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Consolidation of Municipalities

The consolidation of the many jurisdictions into a single one can have many economic merits. By consolidating and having a bigger local jurisdiction, the local government can take full advantage of spatial externalities and any spillover of benefits of any investments by internalizing those effects within the increased borders. This ensures that any investment is utilized efficiently to its fullest potential. Conversely, any negative spillover is internalized as well, thereby not harming neighboring jurisdictions. Another advantage of consolidation is the utilization of economies of scale. With a larger jurisdiction, economies of scale would allow fixed costs to be incurred less frequently (for example, a school district can have one huge high school building instead of having six different school districts all with their own facilities), while driving the average costs down per additional consumption of that utility. The consolidated city would benefit much from economies of scale whenever capital intensive investments with high fixed costs are made. The final advantage is administration and compliance costs. Consolidation will lead to only needing one governor or one superintendent of a district etc. which will lead to costs savings in salaries and amenities to support such administrative entities. Vertical consolidation can allow costs to the citizens can also be cut, for example by allowing the citizen to take time to vote for only one governmental election rather than many seats in multiple levels.

There are several criteria we must observe before deciding to consolidate municipalities.  One thing to look for a valid reason to consolidate is a big difference in municipality expenditure, which can hint inefficient spending of the local governments. This provides support for the said consolidation since the municipalities with high expenditure can reduces costs by sharing some of the amenities with nearby towns. For example town A can offer to share its snow plowing machines with its neighboring town B in exchange for access to their road paving machines. This prevents both towns from having to purchase either machines and save tax payers’ money.

Another thing to look at would be the similarities and differences between demographics of the municipalities. The large variance in per capita income of the people would discourage consolidation. Populations with different income levels tend to have different preferences and consolidation would lead to compromises and sacrifices for both ends. The lesser earning people can take advantage of freeriding. Conversely, some may suffer because their desired level of expenditure may not be realized. Regardless of the preferences of the people, consolidation will alter the tax rate, and some will have to pay more than previously while others less than before for the same services. The comparatively small variance in per capita income within each of the municipalities further enhances the arguments made for the previously case of large variance of per capita income within the large area since this indicates that the neighborhoods/districts are quite different from each other in socioeconomic terms and similar level of preferences are clustered together and distinctively different from one cluster to another.  When such is the case, consolidation would be argued against because the different needs and preferences according to the different living standards of the neighborhoods would necessitate the consolidated government to make decisions that do not wholly reflect the desires of all the people. For example, the neighborhood with the higher income would want a nice park or a marina, while the neighborhood with the lower income would want more social services like child care support, free clinic, etc. With a finite budget, the consolidated government would not be able to satisfy all people. The fact that many municipalities already rely on the upper level government for some amenities also argue against the proposed consolidation. In doing so, the jurisdictions are already utilizing services beyond its jurisdiction or area limit, and already have implemented cost saving measures. Even with the consolidation, the municipalities would not gain or lose anything since state or county level vertical support may not be related to the horizontal consolidation of same-level governments.

The question of consolidating municipalities is not just an inquiry on whether total sum of utility is optimized in the society. It is a matter of not only individuals’ preferences and options, but also the situation and atmosphere which may influence the decision making process. Ultimately, decision making processes and game theories on where to spend money does not end up with results that make everybody happy, but to results that make everybody not discontented – though the society (collective towns) become better off.


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