Wednesday, October 06, 2010

Consolidation is No Solution


Consolidation is No Solution

By Ronald Williams & Tom Guleff

An urgent message persistently delivered by advocates of Shelby County and City of Memphis consolidation is the claim it would bring cost savings and efficiencies to our taxpayers and government. But, they’ve said very little, if anything, about what those would be, even though the questions have been asked by us regularly for over a year. This began with the “Listening Tours” of Mayor A C Wharton, Myron Lowry and Deidre Malone in the fall of 2009. In fact, the same questions will bring the same answer from proponents today – a deafening silence. We’re being asked to vote for something without knowing the hard facts and data behind the proposal.

There’s a popular theory of government efficiency running around among supporters of consolidation that “bigger-is-better”. In fact, the opposite is typically the case. There’s little to support this theory in the way of information. To the contrary, the available evidence does not show a correlation between local government consolidation and improved efficiency at all. A number of examples show that consolidations intended to save money actually wind up increasing spending.

A poster child city of the advocates for consolidation to compare with Memphis has been Indianapolis, Indiana. Various data were rolled out by RebuildGovernment to “prove” how successful and vibrant the city now was as a result of the merger with the surrounding Marion County. They even hired the mayor to “witness” for them. One statistic cited was the rapidly growing population of the city. In fact, the actual reason for such growth is the very low cost of housing in Louisville, attracting people to move there.

There are many reasons for consolidations failing to bring efficiencies and saving money. Some, such as salary and benefit leveling and service level adjustments tend to simply raise costs to their highest pre-consolidation values. Another reason is the increased size and complexity of a new government and the reduced accountability that occurs. These reasons tend to increase expenditures in the long run.

According to Wendell Cox, noted demographer, Metropolitan areas with consolidated cities, such as Indianapolis, “have not generally produced better results in the more important indicators of income and poverty,” and ….. “Average median household incomes were 6.9 % lower and average poverty rates were 1.3% higher than metropolitan areas without consolidation.”1 Therefore, citizens of Memphis and Shelby County should not necessarily expect to see improvements in these areas, despite what advocates claim.

The city of Indianapolis faces significant financial difficulties. In 2008, the state of Indiana assumed $ 1 billion in retirement liabilities and provided other assistance to the city. If consolidated government were more efficient and cost effective, then these actions wouldn’t be necessary. The city of Memphis finds itself facing nearly the same amount in terms of unfunded retirement liabilities. This will undoubtedly increase the future debt and taxes for younger people. Consolidation didn’t fix the same problem in Indianapolis, why should we expect it to here?

Another example of Indianapolis’ problems is the fact that anticipated savings can disappear even before consolidation is enacted. When the former mayor sought to consolidate county fire departments into the city fire department, a report was produced claiming a $21 million savings would be realized. A later report by the Marion County Consolidation Commission found that the projected savings had been greatly overstated and a more realistic number would be $1.3 million. Undeterred, the city proceeded to sign a labor contract with city firefighters that eventually cost the city an extra $20 million over the next three years, according to a press report.

Many other studies of consolidating local governments have concluded the same thing. For example, the Michigan Township Association commissioned Mr. Cox to provide an analysis on the fiscal impact of consolidating local governments. In his report summary, he stated: “In recent years, government consolidation has become the antidote for everything from urban sprawl to state fiscal crisis. Upon closer examination, however, the truth is evident: Bigger government does not necessarily equate to cost savings. In fact, the opposite is typically the case.” He continues “…townships spend far less for government functions and services – including conducting elections, collecting taxes, operating fire departments and other emergency services, and maintaining parks and recreational facilities – than do cities.” In other cases of cities merging with surrounding areas such as Memphis annexing Cordova, Forest Hills and Raleigh, the city failed to deliver promised new services to the annexed areas but collected their new tax revenue from them. Their intent here is clear – collect the taxes and don’t deliver on promises.

When the decision was made to proceed with writing a new charter for Memphis/Shelby County, government efficiency and cost savings weren’t goals. Instead they depended on the solution - government consolidation - to provide the desired answers without really knowing what the results should be. The decision relied on nothing more than assumptions and rhetoric, probably coming from those with special interests who should know better, with no evidence to support the proposition that government consolidation would improve efficiency and cost. The same is true today.

While consolidation is often portrayed in theoretical before-the-fact rhetoric as more efficient and saving costs, in reality there is little evidence that actual efficiencies and therefore cost reductions occur. The bulk of evidence shows that the impact of consolidation is to make government less efficient and more expensive. The effect of consolidating Memphis with Shelby County will be to spread the higher costs and less efficient practices of the city of Memphis across the even larger area of Shelby County to the detriment of its taxpayers.

Bigger is NOT better. Now, the wishes of the citizens can be made known, as they should have been long ago when this journey began. Vote AGAINST consolidation.

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