall density will decline further. According to the Metropolitan Council, the net consumption of land for every new regional household was 0.4 acres between 1970 and 1990. But between 1990 and 1995, net land consumption increased to 0.62 acres for new households.

The Twin Cities metropolitan area is unusual among U.S. metropolitan areas for another reason: it is not only the largest urban area in the Upper Midwest but also the center for Minnesota's state government and its flagship research University.

METROPOLITAN GOVERNMENT STRUCTURES

The Twin Cities metropolitan region is currently made up of some 272 separate local government units: seven county governments, 138 cities, 50 townships, 49 school districts, 22 special purpose jurisdictions and six metropolitan government agencies.

The proliferation of local jurisdictions has often confounded regional policy. Many efforts to develop regional strategies have been thwarted by the "balkanization" of the metropolitan area, which has spawned a great deal of intra-regional competition and encouraged the pursuit of parochial interests.

The metropolitan government agencies (serving the seven-county region encompassing Hennepin, Ramsey, Anoka, Washington, Carver, Scott and Dakota) are:

• Metropolitan Council, charged with planning and coordinating the development of the seven-county metropolitan region. The Council also provides transit and waste water collection and treatment services. Advising the Council are the Metropolitan Parks and Open Space Commission and the Transportation Advisory Board.
• Metropolitan Airports Commission, which owns and operates Minneapolis-Saint Paul International Airport and six other airports in the region. The MAC also does planning and analysis related to the region's air transportation.
• Metropolitan Sports Facilities Commission, which owns and operates the Hubert H. Humphrey Metrodome and the old Met Center site.
• Metropolitan Mosquito Control Commission, which monitors and controls mosquitoes, disease-bearing ticks, and black gnats in the district.

ECONOMY

The Twin Cities economy is in robust shape, continuing a historic record of relative prosperity that has continued virtually unabated since the late 1800s. There is good news on most economic measures. Total employment in the Twin Cities has grown faster than the national average each year since 1990. That pace of job growth ranks the region eighth among the 25 largest metro areas in the U.S. The seven-county Twin Cities' area unemployment rate, generally well below national and state levels, declined to 2.9 percent in 1995, its lowest point since 1978.

The region's per capita income in 1994 ($25,231) was sixth among the 25 largest metro areas and well above the U.S. average of $21,696. The Twin Cities is ranked even higher among U.S. metropolitan area for family and household incomes, in part because of the region's very high labor force participation rates. The metropolitan area's labor force participation rate in 1994 was 78.5 percent, compared with 66.6 percent for the U.S. The participation rate for Twin Cities' women (72.8 percent) is highest in the U.S., a full 14 percentage points above the national average of 58.8 percent. And Minneapolis' 1992 standard of living was sixth highest among the 20 largest metropolitan areas in the U.S. that responded to the Cost of Living Index survey.

The Twin Cities region is home to several industries that are national and global leaders. Four industry clusters account for about 12 percent of total employment in Minnesota: printing and publishing, software, medical device manufacturing, and machinery and metalworking. Other important industries in the state include financial services, insurance and real estate; professional services; and arts and entertainment. All seven industries together account for 25 percent of total Twin Cities employment. During the past decade, the regional economy has shown evidence of a shift toward service industries, including such professional services as advertising, financial and engineering services.

The metropolitan area has an unusually high concentration of corporate headquarters: 17 Fortune 500 manufacturing headquarters, 14 Fortune Service 500 headquarters, and 9 Fortune 400 privately-held headquarters. These businesses have generated high-paying jobs, provided generous philanthropic support and community leadership, and incubated countless entrepreneurial spin-offs.

The diversity of the Minnesota economy shields the state and region from major dislocations and large cyclical swings. Historically, the region has shown a remarkable ability to slough off dying industries and grow new ones, from lumber milling to grain milling to computer hardware to medical devices. Jobs and industries are created and destroyed quickly here, and the fast pace of change seems to have contributed to the overall upward climb in the region's prosperity.

Among all this good news, there are also trouble signs. The seven-county Twin Cities region's poverty rate of 8.1 percent in 1989 was low compared with other large metropolitan areas. However, the proportion of the Minneapolis and Saint Paul populations of color that lives in poverty is higher than in any other central city in the U.S.

ECOLOGY

One of the most attractive features of the Twin Cities metropolitan area is its natural environment. The Mississippi River is fed by thousands of lakes and streams and by the watershed of northern Minnesota's forest lands. The glaciers created more than a thousand lakes in the Twin Cities metropolitan area, including the Minneapolis Chain of Lakes and the largest lake in the area, Lake Minnetonka, with 125 miles of winding shoreline.

Environmental planning and protection responsibilities are shared by a host of agencies, including the state Pollution Control Agency, Environmental Quality Board, Department of Natural Resources, 46 watershed districts in the Twin Cities, and several public and public-private agencies charged (among other responsibilities) with guarding the Mississippi and Minnesota River ecosystems, including the Mississippi Headwaters Board and the Mississippi River Coordinating Commission.

The vigorous Twin Cities economy brings with it the need to make judgments about environmental and economic trade-offs. For instance, barge transportation on the Mississippi and Minnesota Rivers enables Minnesota's agricultural and other commodity producers to get their products to markets around the world and still be price competitive. Proposals to expand the Upper Mississippi navigation system to accommodate increased barge traffic and longer barge tows will have to be weighed against many important environmental, recreational and community concerns.

In addition, the aircraft noise accompanying increased traffic at Minneapolis-Saint Paul International airport continues to plague South Minneapolis and adjacent suburbs. The number of aircraft operations over south Minneapolis has increased more than 400 percent since 1978, an increase of 200,000 operations per year. The additional activity is equivalent to entire activity of the Kansas City airportÄall without any federal or state approval.

Dispersed, low-density urban growth has created environmental problems, including non-point-source pollution from urban and agricultural run-off, water supply concerns and the proliferation of individual sewage treatment systems. The Minnesota Pollution Control Agency estimates that roughly 60 percent of the region's on-site septic systems are failing. According to one report, the seven-county metro area and seven surrounding counties lost 150,000 acres of farmland from 1990 to 1996.

The region's dispersed development pattern has also contributed to growing automobile use. More people own more cars, they are driving them more often, and are traveling longer distances for every trip. The number of regional households with two or more cars grew from about 80,000 in 1958 to more than 500,000 in 1990. From 1970 to 1990, vehicle trips increased almost 75 percent, and vehicle miles traveled increased by 130 percent, while the regional population increased only 19 percent. Trip length in exurban areas is up to 50 percent greater than in the central cities and developed suburbs, and these longer trip lengths alone have added 20 percent to total vehicle-miles traveled in the seven-county region from 1970 to 1990. More trips mean that more pollution is being created. A projection by the Metropolitan Council, Minnesota Department of Transportation and the Pollution Control Agency shows that if present travel behavior trends continue, within 20 to 25 years the increased travel will undo the improvements in carbon monoxide levels resulting from cleaner cars.

The metro region has a significant amount of contaminated land. Minneapolis has approximately 1,000 acres in need of environmental remediation; Saint Paul has about 850 acres of land that is confirmed or expected to have some degree of contamination; the surrounding metro suburbs are expected to have hundreds of acres of contaminated land as well. Various factorsÄincluding long-term liability, higher on-site costs, and longer development time-tablesÄmake lenders, developers, and other investors wary of holding title to urban property that might be environmentally contaminated. Being fearful of the investment risk, developers instead look for much safer developments in undeveloped "greenfields."

Finally, while the inner portion of the metro area is amply supplied with drinkable water, the third tier of urban development is encroaching on areas with much smaller supplies. If present development patterns continue, the region runs the risk of spatially outgrowing its water supply.

SOCIETAL CHANGE

The region's populations of color are growing faster than the white population, with rates of increase between 1980 and 1990 of 79 percent for African-Americans, 48 percent for American Indians, 167 percent for Asians and Pacific Islanders, and 68 percent for Hispanics (of all races), compared with 11 percent for whites. Despite these rapid growth rates, however, minorities still account for a small percentage of Minnesota's total population (9.3 percent). The state's populations of color are expected to account for 15 percent of state population in 2020, well below the current national average of 24 percent. Nearly 65 percent of the Twin Cities region's populations of color currently live in the cities of Minneapolis and Saint Paul.

A very small share of the Twin Cities region is accounted for by immigrants born outside the U.S. (3.5 percent, ranking this region twenty-first out of the 25 largest metro areas). However, nearly half of the region's immigrants arrived during the 1980sÄthe majority from Southeast AsiaÄand settled most frequently in the core cities of Minneapolis and Saint Paul; these communities have experienced more acutely the economic, language and cultural challenges involved with resettlement. Schools, particularly but not exclusively the central city districts, are serving increasing numbers of students for whom English is a second language. The number of Minnesota students whose native language is not English leapt from 9,400 in the 1986-87 school year to 24,000 in the 1995-96 school year. In the seven-county metropolitan area, 60 different native languages are spoken.

Family sizes have been declining steadily. And while most (76 percent) Twin Cities children live with two parents, the number of single-parent households increased 47 percent during the 1980s, compared with a 27-percent increase for married-couple households. One of the region's fastest-growing household types is "single or unrelated," consisting of single individuals living alone or with unrelated relatives.

The region's elderly population is now concentrated in the inner-ring suburbs, because most of the housing development in these communities occurred when today's elderly were setting up households in the 1940s and 1950s. The "old-old"Äpersons age 85 and olderÄcomprise one of the region's fastest-growing age groups.

The Scan

DEFINING TRENDS

Dispersed urban development. The region is projected to add 600,000 people and 330,000 households by 2020. Past policies and patterns of development have resulted in the greater Twin Cities region becoming one of the most geographically dispersed in the U.S. If past development patterns are allowed to continue, the region can expect pressure for more urban service infrastructure such as water, sewer and highways.

One effect of dispersed development is that unemployed and underemployed labor pools in core neighborhoods of Minneapolis and Saint Paul are geographically separated from the areas of fast job growth. In 1960, there were twelve job centers in the seven-county region with at least 3,000 or more jobs. Today, there are 47. Many manufacturing and other low-skill, livable wage jobs have relocated from the central cities to the suburbs. A House Research report on unemployment and job access showed 43 census tracts in the central cities with an unemployment rate of more than 10 percent compared with a regional unemployment rate of about 3 percent.

The region also struggles to provide life-cycle housing, particularly multi-family and other affordable housing options in the expanding suburbs. Job opportunities are indeed exploding in fringe areas. But housing opportunities for all wage earners do not always follow. Of the top ten cities in job growth, only Minneapolis and Brooklyn Park have average housing values less than $100,000 ($81,041 and $83,750, respectively). Compounding the problem is a scarcity of multi-family rental units in the region.

Minnesota's city governments have a substantial role in what is considered "economic development." The focus of most of these municipal efforts tends to be on jobs for that community and tax base for the local governmentÄbut the result might not represent development for the region as a whole. Local government officials reported that they use TIF and other economic development subsidies to compete with one another for new companies. Some communities on the fringe of the metropolitan area have used TIF to subsidize new development in the fastest-growing and most desirable locations in the region. Some cities have used TIF for improvements to public infrastructure such as sewer interceptors, water towers and system and freeway interchanges. The State Auditor recently commented that "even if cases such as these resulted in increasing jobs and tax base for the region as a whole, the use of public subsidies to support such projects might not have been consistent with the Metropolitan Council [Regional Blueprint]'s regional development goals."

The "real region" of twenty counties has outstripped the seven-county regional framework and has spilled across the state border to Wisconsin. Until the political jurisdictions in the Twin Cities are reconciled with the boundaries of this real economic region, the community will have trouble addressing some of its challenges. For instance, it will be difficult for the region to prioritize its investments in metropolitan transportation, including transit, when counties such as LeSueurÄ39 percent of whose workers commute daily to the seven-county Twin Cities areaÄare not considered part of the metro region.

Class, race and distribution issues. The Twin Cities region has one of the wider income gaps between core city and suburban residents and a widening income gap between blacks and whites. In fact, the Twin Cities has the poorest central-city minority population of any major metropolitan area in the country.

Poverty is increasingly concentrated in some Minneapolis and Saint Paul neighborhoods, while at the same time pockets of high poverty are appearing in a number of inner-ring suburbs. In 1970, there were six census tracts in the metro area that had a poverty rate over 40 percent. By 1990, there were 30Äa 500 percent increase.

More than half of all poor children in the seven-county region live in the core, and almost one of every two children in the core lives in poverty. While the poverty rate for white children in both Minneapolis and Saint Paul was about 12 percent in 1989, well over half of all children of color lived in poverty.

State and local policies on housing, transportation and other mattersÄalong with persistent discriminationÄhave made the Twin Cities area one of the most racially segregated of large U.S. metropolitan areas. It is not surprising that Minnesota's schools are becoming more segregated as a result, despite 20 years of state and local desegregation policies. Last year the NAACP and the Saint Paul Public Schools brought lawsuits challenging the Governor, the Department of Children, the State Board of Education, the Metropolitan Council and numerous other agencies to provide an adequate and equitable education. The parties to the Minneapolis suit are now exploring the possibility of a mediated settlement.

Changing labor market and work force. The region's employers have already experienced a shortage of workers, the result both of the region's vigorous economy and population growth that is slower than in the recent past. Minnesota' labor force will continue to grow more slowly than it has in the past. The labor force grew 30 percent between 1970 and 1980 and by 16 percent between 1980 and 1990Äa gain of nearly 319,000 people during the 1980s. Only about 46,000 people will be added between 2010 and 2020.

The rural talent pool, which has contributed significantly to the Twin Cities' growth, will continue to dwindle. The farm population declined from half of the state's population in 1900 to 10 percent in the 1980s. Improvements in agricultural productivity have just about topped out, and the working-age population will decline in many of Minnesota's rural counties through 2020, so the Twin Cities will have to look elsewhere if it wants its labor force to grow. Twin Cities employers may have difficulty finding workers as well-prepared for the workplace as the earlier generation of rural workers were.

The composition of the workforce is changing. The work force is aging, women's share of the work force will continue to increase, and the labor force will become more diverse racially in the next couple of decades. While Minnesota's work force will continue to be predominantly white, the number of persons of color in the labor force is growing much more rapidly than the number of whites. The white labor force is projected to shrink after 2015, so all of the increase in the size of the labor force then will come from non-white workers. By 2020, 16 percent of the youngest workers (age 16 to 24), and 12 percent of all workers, are projected to be non-white; by contrast, today only 5 percent of people age 65 and over are racial minorities.

Education and skills. Minnesota's labor market is shifting in favor of jobs that require advanced education, and the earnings premium for post-secondary education is increasing here as elsewhere in the U.S.

However, Minnesota's post-secondary education system was not designed to meet the continuing education needs of adults already in the work force. Technical college programs today are sometimes teaching to outmoded technologies. In the printing and machinery industries, for example, the rapid pace of technological change requires firms to continually train and re-train their employees. In the three or four years it takes the Technical Colleges to develop a new curriculum, the technology becomes outmoded. Because the current work force is aging, upgrading skills of older workers will be increasingly important, but in general, Minnesota's education system is not designed to view education, training and re-training as a continuous, lifelong process.

There are growing concerns about whether the region's high school graduates are adequately prepared to meet the knowledge and skill demands of an advanced economy. Most international comparisons show that Minnesota high school students are among the best in the world. However, South Korea, Chile, India, Thailand and others across the globe now have well-educated workforces whose wages are much lower than wages here. Many of these regions are investing heavily in advanced education and workforce training in fields that have been important to the Twin Cities. In the future, the Twin Cities region, with its relatively high costs, will have to offer a state-of-the-art workforce with specialized productivity advantages in key activities and industries.

The high average performance has also obscured wide variations in student achievementÄuntil school-by-school and demographic comparisons of basic skills test scores were reported in 1996. Student achievement among Twin Cities students of color and students in poverty is dramatically worse than that of white, middle-class students. Standardized tests show achievement gaps of up to 20 percentage points between white students and students of color in the Minneapolis and Saint Paul districts. Minnesota's students of color also are dropping out of school in alarming numbers. If current state dropout rates for grades nine through 12 remain constant, 62 percent of African Americans in the ninth-grade class of 1994 will eventually drop out of school. The projection for Hispanic and Native American students is only slightly better.

The potential ill effects of inequitable education are growing more ominous, both for individuals and the economy. After 2015 all the increase in the Minnesota's work force will be among minority workers. The state and metro region must assure that the future work forceÄall workersÄis well educated. And because in advanced information economies, individuals' financial well-being depends increasingly on education, the public bears increasing responsibility for ensuring equity in educational opportunity.

Global thinking and connections. U.S. and foreign cities are making major investments in their future position in the global economy. Here in the Twin Cities there are a number of separate efforts to improve the region's global connections, but there is no metropolitan strategy for building the collaborative networks, service infrastructure, education system, foreign contacts and image needed to maintain an important global presence. With the fastest-growing markets overseas, and with competitive advantage increasingly a matter of "thinking globally," the Twin Cities region cannot allow itself to turn its sights inward.

Infrastructure. The public sector in Minnesota and the Twin Cities region is facing key infrastructure decisions:

• Despite an increase in transit funding in 1997, a prolonged period of under investment in metropolitan transitÄcompared with highwaysÄhas resulted in reduced service and higher fares.
• The state's highway system is being used more heavily, but revenues are becoming increasingly tight. Minnesota's population grew 10 percent between 1980 and 1992, 400,000 new jobs were added and the number of vehicle miles traveled on the state's highway system increased nearly 45 percent. Many parts of the highway system are reaching the end of their design life. Minnesota's highway users, however, spend 40 percent less per mile in user fees than they did 25 years ago.

Highway revenues and appropriations are only sufficient to barely maintain the state's current system, not to improve it. The region can expect increases in weight restrictions, more congestion, and deteriorating bridges. Needs for new roadways will go almost entirely unmet, and the state will be forced to patch existing roads when rebuilding would be more cost-effectiveÄthus pushing to future taxpayers the growing bill for rebuilding an aging system.

• The 1996 Legislature culminated the dual-track airport planning process with the decision to expand MSP rather than build a new airport in Dakota County. That decision points to several questions about how MSP will function as a hub and about the degree of competition that will be permitted or encouraged in the region's airline market. And the debate over aircraft noise promises to continue as a new north/south runway is constructed, in part because of a steady increase in passengers. According to an official at the Metropolitan Airport Commission, total passengers have increased by about ten percent per year for the last two or three years.
• The Twin Cities region is running out of rail-truck intermodal terminal capacity. A partnership among the Metropolitan Council, the Minnesota Department of Transportation, CP Rail System, Union Pacific Railroad and Burlington Northern-Santa Fe has recommended that a new shared intermodal terminal be constructed to meet forecast demand over the next 20 years.

· Decisions must be made soon about whether to rebuild the Upper Mississippi's lock and dam system, increase its capacity or do nothing. The U.S. Army Corps of Engineers is charged with making recommendations to Congress by 1999 regarding capital investments needed to make the proposed improvements. The decision is likely to provoke public controversy; the need for expansion of the navigation system will have to be weighed against many important environmental, recreational, economic development and community concerns.

• Minnesota's school districts deferred maintenance on their school facilities during the 1970s and 1980s. In 1995 the Minnesota Department of Education estimated that total spending through school bond issues would be $550 million per year through 2000. There is no ongoing process for planning, prioritizing or coordinating the needed capital investments in schools on a regional basis, however.
• Congress' recent passage of a new law deregulating the telecommunications industry has produced a storm of industry restructuring and technological innovation. The private sector will clearly be in the lead in telecommunications. But the public sector will also play a role in helping to develop a state-of-the-art telecommunications infrastructure capable of supporting the state and region's long-term economic development.

University of Minnesota. The University of Minnesota is frequently cited for its historic contribution to the region's growth and vitality. Its most visible impact has been in technology transfer. The University has also housed centers of top-quality research and teaching in certain departments, which have provided the context for the development of the medical device and computer industries, for social inventions such as metropolitan revenue sharing, and for the region's vibrant arts scene. Perhaps equally important, the University has served as a magnet for talented faculty and graduate students. Once graduated, these talented students tend to stay in the area, many taking jobs with major companies headquartered here. The critical mass of talent has helped to foster an environment of innovation and progress.

Recently, however, there have been signs that the reputation of the University of Minnesota has declined. If the institution is allowed to slip, or even to stand still while others make impressive gains, the Twin Cities region will feel ripple effects for years to come.

Welfare reform. The 1997 Legislature and the Department of Human Services made major changes in Minnesota's welfare programs to bring the state into compliance with new federal welfare reform changes. Beginning January 1, 1998, the Minnesota Family Investment Program will be expanded statewide to replace AFDC. There will be a five-year limit on benefits, with some exceptions. Single parents will have up to six months to find work or enroll in a training program; in two parent families, at least one parent will be expected to begin the job search immediately (work activity is defined very broadly). Families accepting lower-paying jobs will receive some public assistance, along with child and health care benefits, until their incomes reach 20 percent above the 1996 poverty line. Parents who refuse to work or participate in training risk having their benefits cut.

The continuing "devolution" of responsibility for welfare from the federal government to the state will produce chaos in the human services system for some time to come. Devolution is on everyone's agendaÄstate and local governments (especially counties), nonprofits, neighborhood and religious organizations, and foundations. One of the greatest challenges will be assisting people who are currently receiving welfare to find and keep suitable employment, and then to advance to higher-paying jobs capable of supporting families. The Twin Cities economy is virtually at full employment, which means many employers are desperate for workers. But ensuring the right match of jobs with skills, supportive services, and education will be difficult.

Quality of life. The quality of life in the Twin Cities region has become more like that of other big citiesÄand that is a big loss. In the past, the region has overcome many other disadvantages by offering the "good life:" pleasant neighborhoods, lots of cultural amenities, an air of civility, a can-do approach to problem-solving, creative public and private leadership, and a commitment to the mutual obligations among families and communities.

The warning signs of decline include not only the more obvious and alarming ones, such as the 1995 record homicide rate in Minneapolis. Equally troubling is the fact that poverty has deepened and become more concentrated in the central cities and inner-ring suburbs. Parents, even middle-class parents, are spending less time with children, neighbors, and school and community responsibilities. Public discourse has become less civil, politics more dominated by interest groups. Corporate executives, under ruthless competitive pressure, are less deeply engaged in the Twin Cities' regional concerns. Tight public budgets are straining the ability of the public sector to maintain current services, let alone invest in the public amenities that will make the greater Twin Cities region attractive in the future.

CHALLENGES AND OPPORTUNITIES

Goals and strategies. Following a year of public debate about how the metropolitan area should manage its growth, the Metropolitan Council adopted a regional growth strategy, Metro 2040, in December 1996. The land-use and development plan has the potential to significantly change the pattern of the region's physical development. The plan calls for reducing urban sprawl through more compact (higher-density) development; preserving agricultural areas; defining an urban reserve for post-2020 development; revitalizing the urban core; and targeting certain areas in the region for job growth. Cities, townships and counties in the region must update their comprehensive plans by December 1998 to reflect the new strategy.

Another plan, Challenges for a Sustainable Minnesota, offers a vision, decision-making principles and a strategic plan for achieving sustainable development. The Minnesota Round Table on Sustainable Development, composed of 30 business, environmental and community leaders, is now working to translate the recommendations into action.

GovernmentsÄand partnerships of government and businessÄin other states and metropolitan areas have developed strategic plans for promoting their regions' long-term economic competitiveness. The public sector in the Twin Cities region does not have such a strategy. There are some promising beginnings of an economic strategy, but the focus is statewide rather than on the metropolitan area, and the pieces are not connected systematically. In the public sector, the efforts include:

• Economic Blueprint, DTED. This broad-based statement of goals for Minnesota's economic health and competitiveness was developed as part of the Minnesota Milestones process in 1991-92.
• Minnesota Competitiveness Task Force, staffed by DTED. This task force of local leaders in business, education and the public sector was created by the 1993 Legislature to: monitor and modify the goals and benchmarks of the Economic Blueprint; study and define Minnesota's competitiveness at all levels; and formulate strategic recommendations for increasing the competitiveness of Minnesota's people, natural resources, infrastructure and business.
• Metropolitan International, Metropolitan Council. This task force produced a white paper, "Research for an Internationally Competitive Regional Economy," in 1993. The paper identified characteristics of an internationally competitive regional economy. The drafting committee followed up by identifying benchmarks for the Twin Cities in financial and technical assistance, transportation, information and communication resources, and attractiveness to foreign visitors and investors.
• Hennepin International Trade Services (HITS). This group of public- and private-sector executives, convened by the County, has prepared a strategic direction for international business expansion in the metropolitan area with Hennepin County at its core. The group has said that the region is increasingly dependent upon international business, is falling behind its urban competitors, and is at risk of being marginalized in the global economy. The group's Strategic Direction, adopted by the County Board in October 1995, called for a new civic partnership to establish a vision of global competitiveness and set a goal of $20 billion in exports by 2000. The County Board subsequently appointed an International Competitiveness Task Force to prepare action steps.
• Metropolitan Airports Commission: Global Access Development Committee. This task force, composed of representatives from local businesses, airlines, freight forwarders, and export-import companies, has been charged with determining how best to meet the area's international air service and aviation infrastructure needs in a global economy and community.
• Twin Cities Industry Cluster Study, Metropolitan Council and Humphrey Institute. This study, published in July 1995, examined the competitiveness of four diverse industries in the Twin Cities environment.
• U.S. Department of Commerce, International Trade Administration/Minnesota District Export Council (DEC). The Administration conducted a survey of the DEC's members in January 1993 to identify concerns related to economic competitiveness, then held a forum in Little Rock (Ark.) in January 1994 to discuss the issues identified in the survey. In 1994, the Minnesota and Arkansas DECs jointly issued a report of recommendations, based on these findings, for federal policies and actions to make the U.S. more competitive.

Private sector and public-private initiatives include:

• Building Our Future, The Greater Minneapolis Chamber of Commerce. This is a multi-year regional development planning and implementation initiative, with an emphasis on the creation of quality jobs and ownership opportunities as the Twin Cities area competes as one region in the global economy. A Building our Future report of situational analysis, goals and strategies defined by several task forces, was published in 1995. The implementation component of the initiative, a youth apprenticeship program for high school students in the financial services industry, was launched in fall, 1995.
• The Humphrey Institute's State and Local Policy Program. The Humphrey Institute in 1994 conducted a series of roundtable discussions throughout the Upper Midwest on emerging strategies in economic development. The participants in these discussions identified ten principles that should guide new regional development efforts.
• Keeping the Competitive Edge: Positioning Minnesota for a Future in the Global Marketplace, Minnesota High Technology Council. The Council's 1995 white paper suggested that Minnesota's pre-eminence in information technology might evaporate unless the state creates an integrated communications network. The paper outlined an action strategy for maintaining global competitiveness.
• Minnesota Business Partnership. An alliance of the state's leading 100 companies involved in lobbying for business interests, the MBP has been particularly active in recent years in addressing issues of training for the jobs of a global economy.

Constraints and barriers. Many of these efforts to develop regional strategies have been thwarted by the "balkanization" of the metropolitan area, which has spawned a great deal of intra-regional competition for development and encouraged the pursuit of parochial interests.

Despite the recent state budget surpluses, the public sector can expect fiscal stress for many years to come, hampering governments' ability to solve problems by spending more money. In the last dozen years, state and local governments have taken a larger share of personal income. In the next 20 years, the economy will grow more slowly, while demographic trends will lead to increasing demand for public services, so continued increases in spending will take an even bigger bite. Taxpayers seem unwilling to step up to the plate with higher taxes.

The Twin Cities' relative success over the past century, and our current general indicators of success in employment and economic growth, puts us in danger of being smug and complacent about our future. In other metro areas, crises have often precipitated constructive action, but our region lacks a coalescing crisis of sufficient intensity to rally around.

There also has been a change in the environment for leadership and citizenship. In the past, the Twin Cities region's shared values, beliefs and social ties meant that "we didn't have to have a strategy, because we all agreed about what needed to be done." The smoke-filled room method, in which a handful of community and business leaders often decided regional matters among themselves, worked pretty well when a high degree of consensus could fairly be assumed.

But the smoke-filled room can no longer be the region's modus operandi. For one thing, there simply are fewer business and community leaders with roots as deep and investment as personal as that earlier generation of leaders. The global pressure of business is consuming executive time.

For another, citizens and the political process itself are no longer allowing key decisions to be made by a small group of business and civic leaders, however well-informed and civic-minded they might be. Increasing racial and cultural diversity mean that consensus about important questions can no longer be assumed. The public now expects a more open, inclusive decision process.

But at the same time, citizens are "cocooning," retreating from the demands of civic participation. Membership in general civic groups is declining and isolationism is evident in everything from pop psychology to recreation to political involvementÄor the lack of it. Too often here in the Twin Cities, as elsewhere in the U.S., citizenship is construed as protecting one's turf.

Neither the old way of dealing with regional challengesÄthe smoke-filled roomÄnor the present processesÄwhich emphasize parochial interestsÄare equipped to lead the Twin Cities region forward.

The Possibilities

Throughout history, economies and ecosystems have seldom respected political boundaries. Clearly, most of the problems described above cannot be solved by municipalities, counties or school districts alone. In today's global society, the future well-being of a community depends on whether it has its act together as a region. But the decision making structures currently in place often work against regional problem solving.

Anthony Downs, a Brookings Institution economist, recently wrote:

As Congress shifts many now-federal powers to lower levels of government, it is missing a unique opportunity to resolve a fundamental flaw in America's governance structure: the absence of any authority at the metropolitan-region level. Metropolitan regions have become the most important functional units of economic and social life in almost all modern societies. Nearly all major problems in urban areas are region-wide in scope, and so cannot be solved by local governments acting independently. Yet, in most U.S. metropolitan areas, there are no significant governing bodies with regional scope. All public policies are created by local governments with parochial viewpoints, or state governments too far from local conditions to be effective...To mend this flaw, instead of shifting all devolved authority only to state or local levels, Congress should help to create regional institutions more capable of solving key problems.

The Metropolitan Initiative is an effort to encourage innovation in the relationship between metropolitan areas and the federal government. The Initiative staff will compile the results of our discussion on September 8, and of discussions in several other metropolitan areas, and make recommendations to the federal Administration. The recommendations might include a pilot program in a limited number of metropolitan regions.

The Twin Cities metropolitan area is unusual compared with some of the other regions participating in the Metropolitan Initiative in at least two ways. First, the Twin Cities is fortunate to have a very active and involved philanthropic community and a long tradition of foundation, non-profit and civic cooperation in public problem-solving. Second, this area has a long history of regional governance and problem-solving, going back to the creation of the Metropolitan Council in 1967. There are hundreds of initiatives already underway addressing important problems from a regionalÄor at least cross-jurisdictionalÄframework. Of course, these regional mechanisms might or might not work as well as we would hope. For the past thirty years there has been a running debate on whether to elect the currently appointed Metropolitan Council. But Twin Citians hardly need persuading to think regionally. The greater challenge is to determine how the principle of regionalism can be put into action.

For these reasons, we will focus on three policy-level questions:

1. Are there ways that the federal government could encourage the Twin Cities metropolitan community to change its decision structures to reflect the "real" economic and environmental region?
2. Are there areas in which the federal government could help the Twin Cities region address regional issues by making changes to existing federal programs or policies?
3. What should be the appropriate division of responsibilities among federal, state, regional and local governments in dealing with regional concerns?

The paragraphs that follow elaborate on these three questions and outline a few examples of issues related to each. This list of possibilities isn't exhaustive, but rather is intended to stimulate your thinking prior to the discussion on September 8.

1. Encouraging regional problem-solving

Are there ways that the federal government could encourage the Twin Cities metropolitan community to change its decision structures to reflect the "real" economic and environmental region?

The Intermodal Surface Transportation Efficiency Act (ISTEA) encouraged regional problem-solving in transportation by providing federal transportation dollars through a regional funding pool subject to regional planning. Are there other issues on the Twin Cities region's public agenda that should be tackled regionally? What should be the form of federal involvement in dealing with these regional matters?

Examples of possibilities:

• Pricing of infrastructure. There is a growing recognition that the way highway and other urban infrastructure has been financed and priced has obscured the true costs to individual citizens of suburban living and contributed to automobile dependence, low-density development and inefficiency. Policy experts agree that the "price" users face should more accurately reflect the total economic and social costs involved. Congestion pricing is among the policy tools being developed to manage demand for highway infrastructure; the system involves charging drivers a use fee during peak hours in order to encourage them to travel during less congested times. The 1994 and 1997 Legislatures directed the Minnesota Department of Transportation and the Metropolitan Council to study the feasibility of road pricing, and a demonstration project on the use of congestion pricing on I-394 is now underway. How can the federal government be a partner with the Twin Cities region as it explores how to manage future infrastructure demand?
• Welfare reform and job training. The State of Minnesota, and the seven counties of the Twin Cities metropolitan area, are now working furiously to cope with the massive changes wrought by federal welfare reform. There are already more than 100 job training and employment support programs in the metro area. There have also been anecdotal reports that counties are developing additional infrastructure to deal with the challenge of helping the thousands of current welfare recipients to find jobs. Are there ways for the federal government to package the many state, county and local employment assistance efforts to produce more effective results for the region?
• Special education. Federal law establishes an absolute right to an equitable public education for students with learning, physical and behavioral disabilities. However, the per-pupil state funding provided for students with disabilities falls considerably short of districts' average cost to serve such students. Because special education is an absolute entitlement, districts must cover the shortfall from their general operating budgets. In part because of larger overall populations, the large central-city districts have developed expertise in special education, and there is some evidence that their programs are attracting disabled students from throughout the metropolitan area via Open Enrollment. One consequence is that resources for "regular" students in these districts are being tapped to provide for the needs of higher populations of "special" students. These districts' regional role in providing special education services has evolved, not been actively chosen. (By contrast, one intermediate school district in the region has consciously chosen to develop a focus and expertise in special education.) All school districts face particularly acute challenges when it comes to serving students with complex, multiple or medically-severe disabilities, for whom services are extremely costly. Should the metropolitan area have some regional framework for planning, financing or delivering special education services?
• Well-head protection. Federal law requires local water utilities to monitor the post-treatment quality of drinking water and to develop plans for protecting their drinking water supplies. The responsibility for carrying out this federal law has been delegated to states. Minnesota's Department of Health has just completed the process of promulgating administrative rules. Each of the many local water utilities in the Twin Cities metro area will now be required to develop these "well-head" protection plans, even though the geographic territories covered by each well-head overlap one another and cross municipal boundaries. Should there be some regional process for protecting well-heads?

2. Regional coherence on federal policy concerns

Are there areas in which the federal government could help the Twin Cities region address regional issues by making changes to existing federal programs or policies?

There are dozens of policy matters over which the Federal government has principal authority that have important effects on the well-being of the Twin Cities region. Around what federal policy matters should the Twin Cities region "get our act together"Äthat is, develop a more coherent regional vision and greater unanimity on needed policiesÄin order to more effectively influence federal policy-making? And how can the federal government be more effective?

Examples of such issues include:

• Interstate competition for economic development. At least half the states in the U.S. now induce companies to locate, stay or expand in their states by offering financial incentives, including revenue bond and general obligation bond financing, public-sector low-interest loans and loan guarantees, tax abatements and even equity investments. Economists generally agree that such incentives are inefficient and inequitable when viewed from the perspective of the economy as a whole. Even though companies consider other factors besides public subsidy to be more important to their location decisions, they broadcast their intentions with the hope that government officials will offer such deals. States and municipalities express dismay, but they are understandably unwilling to take the political risk of unilateral disarmament. How can Congress and the federal Administration reduce the degree of interstate and inter-regional competition for economic development?
• Immigration. Between 1984 and 1994, immigration into the U.S. matched that experienced between 1900 and 1910. The Twin Cities region is being transformed by the arrival of immigrants from Asia, Africa and Europe. This infusion of new perspectives and talent holds great promise for the region; indeed, the region's immigrant heritage has often been cited as a key factor in its vitality and prosperity. As society and the economy become more globalized, the presence of citizens who are literate in foreign languages and cultures can help improve the internationalism of the Twin Cities region. At the same time, the region will be challenged to meet the educational and other needs that typically accompany new immigrants, and the challenges are costly in the short term. One California study of immigration concluded that immigration works to the benefit of the national government but to the detriment of state and local governments; this is because immigrants often require a more intensive investment of educational and other resources that are typically financed at the state or local level, while the long-term returnsÄin the form of increased income and productivityÄare captured primarily by income taxes. What regional mechanisms could improve the Twin Cities' ability to meet the challenges of immigration, and how might the federal government act as a partner in these efforts?
• Price competition in the Twin Cities airline market. The evolution of the hubbing system in the U.S. airline industryÄand the repercussions of the hubbing philosophyÄhas affected and will continue to affect the Twin Cities, which is a hub market. Exactly what the costs and benefits are of being an airline hub are not clearly known, however. National studies have shown that the benefits of a hubÄbetter and more frequent flights and non-stop serviceÄcome at the cost of fares that are higher than at non-hub airports. At MSP, which is dominated to a greater extent than other hubs by its largest carrier, price premiums are significant. There are other factors that contribute to higher prices, but dominance of MSP by one major carrier has clearly insulated it from fare competition. What role should Congress, the Federal Aviation Administration, and Department of Justice play in opening up MSP to greater competition? How could a coordinated approach within the region encourage appropriate federal action?
• Mississippi River management. River management is shared by many overlapping jurisdictions, including the U.S. Army Corps of Engineers, U.S. Coast Guard, National Park Service, Minnesota Department of Natural Resources, Minnesota Department of Transportation, and many local governments. The U.S. Army Corps is studying whether the lock and dam system should be expanded; Congress will act on the Corp's recommendations in 1999. Meanwhile, a comprehensive management plan developed in 1994 called for steps to increase protection of fish and wildlife resources, protect and restore the most significant visual resources, provide for open space along the shoreline, and encourage a wide range of visitor activities. How can or should the federal government assist the Twin Cities region as it balances the tradeoffs among good views, development, recreation, biodiversity, historic preservation and commercial activity? How should the Twin Cities region be cooperating to inform Congress in its upcoming decisions?

3. Framework for federal and regional intervention

What should be the appropriate division of responsibilities among federal, state, regional and local governments in dealing with regional concerns?

Americans' constitutional system of government is based on the principle of limited government. The U.S. Constitution specifically delineates the powers assigned to the federal government, then reserves all other powers to the states or to "the people." American culture is also distrustful of centralized authority. In general, Americans believe that problems should be solved at the lowest level of authority possible.

The framers of the Constitution stressed the need to keep government closely accountable to the people. The benefit of decentralized authority from a practical perspective is that many problems are best solved by the those who are closest to the action. But for metropolitan regions, where many problems are impossible to solve at the level of local government, there is a constant tension. We need to move up to solve the problems, but we want to keep the benefits of local governance.

To add to the complication: local and regional governments are creatures of state government, so there are sticky constitutional and practical questions to consider when looking at direct federal-regional connections.

Does the region need some decision criteria to sort out what is local, what is regional, what is stateÄand whether and how the federal government should be involved? Should the burden of proof be on arguments to bump decisions to a higher level of government? Does the Twin Cities region need federal intervention to create stronger regional governance, or can the state of Minnesota "just do it?"

What should be the nature of federal involvementÄmandates, money, incentives to promote greater regional cooperation, pilot projects involving partnerships of state, regional and local government? Are there some activities in which a government roleÄat any levelÄno longer makes sense? Could government instead act as a "market maker" and encourage some public services to be provided by the private sector?

Sources

Adams, John S. and Barbara J. VanDrasek. Minneapolis-Saint Paul: People, Place and Public Life, Minneapolis: University of Minnesota Press, 1992.

Beal, David. "The Underlying Force in The Area's Economic Turbulence." The Region, September 1991.

Citizens League. Compete Globally, Thrive Locally: What the Public Sector Should Do to Help the Twin Cities Region Prosper, 1997.

-- It Takes a Region to Build Livable Neighborhoods, 1997.

-- Straight A's for Minnesota's Schools, 1997.

-- The Case for a Regional Housing Policy in the Twin Cities Metropolitan Area, 1994.

-- Accountability for the Development Dollar, 1985.

Downs, Anthony. "The Devolution Revolution: Why Congress is Shifting a lot of Power to the Wrong Levels," Policy Brief #3, The Brookings Institution, 1995-96. See the Brookings web site at: www.brook.edu

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Goldman Sachs U.S. Research. Northwest Airlines Corporation/UAL Corporation, January 4, 1995.

Hirasuna, Donald. "Unemployment and Job Access," Policy Brief, House Research, October 1996.

Martin, Judith A. "In Fits and Starts: The Twin Cities Metropolitan Framework," Metropolitan Governance: American-Canadian Intergovernmental Perspectives, Donald N. Rothblatt and Andrew Sancton, eds. Berkeley, CA: Institute of Governmental Studies Press, University of California, Berkeley, 1993.

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-- 1990 Travel Behavior Inventory Summary, 1994.

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-- Tomorrow's Labor Force: The Next 30 Years, July 1994.

-- Within Our Means: Tough Choices for Government Spending, January 1995.

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The Need for Intermodal Railroad Terminal Facilities in the Twin Cities Metropolitan Area, Minnesota Intermodal Railroad Terminal Study, February 1995.

United Way of Minneapolis Area. The Face of the Twin Cities: Another Look; Trends Affecting our Community Through 2000, 1995.

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The following people provided valuable assistance in the preparation of this paper, although any errors or misjudgments are solely my responsibility. Many thanks to: John Adams, John Cairns, Kent Eklund, Curt Johnson, Peter Hutchinson, Pam Neary, Art Rolnick, Steve Rothschild, Dan Salomone, Jim Solem, Susanne Spitzer, John Wells, and especially Citizens League research associate Ron Wirtz.