October 25, 2018

Uncategorized

# The Urban Commonwealth

As the federal government continues to abdicate responsibility for urban investment, cities face a depressing modern calculus. Urban inequality has increased over the past decade, and many cities are struggling to make much-needed long-term investments (see the well-publicized summer meltdown of NYC’s subways). Raising taxes is politically challenging and skimming funding from current programs may detract from other critical policy goals. With no federal cavalry on the horizon, cities are under pressure to make the best of what they have.

In this context, social wealth funds (SWFs) and urban wealth funds (UWFs), which have featured prominently in the public discourse recently, might seem like a policy panacea. SWFs promise to reduce inequality and build public wealth, while UWFs offer the tantalizing prospect of increasing revenues without raising taxes. Both scenarios seem desirable at face-value, but the consequences of wealth funds can vary greatly depending on their particulars. Digging deeper into these structures reveals why, though there is reason to be optimistic about applying elements of both types of institutions to urban contexts, there is also reason for caution.

First, a note about terminology. Often used interchangeably or loosely, SWFs and UWFs refer to two qualitatively distinct types of wealth fund proposal. Both SWFs and UWFs are collectively-held, independently-managed investment vehicles that aim to preserve and grow public assets. SWFs generally aim to apply transparency and social goals to the sovereign wealth fund blueprint by engaging “new” liquid resources (e.g. natural resource dividends, progressive taxation) to initially capitalize a fund, which is then invested in a varied portfolio of financial assets. UWFs, on the other hand, compile existing public assets (e.g. public land, commercial enterprises, utilities) under a single entity, which actively manages the assets to maximize value. While proposals for SWFs often seek to earmark proceeds for cash transfers (this specific arrangement is called a Citizens’ Wealth Fund), UWFs aim to broadly pursue social investment, at least as conceptualized by Dag Detter and Stefan Fölster.