NOTE: This is the sixth in a six-part series of Policy Updates on the OECD Territorial Review:
Part 4: Transportation and Logistics
Part 6: Governance
The Organisation for Economic Cooperation and Development (OECD) recently profiled a broader Chicago "mega-region" that includes northeast Illinois, northwest Indiana and southeast Wisconsin as part of its Territorial Reviews: Competitive Cities in the Global Economy series. This Policy Update, the sixth and final in a series on the OECD report, focuses on the OECD's analysis of the tri-state area's governance.
The OECD report examines the tri-state area's challenges and opportunities for effective institutional arrangements. The 21-county area covered in the report contains over 2,100 units of government, each with its own set of revenue and service provision responsibilities and authorities. The report points out that the large number of local governments hinders efforts to reach consensus on strategic planning for goals such as economic development, equitable public finance, and quality public services. According to the report, the lack of institutional coordination may affect the tri-state area's competitiveness, growth, and long-term economic vitality. The uniquely large number of units of local government is a visible and quantifiable indicator of other challenges, including duplication of services, high tax burdens, and reduced accountability and transparency.
The OECD report examines the interdependence of northeast Illinois, northwest Indiana and southeast Wisconsin in today's economy, with competition that originates from beyond the tri-state area, both nationally and internationally. GO TO 2040's section on effective governance discusses many of the same challenges and also identifies the need for state and local tax reform and coordination of investments. Informed in part by GO TO 2040, the OECD recommends efforts for more responsive local governments and intergovernmental cooperation. Government fragmentation limits the area's ability to develop and implement long-range planning strategies for sustainable prosperity. Indeed, the report identifies examples of internal competition here, such as companies re-routing sales transactions through lower-tax jurisdictions to avoid higher-taxed counties or governments luring companies from one jurisdiction to another. These efforts merely transfer commerce from one part of the tri-state area to another and do not grow the mega-region's economy.
The OECD also identifies the need for tax reform. Local and state tax policies acutely affect residents and businesses alike. The report states that residents face "complex, inefficient, and often inequitable tax system that cannot raise the revenues needed to pay for needed maintenance and upgrades, let alone expansion of transportation and municipal infrastructure and other public services." At the same time, "businesses face a complicated and unbalanced property tax system." The OECD recommends a careful review of the area's tax policies. The OECD noted the work undertaken by CMAP's Regional Tax Policy Task Force, which developed a report evaluating the seven-county CMAP region's tax policy challenges. The OECD report recommends steps for the tri-state area to develop a "fair and efficient local tax system" so that the region can become more internationally competitive. The OECD report recommends that the tri-state area should pursue budgetary and tax reforms at both the state and local levels, while also exploring consolidation of municipal services.
A driving theme of the OECD's report is the mega-region's need for better coordination and collaboration to drive economic growth. The area needs more coherent, integrated, regional planning to address some its pressing challenges and opportunities such as fostering innovation, green economic development, workforce development and region-wide, inter-modal transportation.