Private Governments in Urban Areas

Abstract

Urban areas are increasingly populated by new organizations called private governments that are created within the boundaries of existing local governments. Examples include homeowner associations, community benefits districts, and business improvement districts. Citizens attempting to form private governments that supply public goods may encounter collective action problems. Utilizing transaction resource theory, the article examines potential collective action problems in forming private governments and explains how solutions to these problems emerge as a consequence of a political contracting process between stakeholders, where the rules of the resulting relational contract define expected cooperative behaviors. The article also applies transaction resource theory to a case study of the contracting process used to overcome potential collective action problems in creating a private government in Baltimore, Maryland. The case study demonstrates the complexities of the contracting process and illustrates how collective action problems might be intertwined in the prephase, negotiation phase, and postphase.