A talk to the Annual Meeting of the BC Municipal Finance Authority
local government is not merely a device for supplying municipal services, but also for finding out what services people want and how much they are prepared to pay for them. The smaller the government unit, the better they are at discovering this, because the empirical evidence is very strong that local government is closest to the people.
Amalgamation tends to undermine this relationship and therefore can only really be justified if there are pretty remarkable efficiencies to compensate for dilution of responsiveness and democratic accountability.
But, second, they would have discovered that the evidence is quite strong that creating single-tier local government monopolies doesn’t reduce costs — it increases them. It levels costs up to the highest common denominator in the pre-existing units, and seems to result in higher trends of cost growth over This is especially true where amalgamation has eliminated competition between pre-existing municipalities both in terms of attracting residents and industry and in terms of tax and service levels. It seems that the most dynamic force helping to keep costs down is not a highly centralised and bureaucratic monopoly provider of public services, but a decentralisation of authority and decisionmaking within several municipalities within an urban area where residents cannot vote themselves benefits at the expense of other taxpayers in other parts of the city. This ensures that people only demand services that they’re prepared to pay for, and municipalities have powerful incentives to keep costs low and satisfaction high, or risk the erosion of their tax base as people and businesses vote with their feet.
Third, they would have discovered that it is a fairly small part of public services where there are significant returns to scale — in other words where the bigger you are, the cheaper it is to produce a unit of a given service. The evidence says pretty unambiguously that the lowest observable level of per unit costs for most services are compatible with very small municipal units (on the order of 5,000-10,000 residents). Moreover, there are significant diseconomies of scale beyond relatively small population numbers — on the order of 250,000 residents. And, finally, that the supposed savings from smaller councils and elimination of several city halls and other trappings of multiple local governments, is so paltry as to be not even worth mentioning.
But of course, given the culture of executive personalism that I mentioned, they didn’t consult the literature. Had they done so, they, like California under Ronald Reagan, would likely quickly have abandoned their amalgamation policy.
Crowley's 2009 Red Deer Alberta talk, note: "spend-thrift city centres"
http://www.auma.ca/live/digitalAssets/33/33585_BrianCrowley_09PS.pdf
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