Local Government: Is Consolidation an Answer to Financial Woes?

The traditional view of the city as a densely populated urban center where people work in factories, offices, and can walk to shops that surround their homes has witnessed radical changes in the urban landscape of America. People’s lives are now predominantly based in the suburbs. American cities are now plagued with old infrastructure, failing school systems, poverty, drugs, crime, and a whole host of other policy related challenges.

One of the reasons that these challenges exist in cities can be traced to the governmental structure in urbanized regions and poor regional planning. The idea of a city as a collection of institutions, businesses, and transportation center will be a permanent feature of American life – even though how we traditionally define cities may be changing. Although many American’s lives are rooted in suburbia, there is still an allure about “going downtown,” that will always remain a fixture of American life. What we are increasingly witnessing is throughout America the city-suburb relationship is symbiotic; both are contributing to the overall economic health and fabric of a metropolitan area.

We have also seen the development of an enormously fragmented government. I got thinking about this after reading an article from my hometown of Syracuse, NY. Just outside of the City lies the village of Camillus, which will be voting to dissolve. The Mayor of Camillus, Michael Montero, announced to village residents that a vote to dissolve will take place this fall. Montero will be moving out of the village and moving to Pennsylvania in December to be closer to family. Stripped of any political motives, Montero is likely making the right decision for the village residents. The village has about 1,200 residents, and the services would be taken over by the town of Camillus.

The Syracuse Post Standard reports:

“Village officials started looking into the possibility of dissolving last year, Montero said. The village, like other municipalities, has been stripped of sales tax revenue and has seen a drop in state aid while still facing increasing costs. Other costs, such as repairs to buildings and roads, also can add up, the mayor said.”

Residents showed up to local meeting wearing shirts that said “Save our Village,” and some felt that the vote to dissolve was not representative of the village. There is a strong connection to local government, and the decision to consolidate services is always controversial, and never an easy choice.

What will happen to the village of Camillus if the vote to dissolve passes? The Town of Camillus would receive $1 million annually, and $700,000 must be used for property tax relief across the town. Mayor Montero will be holding sessions for village residents to explain the impacts. Essentially, the town will take over services, village board would no longer exist, the village would still get representation in the county, and the town will hire some of the workers.

So is consolidation an answer to local government financial woes? There are a lot factors that come into play, and seems like in the case of Camillus, it works. In such tight fiscal times, maybe the move is to start thinking about local government in terms of metropolitan areas, not arbitrarily defined city boundaries, that in many cases are outdated and remnants of a different urban era and created based on political motivations. Whether they like it or not, suburbs are closely linked to the city and an economically viable city will be enormously beneficial to surrounding suburbs.

What’s your opinion? Is government too fragmented? Is consolidation an answer?

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Bob Woods

Ultimately the entire question is one of the quality of management.

In private sector consolidations, weak non-performing organizations are taken over with the express purpose of eliminating or improving weak management and poorly performing operational units. The same could occur in government, but the mere act of consolidation does not mean success.

If you replace poor management with more poor management, why would you expect success?

Recent articles have talked about the additional costs that occur when larger organization means higher salaries or more layers.

That means that the first consideration would be that the unit cost of delivering services, at the same or improved levels, can be lowered. If yes, then further consideration is warranted. If no, or not sure, then you might want to stop right there.

The real shame is that in far too many governments, no one has a clue of what thee cost of service is.

Pat Fiorenza

Hi Bob – thanks a lot for your comments. You reminded me of sitting in my budgeting class calculating per-unit costs. Lots of great insights and you highlighted a lot of the complexities surrounding the issues of consolidation.

Timothy Theberge

If small cities and towns understood their cost-pers, most would not have full-time custodial or DPW operations. The cost of idle time is staggering and hides in the budgets. The other major issue is the officer to staff ratio requirements in police and fire operations that are woefully out of date.

Chris Poirier

Being from the north east myself as well, Vermont, I have often begged to ask this question from a public safety position. There are many towns and cities in Vermont and most have some type of Fire Department and/or Police force however usually only a handful of paid employees. (e.g., most everyone have a “police force” though that may literally only be one or two people and in some cases its part time relying entirely on the state police.) Fire is similar though the state is 92.5% volunteer based for fire protection and EMS response. (Not going to get into the volunteer vs. career discussion here..that is a monster in and of itself.)

I have often felt that combining at the county level in the state would free up more tax base and grant dollars from the state and federal government in support of public safety. I also have felt that combining volunteer and career organizations would be ripe for supplying much needed public safety services to more people in the state. Well some things die hard in the north east, but hopefully eye opening disasters like the recent flooding, etc will give way to consolidation discussions and foster a new age of public safety.

Andrew MacLean

I’m a fan of consolidations for some of the reasons already expressed. The biggest barrier IMO is not knowledge of costs but the emotional ties to the existing community – both local history and school athletic programs, for example. It is particularly intrenched in the northeast where many communities are only a few square miles and have separate schools and government operations compared to those in other parts of the country where school districts and government cover much larger geographic and political boundaries.

@ Bob Woods – the difference between a company shutting down a poorly performing division and a community doing the same is that the product or service is easily replaced (or not missed) by another company. Government services, especially public roads and safety, are not as easily replaced – are generally missed – and are by definition tied to a geography. If the best, most efficient, DPW is 2000 miles away, that doesn’t help locally. In businesses it matters far less, in most cases, where they are located.

Jeanne Brown

Consolidation of governments can be cost effective, but often it is not. The comment about higher salaries for those in larger governments is one reason. Another reason in New York, where have many very small governments, is that the part-time officials in these small governments are often paid little or nothing so eliminating their positions saves very little money but results in the residents they represent being less close to the decisions made by the government representing them, in effect, losing representation. A better way, I think, to save tax money in the current environment is to consolidate functions, not the governments themselves. Where there is idle time and waste, consolidate the function through inter-municipal agreement. This both builds a larger, presumable more efficient way to do the particular job and leaves the representation intact.

Pat Fiorenza

Great comments everyone – thanks…I like what you said Jeanne, about maybe not consolidating governments, but consolidating functions. Andrew also pointed out the emotional ties to a community – which I think is a legitimate response and needs to be part of a conversation for consolidation. Most important thing here is that the needs of the community are met. Thanks again for all your comments.

John Westra

Efficiency First > Collaboration Second > Consolidation ONLY When (A + B) < Value Proposition of C!

Consolidation, as Jeanne has pointed out, is not always cost effective. many local government units can and do deliver services in a very cost effective manner. I’m proud to say that Michigan, despite her many challenges, was recently recognized as having one of the most efficient local government structures in the nation. The Michigan Townships Association has published study (click HERE to read) that shows how local government is significantly more efficient than larger government units, at delivering the services people depend on and want.

Improving Local Government Efficiency should be the first priority. Many local government units are run by people who have little or now experience in business process improvement, right-sourcing, LEAN or want to learn anything about it. These elected Supervisors, Clerks and Treasurers as well as old-school staff, need to either upgrade their skills and adopt a LEAN culture or be replaced with those who can make their local government units models of efficiency.

Wherever possible, local government units should Collaborate to reduce costs. Whether its purchasing, technology infrastructure or management, there are a tremendous number of possibilities to gov units to share the burden and leverage their financial and people assets via collaboration.

Consolidation should ONLY be considered, when the gaining government unit is recognized as being significantly more efficient, Lean and collaborative than the unit(s) it would absorb. Making an inefficient machine bigger will NOT reduce costs and in most cases will actually increase them!

Spencer Stern

Great post Patrick. I think consolidation should be investigated. My home state of Illinois has a lot of overlapping responsibilities across different government entities which creates confusion and can be costly.

Pat Fiorenza

@John: Great comments, thanks so much. I think you pointed out the worst case scenario: “Making an inefficient machine bigger will NOT reduce costs and in most cases will actually increase them!” Also liked how you mentioned local governments should collaborate whenever possible, and the need for local government employees to be properly trained to administor the programs they are running. Consolidation is absolutely something that needs to be looked at on a case-by-case basis, as you’ve identified.

@Spencer: Thanks! New York has the same issue, as the article I linked too pointed out. It’s pretty interesting to think about how the fragmentation developed in New York. I took a couple of local government courses in grad school, really enjoyed them.

Karen Purser

Interesting article, and obviously there is no simple answer to the question. Here in Australia we have been asking the same question and the Australian Centre of Excellence for Local Government (ACELG) has prepared a very interesting research paper – Consolidation in Australia – A Fresh Look, which can be downloaded here for anyone who may be interested.http://www.acelg.org.au/program-details.php?pid=1

I should note that I work for ACELG in a gender equity role, but think the report is great.

David Kuehn

Scales of efficiency differ for different types of government services. Specialized functions like health inspections may be more efficient and effective across larger jurisdictions while other functions like primary education appear to be more efficient and effective at smaller scales leaving very large districts such as New York, Chicago, or Los Angeles at a disadvantage. This is one of the primary reasons for states allowing contract services and specialized service districts. An array of overlapping districts based on scale of efficiency may provide better services, on the other hand, the compexity can reduce government transparency and accountability.