Deepening Interlocal Partnerships: The Case of Revenue-sharing Infrastructure Agreements

• Author: Meghan Z. Gough,Stephanie D. Davis
• DOI: 10.1177/0160323X20928580
• Date: 01 December 2019
• Published date: 01 December 2019
• Subject Matter: Articles

Article
State and Local Government Review
2019, Vol. 51(4) 292-300
Deepening Interlocal
ª The Author(s) 2020
Article reuse guidelines:
Partnerships: The Case
sagepub.com/journals-permissions
DOI: 10.1177/0160323X20928580
of Revenue-sharing
journals.sagepub.com/home/slg
Infrastructure
Agreements
Stephanie D. Davis1
and Meghan Z. Gough2
Keywords
interlocal cooperation, revenue-sharing agreements, economic development
For decades, academics and many practitioners
benefits when a business locates in any of its
have recognized interlocal collaboration as a
jurisdictions (Chen, Feiock, and Hsieh 2016;
rational and practical way to overcome the
Orfield 2002). Recent research has found that
problems of local government fragmentation
economic benefits may spill over an even
that beset modern American regions. Across
wider geographic area to encompass rural and
the country, collaborative arrangements pro-
urban areas within a region. These studies
vide a wide array of services, ranging from pub-
show that increases in rural employment in
lic safety to utilities, to libraries, to schools
specific industry clusters generate employ-
(Agranoff and McGuire 1998; Andrew 2009;
ment increases in urban areas as well (Dabson
Benton 2013; Zeemering 2016).
2007; McFarland 2018). Yet tax-base sharing
Interlocal collaboration for economic devel-
arrangements remain the exception, not the
opment has proven more difficult to establish
norm.
or at least to expand beyond limited partner-
This is not to say that interlocal partnerships
ships. This is largely due to the fact that local-
for economic development do not exist. On the
ities typically derive well over half of their
contrary, regional economic development part-
revenues from taxes on real property and sales,
nerships have proliferated over the past forty
which are collected at the local level. To the
extent that they view economic development
as primarily an effort to attract inward invest-
1 Center for Public Administration and Policy, Virginia
ment through business recruitment efforts, they
Polytechnic Institute and State University, Blacksburg, VA,
may still be reluctant to share the spoils of the
USA
2
hunt—the tax revenues—with others (Chen,
L. Douglas Wilder School of Government and Public
Affairs, Virginia Commonwealth University, Richmond, VA,
Feiock, and Hsieh 2016; Hawkins 2010; Ken-
USA
yan and Kincaid 1991; Lee, Feiock, and Lee
2012; Peters and Fisher 2004).
Corresponding Author:
Many years ago, St. Paul and Minneapolis
Stephanie D. Davis, Center for Public Administration and
Policy, Virginia Polytechnic Institute and State University,
solved this zero-sum game by crafting a tax-
104 Draper Road, Thomas Conner House, Blacksburg,
base sharing arrangement. They explicitly
VA 24061, USA.
recognized that the entire metropolitan area
Email: sddavis@vt.edu

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Davis and Gough
293
years (Scholz and Feiock 2010; Lee, Feiock,
engaging in new activities. Moreover, the
and Lee 2012; Olberding 2002; Porter 2000).
assets of rural areas are often undervalued,
These entities market and promote the region
making it difficult for them to bargain as equals
to prospective new businesses (Cigler 2014).
with urban areas (Dabson 2007; Forman 2008).
Regional economic development agencies can
By contrast, urban areas typically face chal-
also provide a neutral voice on the value of col-
lenges related to growth, such as a lack of nat-
laborating regionally, and they may serve as a
ural resources or undeveloped land to
coordinating body to build a regional vision
accommodate growth; and growth may put a
of the economy. They bring professionalism
strain on service capacity. For these and other
to the practice of economic development, they
reasons, working relationships between urban
help to organize local government agencies and
and rural communities may be absent or
the private sector around the development pro-
untested and mutual trust may be low, espe-
cess, and they provide a crucial bridge between
cially on the part of rural areas that fear being
state-level economic development agencies and
dominated by their urban counterparts (Orga-
localities. The interconnectedness and interde-
nisation for Economic Co-operation and
pendence of state, regional agencies, and local
Development 2013). But through strategic col-
governments signals the evolution toward net-
laborative relationships, urban areas and their
works of public agencies required to facilitate
rural neighbors may be able to overcome these
economic development opportunities (Lee,
demands and stressors and work to strengthen
Feiock, and Lee 2012).
each other (Arnosti and Liu 2018).
But the depth and extent of regional partner-
New partnerships between individuals or
ships can vary. If they are focused primarily
organizations tend to form when the risk-
on business recruitment, partnerships may
adjusted expected benefits of collaboration
resemble buying clubs that pool resources to
outweigh the expected transaction costs and
be able to mount more effective marketing
other costs of collaborating. How can local-
and recruitment efforts, but in which the
ities, especially urban and rural areas, create
members still do not share the tax revenues
or deepen and expand collaborative relation-
from business recruitment or engage in other
ships? What factors are necessary to change
collaborative actions. Such limited partner-
localities’ expected costs and expected bene-
ships may be more prevalent in states with
fragmented local governance structures (Bel,
fits to lower transaction costs or to raise
Germa and Warner 2016).
mutual trust levels so that they begin to colla-
Collaboration between urban and rural juris-
borate or deepen and expand an existing
dictions presents another level of difficulty,
collaboration?
despite the above-referenced advantages that
In this article, we address those questions
could redound to both because of economic
via two cases of successful interlocal collabora-
clusters that span urban and rural areas. One
tion in a state where deep and extensive interlo-
of the main, and seldom acknowledged hurdles,
cal partnerships, such as revenue-sharing
is that urban and rural areas—even in the same
agreements, are not the norm—Virginia. To
region—often have unequal or at least very dif-
understand the motivation for localities to col-
ferent assets and capacities to engage in new
laborate on economic development opportuni-
activities. Rural communities often face chal-
ties, we studied the history and context of
lenges retaining population and skilled workers
intergovernmental relations and conducted in-
and in attracting new business, and they often
person interviews with elected...