“Focused, coordinated and sustained public investment in distressed urban areas is required to
compensate for the increased risk of private investment in these areas. [...] Federal and State
governments must have at their disposal a full array of incentives to foster business activity in
distressed places [...]” (The President’s Urban and Regional Policy Group Report, 1978:II-9).
Partnerships have appeared to be an appropriate tool to attack social and economic
restructuring problems of cities by "integrating capital, leading sectors and favored social
groups in specific locations” (Newman, P.; Verpraet, G., 1999:488). Public-private
partnerships have been supported by city officials in efforts to attain and institutionalize
involvement of the private sector in cities (Stephenson, M. O., 1991:111).
Encouraging private enterprise to solve public problems was one of the big ideas for
government in the late 1970s and 1980s. City entrepreneurship and public-private
partnerships were part of this tack in public urban policy. (Frieden; Sagalyn, 1989:216). The
Carter Administration aggressively promoted public-private cooperation through its Urban
Development Action Grant (UDAG) program. UDAG was launched in 1977 and was
designed to help stimulate economic development in cities in a way that CDBG could not
achieve. The UDAG program served as the basic instrument for the Carter administration for
leveraging private investment for local economic development. In essence, UDAG explicitly
required private sector investment (see II.2.C).
Joint public-private ventures had a boost in the 1980s as public-private partnerships were
fostered by the Reagan Administration. Reagan brought about fundamental changes in urban
policy. His policy rested on three basic pillars: (1) national economic recovery, (2) ‘New
Federalism’ that aimed at devolution , and (3) greater local self-reliance and responsibility
(Ledebur, L. C., 1984:192). The concept of a ‘New Federalism’ of the Reagan administration
transferred responsibilities for urban revitalization to local governments. Local entities had to
come up with new approaches to search for funds and financing methods. Public-private
partnerships met the need for new innovative approaches in urban development with regard to
Reagan’s policy demands. The differences between ‘new’ partnerships in the 1980s and
previous partnerships in the 1950s until 1970s lay in the “need for local governments to
innovate in ways that did not involve the federal government and that therefore required a
greater share of private participation” (Lyons, T. S.; Hamlin; R. E., 1991:57). While cities had
to compete increasingly with another, they became more entrepreneurial. Due to Reagan’s
urban policy, so-called entrepreneurial cities emerged since entrepreneurial strategies have
become more important in municipal politics.
In California an additional factor contributed to public-private cooperation in urban
development. Proposition 13 in 1978 limited property tax increases of municipalities almost
overnight. Accompanied by federal cutbacks, local governments in California had to search
for new ways of revenue raising and financing development. In essence, cities began to raise
additional revenue by becoming active partners in real estate development.
In sum, public-private partnership has been considered a critical catalyst for urban economic
development. The partnership concept were popularized initially by the Carter administration
which announced a ‘new urban policy’, entitled ‘A New Partnership to Conserve America’s
Communities’ in 1978 and then by President Reagan’s ‘New Federalism’ accompanied by
dramatic federal cutbacks in urban programs. Hence, the preceding discussion illustrates a
clear link between the social and economic fragmentation of cities and public-private
partnerships as a form of urban governance.