1. General Discussion of “Urban Competition”
David Albouy, university of illinois

2. Brueckner’s “Bi-spanning” Bridges
Suburbs
Midcity
Central

3. Brueckner’s Bispanning Bridges
Advanced application of the “self-financing theorem”
Constant returns in building capacity to alleviate congestion
Can apply to an unbounded number of bridges.
Monopoly pricing?
If midcity owned the suburban bridge
If central city owned either
Benefits ruled out by budget balance condition: but could be passed on with lump-sum transfers
Could the midcity bridge price discriminate?
Different fees to suburban residents
Don’t suburban residents create other externalities going through midcity?
Sequential equilibrium
What if the suburbs developed later?
Midcity-central bridge too small: should charge more, until new one built.

4. 3 “Jurisdictions”: The Ambassador Bridge
U.S., Canada, and Private
Finished in Cost?
$1-2 Billion for new bridge.
Capacity of four lanes (initially 5)
Annual 5M autos at $5 each; 3M commercial vehicles at ~$20 each = $85M annually
Long wait times at border crossings
25% of U.S. Canada merchandise passes through
Privately owned by Manuel “Matty” Moroun
Through Detroit International Bridge Company
Sells duty free gas at only a slight discount.
Company held in contempt for failing to make access improvements
Getting competition from the New International Trade Crossing
To be paid for entirely by Canada (with tolls)
Held up by Moroun legal and political maneuvering

5. Land use in McMillen’s former suburb
Napierville, IL

6. Other kinds of externalities across state borders
Primm, NV
(formerly “State Line”)
Are discontinuous policies efficient?
Breakdown of Tiebout: space matters!

7. 45 minute drive to Las Vegas; (3 hr 15 min to LA)
Las Vegans and others started turning out as early as 6 a.m. Thursday at the Primm Valley Lotto Store to claim their spot in line and get a chance to win the largest Mega Millions jackpot in history.
$1 ticket for a shot at the record $540 million jackpot
By 11:30 a.m., the line…stretched to more than 1,000 people.
Since lottery tickets are not sold in Nevada, the Primm Valley Lotto Store on the California-Nevada border is one of the closest places Las Vegas residents can get a piece of the Mega Millions action.

8. Jacob-McMillen Borders
Is there a more specific way of modeling the behavioral response?
Changes in quantity relative to changes in price.
Transportation costs
More to look at than densities and prices (although those are key)
What are the nature of the externalities?
Aesthetic, pollution, moral
Could make better sense of the policies and repsonses
When are the border effects stronger?
Stronger local governments
Is zoning as efficient as a tax or impact fee system?

9. POLITICAL EXTERNALITIES
Rep. Luis Gutierrez
4th Congressional District (1993-)
Alderman of 26th ward of ( )
*Wicker Park/Bucktown developed rapidly
Will soon be running for Chicago mayor…

10. Urban development and political externalities

11. “New Homes for Chicago” program
Modular housing very affordable
Angers local building unions
Some think its ugly (surprise)

12. Gas cost vs. time cost of commuting
Typical commuter drives at 20 miles per hour and gets 20 miles per gallon
Each mile costs 0.05 gallons and 0.05 hours
The price of gas is ~ $4/gallon (after tax) and average wages are ~$24/hour (pre tax)
A difference of six times!
20 cents a mile in gas
2.5 cents/mile in tax (1 cent federal, 1.5 cents state)
17.5 cents/mile pre-tax
$1.20 in labor (social).
Typical federal tax is 30 cents (25%)
Typical state 12 cents (10% income tax + consumption)
Private cost 78 cents MINUS “leisure value of commuting”
Taxes on income do much more to raise commuting distances than gas taxes do to lower them!
Should effect patterns of commuting far more
Marginal negative externalities from driving (accidents, pollution, congestion): ~15 to 75 cents/mile
All the more reason to tax gas more to replace income tax

14. Reciprocity Agreements
No: Portland,or and Vancouver, wa
YES: Philadelphia, pa & CAMDEN, NJ
Pennsylvania: 3% income; 8% sales (Philadelphia + 1% payroll)
New Jersey: 5% income; 7% sales
Washington: no income tax; 9% sales tax
Oregon: no sales tax; 9% income tax

15. Income Tax
Texas: none
Arkansas side: received an exemption in 1970
Sales Tax
Texarkana, TX: 8.25%
Texarkana, AR: 12.5%
Population
Texas: 37, Arkansas: 30,000

16. Agrawal Hoyt Bi-taxed Cities
Great use of data
Always wanted to see this tested
What about benefits of living in each state?
Taxes come with benefits
Or do some states have fiscal advantages from other sources.
What happens when the crossing cost is zero?
The crossing cost is potentially endogenous?
Brueckner’s bridges!