IF DOWNTOWN IS the city's heart, then its soul is surely its neighborhoods. The primary function of neighborhoods is to provide a place for city residents to live and raise their families. Neighborhoods are where children play and go to school, where people lean across back fences or stop in apartment lobbies to chat, and where people run to the local store for a gallon of milk. Neighborhoods help give a city its character and its sense of community.

In turn, the city needs its neighborhoods to prosper. Neighborhoods comprise a significant portion of a city's tax base, which provides money the city needs to operate. In St. Paul, Minnesota, for example, about half of the approximately $237 million the city collected in property taxes in 1994 came from residential property. Residents also contributed to the tax base by paying sales and income taxes...