New York City
New York City originally was established and operated under the same private legal terms as a business corporation. As the historian Hendrik Hartog explains in Public Property and Private Power, the same generally was true of America's other "incorporated municipalities" until the mid-19th century. New court interpretations shifted the legal status of the municipality to a "public" category. The result: New York's legal authority "changed from one of [private] autonomy and distinction to one of general powerlessness before the authority" of the state government in Albany.
From its beginnings in the 1960s, the private city of Reston, Virginia, has grown to almost 60,000 residents. Its government reflects a private form of federalism: Besides the citywide Reston Association, there are more than 130 neighborhood "clusters," ranging in size from 11 to 231 housing units, each with its own private governing association.
Since the 1970s, thousands of small, street-level governing arrangements called woonerven have been created in the Netherlands. To create one on an existing street, more than 60 percent of the residents must vote their approval. The woonerven provide redesigned streets to create a safe area for the enjoyment of adults and children; the residents might, for example, plant flowers and install benches and speed bumps and other traffic calming devices.
There are more than 400 private streets in St. Louis, the first of which was created in 1867. The streets are deeded to the surrounding residents, who maintain and operate them, in some cases tightly limiting public access. In the 1970s, while much of the rest of St. Louis was in crisis, the urban planner Oscar Newman found that the private streets were an oasis of stability in which the "residents have been able to create and maintain for themselves what their city was no longer able to provide: low crime rates, stable property values, and a sense of community." In 1997, following a similar model, the city of Richmond gave private ownership of the streets to the local public housing authority, which restricted access. The U.S. Supreme Court upheld this street privatization in Virginia v. Hicks (2003).
In 1954 Lakewood, California, became a newly incorporated city within the boundaries of Los Angeles County. Rather than provide its own services directly, Lakewood contracted with the county and other public and private parties. The Dell-style "Lakewood Plan" became the model for more than 30 other California "contract cities." Outside California, in Broward County, Florida, the contract city of Weston today has 65,000 residents, an annual budget of $100 million, and three city employees. The newest contract city: Sandy Springs, a suburb of Atlanta.
In 1992 the Sursum Corda housing project in Washington, D.C., was turned over to the tenants as a private cooperative. In October 2005, after a Metro stop opened nearby and as property values rose rapidly, the board of directors voted to sell the whole project to KSI, a leading developer in the Washington area. The 167 low-income families in Sursum Corda received $80,000 per unit, a future share in KSI's development profits at the site, and an option to buy a discount-price home in the new 500-unit project planned there. It was a private form of urban renewal—established, unlike the traditional sort of urban renewal, by a transaction between willing buyers and sellers.
Selling Whole Neighborhoods
Where a neighborhood faces rapidly rising values and a transition to a brand-new use, speculators often capture much of the financial windfalls. In Fairfax County, Virginia, hoping to avoid this outcome, the owners of 70 homes near the Vienna Metro stop banded together in 2004 to sell their whole neighborhood as a single package. Their new private association signed an agreement to receive more than $760,000 per unit for redevelopment of the neighborhood as an apartment complex, compared with housing values of about $400,000 in current single-family use.
Residential Improvement Districts
Facing poor public services and deteriorating downtown conditions, businesses increasingly have been banding together to create a new public/private hybrid, the business improvement district. Pioneered in New York City in the 1980s, a BID has a board of directors, can levy assessments, and in other ways resembles a private community association. Yale law professor Robert Ellickson proposes that the private association model be extended by legislatures to deteriorating residential neighborhoods, resulting in what he calls a "block improvement district."
Schools are the largest area of responsibility of American local governments, absorbing about 40 percent of their budgets. But there are no economy-of-scale or other physical requirements that necessitate a unified public system, and the public school monopoly historically reflected a desire to inculcate "the American religion" throughout society. The current turn to school choice, charter schools, and private vouchers points to a different future for elementary and secondary education, one that resembles Bruno Frey's "functional overlapping competing jurisdictions."
About 1 billion people around the world live in squatter communities, including some 1 million in the favelas of Rio de Janeiro. Largely ignored by the official governments, the residents of favelas obtain their services through informal arrangements among themselves. Journalist Robert Neuwirth reports in Shadow Cities that he was much safer living in a favela than in the parts of Rio served by public police. With the streets teeming with people and drug lords enforcing strict discipline, the criminals know to stay away.