Most city–university relationships are transactional.

Few cities and universities have what you might call a true partnership—an intentional agreement about how to work together to strengthen the local economy and quality of life

A mayor might call a university when a ribbon-cutting is needed, or a campus might approach city hall for zoning approvals or infrastructure support. But few places have what you might call a true partnership—an intentional agreement about how to work together to strengthen the local economy and quality of life.

One way to do just that is a higher education ‘compact,’ essentially a public agreement between city leaders and anchor institutions that lays out shared priorities, mutual commitments, and a process for accountability. Ten years ago, I detailed the virtues of compacts with colleagues at the Urban Institute in a report entitled "Striking a Local Grand Bargain."

Back then, compacts felt like a “nice to have.” A few communities effectively used them to address local challenges. They were a good governance tool—something that helped boost collaboration if leaders chose to pursue it.

Artificial intelligence has revived the relevance of compacts.

In a new policy brief, The AI Lab Next Door, which I co-authored with Eric Gordon and Mai-Ling Garcia, we examine how cities and communities can begin navigating the AI era. 

In a new policy brief, The AI Lab Next Door, which I co-authored with Eric Gordon and Mai-Ling Garcia, we examine how cities and communities can begin navigating the AI era. One surprising conclusion we reached is that the greatest partners for governments and nonprofits may already be hiding in plain sight: local colleges and universities. 

Higher Education Is Already an AI Power User

While much of the public conversation about AI focuses on technology companies or federal policy, higher education institutions are becoming the most active AI enterprise around.

Higher education institutions are becoming the most active AI enterprise around.

Universities have been grappling with AI for several years now. Within weeks of the public release of tools like ChatGPT, colleges were already confronting questions about teaching, research, and administrative use. Faculty committees, provost offices, and campus task forces quickly began establishing policies and experimenting with applications.

At the same time, universities are building enormous technical capacity. Hundreds of AI-related degree programs now exist across American higher education, and billions of dollars in new research funding are flowing into campus-based AI initiatives.

Yet the connection between that work and local communities remains surprisingly thin. 

The Partnership Gap

Most cities do not maintain deep or strategic relationships with nearby universities. The familiar town–gown divide still exists. Local governments focus on service delivery and immediate problems, while universities operate on longer timelines centered on research and teaching.

But AI may be creating a rare moment when those incentives align.

Cities need technical capacity. Communities want to understand how AI will affect jobs, services, and local economies. And universities are increasingly under pressure to demonstrate their public value. That convergence creates a real opportunity for collaboration. The problem is that collaboration rarely happens organically; it usually requires structure. Which brings us back to compacts.

Why Compacts Matter Now

Compacts are powerful because they create clarity. They force institutions to articulate shared goals. They establish expectations. And they provide a framework for ongoing collaboration rather than one-off projects.

In the context of AI, that clarity is incredibly valuable.

Cities may want help with things like:

• building an AI-ready workforce
• experimenting with AI tools in government
• translating research into practical civic applications and resident engagement

Universities, for their part, often want access to real-world problems, data partnerships, and opportunities for students and researchers to apply their work.

A compact can connect those interests and identify mutual benefits.

Rather than hoping collaboration emerges organically, a city and its anchor institutions can sit down and ask a simple but powerful question: How should AI strengthen this region?

An AI compact can outline concrete commitments of joint research initiatives, student placements in government agencies, shared experimentation labs, or workforce development programs tied to local employers.

From there, a compact can outline concrete commitments of joint research initiatives, student placements in government agencies, shared experimentation labs, or workforce development programs tied to local employers.

The key point is that the partnership becomes intentional rather than accidental.

A Curious Twist in the Compact Story

There is also an interesting twist to the compact idea today.

When we wrote Striking a Local Grand Bargain, relatively few people had heard of higher ed compacts. They were mostly discussed within urban policy and higher education circles as one way to strengthen city–anchor collaboration.

Recently, however, the concept has entered the national conversation in a very different context.

The New Yorker Magazine just published an article titled “The Unmaking of the American University,” which details how the federal government has moved away from its longstanding compact (partnership) with higher education. David Remnick, the magazine’s editor, writes in an introductory note to the article that “institutions of higher learning and the U.S. Government shared a mutually beneficial compact.

Schools were the beneficiaries of billions of dollars in funding, and the government and the American people received myriad benefits in return: educating generations of students, technological innovation, and medical breakthroughs.”

Indeed, the Trump administration has proposed an entirely new arrangement under the heading “Compact for Academic Excellence in Higher Education,” using the notion of compact as a mechanism to influence university behavior, potentially tying institutional commitments to federal funding.

That current federal approach is quite different from the civic compact model we originally envisioned. The model we proposed is a two-way street, locally driven. Cities and universities work together as partners to define shared goals for their region. The purpose is not federal compliance but local alignment. And AI makes that kind of alignment more important than ever.

The Window Is Open, But It Won’t Stay That Way

Artificial intelligence is arriving faster than most public institutions can comfortably absorb. Universities have already spent several years experimenting with the technology and developing governance frameworks. Local governments and communities are only beginning that journey. The current environment presents a rare opportunity.

Cities that engage their universities now can help shape how AI strengthens public services, workforce development, and democratic institutions.

Right now, institutional practices are still forming, and major investments are still taking shape. Cities that engage their universities now can help shape how AI strengthens public services, workforce development, and democratic institutions. And the notion of compacts based on mutual benefit can be revived for a new generation of innovation.

But that window will not remain open indefinitely. Once capital investments lock in and institutional practices harden, shaping the trajectory of AI becomes much harder.

The bottom line is that higher education is one of the best partners we have to make AI work for the public. The challenge is not discovering that partner; it is intentionally building the relationship before the moment passes.