Time Capsule Tuesday: Stanford Research Institute Study on City of Industry, 1957-1970: Part Twelve

by Paul R. Spitzzeri

As we approach the end of a deep dive into this important early study on the City of Industry, the next section of the Stanford Research Institute publication focuses on “City of Industry Relative To Its Region.”  Specifically, the city’s development “is examined in terms of its share in the industrial activity of Southern California and the State of California” with impacts in the areas of population, housing, income, and sales gained by local communities because of booming employment in the city.

While Industry’s size and population were small, “in terms of being an industrial center,” the city took on greater and outsized importance.  Using a system of ratios (the details of which are not necessarily important for this post’s purposes), the authors observed that, for the years 1958-1963, “the City at least doubled its importance in terms of manufacturing employment, payrolls, value added by manufacturing, and assessed valuation, and nearly doubled its share of taxable retail transactions.”

Moreover, it was expected that, in the next several years through the end of the decade, there would be another tripling so that “the anticipated lesser gains in assessed valuation and taxable retail transactions are still eminently respectable indicators of future growth in the City.”  Interestingly, the city’s expected growth would happen even as the region’s share of industrial activity was forecast to decline.  Energy usage projections in electricity and natural gas were offered as other indicators of the substantial growth in the city by 1970.

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Moving to effects on the local area, the report stated “the remarkable changes in City of Industry have deeply affected surrounding areas,” noting that restrictions in housing within the city meant the presumption that most of the growing legions of workers in Industry sought homes in nearby communities.

Based on research conducted by the U.S. Chamber of Commerce, a table showed Industry’s impact on neighboring localities by looking at anticipated growth from the known information up to 1963 to what was expected in the following seven years.  With employees expected to grow from about 4,500 to nearly 17,000, increases in local residents of more than 3 1/2 times, nearly four times personal income and similar increases in retail establishments, registered passenger cars and bank deposits, among others, were anticipated.

Calling the summary “a fleeting appraisal,” the authors stated “City of Industry and its industrial growth have brought even greater benefits to the neighboring communities than the tabulation suggests.”  They cautioned, however, that more people in the area meant more expenses in administration and costs, although it also observed that “business firms in the City have picked up a very large percentage of the several school districts’ tax levies without contributing any children to the districts’ burdens.”  This lowered the rate on the residences that housed these students.  With respect to having more cars, this meant more costs in road building and maintenance, they wrote “a point is soon reached when benefits and burdens cannot easily be matched in quantitative terms.”  Still, “if all functions within City of Industry were to cease suddenly and permanently, the surrounding areas would lose more than they would gain.”

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A lengthy section followed outlining arguments pro and con regarding special-purpose cities like the City of Industry.  The authors wrote that investigators sent out by the institute heard a wide range of views on this topic, ranging “from the obviously true to the patently false.”  For what it called “an objective analysis,” interviews were done with four academics knowledgeable in municipal affairs, with the men from San Diego State University, UCLA, California State University, Los Angeles, and UC Berkeley.  The questions were:

  • What are typical arguments for and against these cities at the local, county and state levels?
  • How valid are the arguments that are made?
  • What are the most serious issues confronting these cities contrasted with “regular” municipalities?
  • What are recommended solutions to those matters?

With respect to the first question, there were many arguments put forward in support of special-purpose cities, including the right of property owners to create a city for mutually satisfactory reasons; protection of industry from residential developments that could restrict noise and traffic aspects necessary to industry; concentrating industrial propery means a lower property tax burden and more efficient services if provided by, say, the county; creating an industrial city preempted other cities “milking” industrial areas with property and other taxes; special-purpose cities can lobby more effectively for its constituents rather compete with other special interests in a diverse city; incorporation of Industry held off potential county-led zoning changes; the industrial city was more attractive in bringing firms to California; and that special-purpose cities were encouraged by the State through existing tax structures.

As to opposition arguments, these included segregating an industrial tax base deprived neighbors from having funds to pay for services; sales tax revenues financing special-purpose cities are “passing on the cost of its government to persons who do not benefit from such services;” neighboring cities are affected by industrial traffic “and other inconveniences and detractions;” special-purpose cities are not “well-rounded” and should support the areas where workers live, while business owners and managers may not live nearby and have an outsider effect that leads to factions and strike; regional planning is fragmented by such cities; tax burdens are unevenly distributed between these cities and their neighbors; larger governments more effectively deliver services and special-purpose cities limit funding for that delivery; having industrial workers live outside the city causes more traffic; and it is not in the state’s interest to allow special-purpose cities that cause the above issues.

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In an assessment of these positions, the authors wrote “the arguments on both sides seem to have some degree of validity, the degree varying according to the context and the set of circumstances chosen to prove or refute the given argument.”

For the pro side, they referred to the strength of three main arguments.  First, there are private property rights, noting that the formation of cities is handled through a process that includes submission of boundaries for a city, the exclusion of those property owners who opt out, and a referendum of registered voters in the proposed city.  Notably, Industry was created before the institution of local agency formation commissions in each county by a 1963 statute.

Then there was the assertion that “special-purpose industrial cities are sometimes needed essentially as devices of land use control.”  This allowed for industrial development unencumbered by residential areas and the avoidance of “competitive annexation attempts of neighboring municipalities.”  Yet, to take the former too far was “too blatant a denial of the public welfare in general” and of those of individual residents.  Moreover, the report stated, planning in special-purpose cities was not inherently better than that in others. As for the question of services provided, this was “two-edged,” in that fewer services offered at lower levels (and, in many cases, contracted to the county) might be perceived as efficient, but municipal tax rates for city services were generally low anyway and had a “small marginal effect on the total rate.”

On the con side, the four experts largely agreed that special-purpose cities had issues relative to questions of home rule and about tax havens.  One of them stated that “there is considerable argument that it is unwise to encourage indiscriminate, spotty tract development” and “there is also widespread acceptance of the ideal that industrial and residential uses should be separated for the best results.”  But, he cautioned, “industry cannot set itself apart governmentally from the people of the urban area in which its production plants are located.” Another offered that idea that the “lack of a well-rounded community does not seem particularly important” because “the metropolitan region, the work organization, the ethnic group, and so on are the real communities.”

004 A third of the interviewed men observed that institutions change to adapt to the times and that evolving from the original intent is not necessarily wrong.  Studying the particular institution and looking at implications and consequences “would tell us whether the modifications are acceptable as being in the public interest.”  The last of the experts added that changes in urban areas mean that “new approaches to governmental arragements are very probably in order.”  While this did not mean automatic support for special-purpose cities, it also means that believing these cities to be illegitimate “is not only fallacious but begs the question of the larger or regional interest.”

The tax haven question “is one of the more difficult to prove or disprove with any degree of certainty.”  Yet, the authors averred that “the more categorical and vehement the criticism, the more likely it is to be incorrect.”  They went to state that “any city, special-purpose or otherwise, receives back only those sales tax receipts that are collected by firms within that city” and, in a footnote, added that government operations are not necessarily connected to sales tax receipts.

They went on to suggest that “the finger of criticism, if it is to be pointed at all, often may be pointed more appropriatey to the residential municipality for reasons cites in “pro” argument number five.”  That is, industrial concentration “tends to reduce the property tax burden.”  The larger concern should be the comparison of lower municipal tax rates in the industrial city and higher ones in the residential city.

Finally, the authors wrote that most arguments against special-purpose cities could apply to any city, including annexation battles for desirable areas; traffic and other problems of industrial parks within general purpose cities; and the matter of how local services are provided regardless of the type of city.

Next week, we complete our exhaustive look at this interesting report with a look at the problems and possible solutions of special-purpose industrial cities like Industry; reasons for locating in the city; and the pros and cons of Industry as a place to locate.

 

 

 

 

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