Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 35

City- Consolidation in St. Louis: An Analysis

United States over the past fifty years. These consol- Joshua Hall, PhD idation attempts, and the findings of the scholars that West Virginia University have studied them, can give policymakers some in- Josh Matti, PhD Candidate sight into opportunities for improvement in regional governance and potential pitfalls to avoid. As authors West Virginia University of two recent papers on -county consolidation, we employ our understanding of the literature, combined 1. Introduction with our own original research, to provide citizens and policymakers of St. Louis County with insights The county of St. Louis is one of the most politically and lessons from the academic literature on city- fragmented in the United States. According to Better county consolidation. Together,1 a group in favor of municipal reform in St. Louis County, the county contains ninety municipal We proceed as follows. We begin by summarizing the governments, fifty-seven departments, eighty- theoretical arguments in favor of consolidation in one municipal courts, and forty-three fire . Section 2, followed by the theoretical arguments This political fragmentation has been argued to lead against consolidation in Section 3. Where possible we to a number of problems, including wasteful compe- try to link discussion from the academic literature to tition among local governments, inefficient duplica- arguments made regarding the situation in St. Louis. tion of services, an inability to coordinate efforts Section 4 discusses the empirical literature on city- geared towards regional growth, and a disparity in county consolidation. In Section 5 we provide five services across the county. Many of these complaints lessons for citizens and policymakers in St. Louis regarding the consequences of political fragmentation drawn from our reading of the relevant research. Sec- in St. Louis County are not unique to Missouri, and tion 6 provides some closing comments. the problems of excessive political fragmentation 2. Theoretical Arguments have been discussed in the academic literature for in Favor of Consolidation nearly a hundred years.2 The United States traditionally has had a fragmented In this paper, we aim to bring a discussion of the system of government. Currently, there are nearly scholarly literature to the debate surrounding local 90,000 separate governmental units in the United governance in St. Louis County. In particular, we fo- States.4 With one federal government and fifty state cus our attention on city-county consolidation. We do governments, the fragmentation of governments oc- so for two reasons. First, much of the discussion of curs at the local level. Local political units are divided reform in St. Louis has focused on city-county con- into , , , school dis- solidation.3 Second, city-county consolidation has tricts, and other special districts that serve a specific been a major push in many metropolitan areas of the

Joshua Hall is a Professor of Economics, Department of Eco- 2 Chester C. Maxey, “The Political Integration of Metropolitan nomics, at West Virginia University. Communities,” National Municipal Review 11, no. 8 (1922): Josh Matti is a PhD Candidate in Economics at West Virginia 229-254. University. He is an Assistant Professor of Economics at Geor- 3 Shayndi Raice, “Campaign Asks if St. Louis Area Really gia Gwinnett College. Needs 91 Local Governments,” Wall Street Journal, November Funding for this study was made possible by the Hammond In- 2, 2017. stitute’s Center for Economics and the Environment, Linden- 4 US Census Bureau, Census of Governments (Washington, wood University. DC: Government Printing Office, 2012); I. Vojnovic, “The 1 Better Together, “The Will To Change,” accessed July 2, Transitional Impacts of Municipal Consolidations,” Journal of 2018, http://www.bettertogetherstl.com/studies/will-to-change. Urban Affairs 22, no. 4 (2000): 385-417.

36 | Missouri Policy Journal | Number 8 (Spring/Summer 2019) function, such as police districts. Over the last hun- Another theoretical reason for economies of scale dred years, there has been an increasing push to con- with larger governments comes from spreading the solidate local governments. Policymakers and local fixed costs of government programs across more peo- activists have steadily reduced the fragmentation of ple.6 Services such as power and public transportation through consolidation efforts. Con- are capital intensive and require a large initial invest- current with the real-world changes in local govern- ment. But once built the marginal cost of adding an ment, a body of scholarship in support of consolida- additional user is low. Thus, in smaller governments tion has emerged. Although studied by scholars each citizen will bear a higher fraction of the large across different decades and in different local con- fixed costs of capital intensive services. Their tax bill texts, their arguments in favor of consolidation tend will be higher to cover the cost, or the capital inten- to fall into four categories: efficiency, equity, spillo- sive service will simply not be provided. In a larger vers, and development. This section explores each of government, however, the high fixed costs of capital these four theoretical arguments in favor of consoli- intensive services can be spread across a larger num- dation and draws connections between the theory and ber of people. Thus, each citizen’s tax bill is lower. the specific context of St. Louis. A third way large governments achieve economies of 2.1 Efficiency scale is through removing administrative duplica- tion.7 For example, two small municipalities likely Scholars in favor of consolidation contend that simple have the same administrative structure and types of systems of government are more efficient. A frag- administrative employees: Each is likely mented system of government with overlapping juris- to have its own public works department, zoning dictions is not a simple system. It is complex, and its commission, courts system, etc. Such duplication can complexity can lead to inefficiency. In terms of gov- be wasteful. Rather than duplicated administrative ernment, inefficiency leads to higher costs and poor structures and employees, a consolidated government service provision. Scholars in favor of consolidation can cut operating costs through a single administra- identify several ways in which larger governments tive system with a streamlined number of employees. operate more efficiently. The second efficiency argument for consolidation re- First, larger government can achieve economies of lated to economies of scale is economies of scope. scale. Just as a larger factory can lead to lower aver- Economies of scale are achieved through lower aver- age costs in the private sector, a larger government age costs when providing a larger quantity of a single can theoretically lower average costs of producing service. Economies of scope come from the cost of goods and services in the public sector. With econo- providing a diversified set of services within a single mies of scale, larger governments can provide ser- government being less than the cost of several spe- vices at a lower per unit cost. A related, but different cialized governments providing the same services.8 mechanism can occur through bulk purchasing. A For example, rather than separate dispatch centers for larger organization can reduce costs because of police and fire departments, a unified dispatch center 5 greater purchasing power. The principle is simple: for police and fire departments would be more effi- Sam’s Club is cheaper than Walmart. Just as buying cient. in bulk saves money for households, buying in bulk can lead to lower costs for governments, the savings The third efficiency argument for consolidation of which can be passed along to taxpayers. comes from a careful study of what the nature of frag- mented government in the United States is like. Of the approximately 90,000 governments in the United

5 George A. Boyne, “Local Government Structure and Perfor- 7 Robert F Adams, “On the Variation in the Consumption of mance: Lessons from America?” Public Administration 70, no. Public Services,” Review of Economics and Statistics 47, no. 4 3 (1992): 333-357. (1965): 400-405. 6 Elinor Ostrom, “Metropolitan Reform: Propositions Derived 8 Shawna Grosskopf and Suthathip Yaisawarng, “Economies of from Two Traditions,” Social Science Quarterly 53, no. 3 Scope in the Provision of Local Public Services,” National Tax (1972): 474-493. Journal 43, no. 1 (1990): 61-74.

Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 37

States, over half are school districts or other types of from a plethora of special districts, however. Con- special districts.9 Special districts are designed to sider the case of citizens living in an area where the achieve efficiency through their focus on providing a public utility company is inefficient. Moving because single service, such as fire, police, public utilities, and of one poorly provided service is unlikely, especially housing authorities. Although special districts could if other special districts, such as a school , po- be efficient, special districts can be controlled by spe- lice department, and fire department, operate effi- cial interest groups. With a focus on a single issue, ciently. With less of a threat of moving, special dis- special districts tend to be less politically visible, al- tricts face less competition, and the lack of competi- lowing groups with a vested interest in a specific issue tion can erode efficiency. to exert greater influence.10 For example, teachers are more than twice as likely to vote in Efficiency arguments for consolidation have been elections as other registered voters.11 Special interest prominent among scholars over the last hundred influence erodes efficiency as policy is shaped to suit years. Efficiency also has been part of the debate over special interest rather than the more general public in- St. Louis city-county consolidation. Those in favor of terest. consolidation have felt a general sense that fragmen- tation is unnecessarily complicated. Two reports have Additionally, special districts can result in higher provided specific examples that support the general costs because they face less competition. In the mar- sentiment of consolidation as efficiency-enhancing. ketplace, more competition leads to lower costs and One report, conducted by The PFM Group in 2011, higher quality. The same is true with government. estimated the efficiency gains from a variety of col- More competition can lead to lower costs of operation laboration possibilities between the City of St. Louis and thus lower taxes and better service provision. and St. Louis County.14 The other report, conducted However, different types of special districts are not in by the pro-consolidation group Better Together, ar- competition with one another.12 For example, a gues for consolidation for a variety of reasons, includ- school district and a public utility company may op- ing efficiency.15 Although not referenced in either re- erate in the same geographic area, but they provide port, the arguments in each are related to the scholarly different services and are therefore not competitors. body of research in favor of consolidation. Another way special districts lack competition is with The research argues that economies of scale exist in the high cost of moving to another jurisdiction be- larger governments because of lower input prices due cause of one service provision.13 For example, if all to greater bargaining power,16 removing administra- services are provided by a municipal government and tive duplication,17 and spreading fixed costs across a the municipal government in doing a poor job of larger number of citizens.18 Each reason also has been providing all the services, citizens may relocate to a voiced within the St. Louis consolidation context. municipality with better governance. Governments With greater purchasing power through consolida- face competition because the threat of losing citizens tion, a unified St. Louis would save money on insur- through migration to other municipalities. The threat ance and raw materials, such as asphalt and salt.19 For of moving is muted when citizens receive services example, The PFM Group estimates $2 million in

9 US Census Bureau, Census of Governments. 13 Boyne, “Local Government Structure and Performance.” 10 Christopher Berry, “Piling On: Multilevel Government and 14 PFM Group, City of St. Louis and St. Louis County Intergov- the Fiscal Common Pool,” American Journal of Political Sci- ernmental Collaboration Study, Technical Report (2011). ence 52, no. 4 (2008): 802-820. 15 Better Together, “The Will To Change.” 11 Terry M. Moe, “Political Control and the Power of the 16 Boyne, “Local Government Structure and Performance.” Agent,” Journal of Law, Economics, and Organization 22, no. 17 Adams, “On the Variation in the Consumption of Public Ser- 1 (2006): 1-29. vices.” 12 Randall W. Eberts and Timothy J. Gronberg, “Can Competi- 18 Ostrom, “Metropolitan Reform.” tion Among Local Governments Constrain Government Spend- 19 PFM Group, City of St. Louis and St. Louis County Intergov- ing? Economic Review 24, no. 1 (1988): 2-9; Berry, “Piling ernmental Collaboration Study. On.”

38 | Missouri Policy Journal | Number 8 (Spring/Summer 2019) savings each year from merging insurance plans for cost-effective way. However, consolidated govern- public employees. ment could afford dedicated heavy rescue squads and hazmat teams. In line with Adams,20 achieving greater administra- tive efficiency has been prominent in the St. Louis 2.2 Equity consolidation debate. With 684 local elected officials (more than Congress) across the and the de- Arguments in favor of consolidation based upon eq- partments they oversee, there is substantial potential uity considerations fall into two categories. First, for reducing administrative duplication.21 For exam- fragmentation acts as an institutional barrier that ple, one suggestion has been to centralize the process helps promote racial segregation and wealth dispari- 26 of hiring and training new employees, particularly in ties. In this theory, Hill elites use zoning restrictions the area of healthcare.22 More streamlined hiring and to prevent poorer residents from living in their juris- training means fewer administrators and offices are dictions. The result is enclaves of wealthy, white sub- needed. Besides specific ways of reducing admin- urbanites and pockets of poverty in minority jurisdic- istration costs, Better Together23 compares St. Louis tions, both in the central city and in older inner-ring to similar areas that have consolidated their govern- suburbs. A vicious cycle of racial and wealth discrim- ments. They find that the merged Louisville-Jefferson ination arises as fragmentation reinforces preferences County government has 41 percent lower per capita for separation along these two dimensions. Frag- administration costs than in St. Louis. While many ar- mented governments can more easily operate along gue for greater administrative efficiency through con- racial and wealth dimensions. With greater separa- solidation, some remain skeptical. Greenblatt casts tion, trust and sympathy among different races and doubt on the magnitude of savings possible by merg- wealth classes declines, which leads to even greater ing the small municipalities in the county.24 The small desires to formally separate society into local jurisdic- 27 municipalities, those with 6,000 residents or less, only tions comprised of homogeneous residents. account for 4 percent of all metropolitan spending The second set of theoretical arguments for consoli- across the county. dation based on equity concerns pertains to the Tie- 28 Consistent with Ostrom, Better Together has identi- bout model. The Tiebout model is often framed in fied ways in which the current fragmented system terms of enhancing efficiency. Rather than people fails to provide capital-intensive services effi- sorting into different jurisdictions based upon the ef- ciently.25 An example is the small fire departments ficiency of local governments, people instead sort into across the county that currently cannot afford heavy different jurisdictions based upon racial and wealth rescue squads or hazmat teams. Individual municipal- dimensions. Lifestyle preferences divide people into 29 ities simply are not large enough to spread the fixed different social worlds, so that sorting into local ju- costs of the expensive equipment required for heavy risdictions is not about efficiency but instead about 30 rescue squads or hazmat teams across its citizens in a maintaining lifestyles. This results in racial segrega- tion and wealth inequality across local jurisdictions.

20 Adams, “On the Variation in the Consumption of Public Ser- 26 Richard C. Hill, “Separate and Unequal: Governmental Ine- vices.” quality in the Metropolis,” American Political Science Review 21 Better Together, “The Will To Change.” 68, no. 4 (1974): 1557-1568. 22 PFM Group, City of St. Louis and St. Louis County Intergov- 27 David Lowery, “A Transactions Costs Model of Metropoli- ernmental Collaboration Study. tan Governance: Allocation versus Redistribution in Urban 23 Better Together, “The Will To Change.” America,” Journal of Public Administration Research and The- 24 Alan Greenblatt, “Consolidation Makes Sense, Yet Few Cit- ory 10, no. 1 (2000): 49-78. ies Have the Urge to Merge,” Governing, October 2017, ac- 28 Charles M. Tiebout, “A Pure Theory of Local Expenditures,” cessed July 2, 2018, http://www.governing.com/top- Journal of Political Economy 64, no. 5 (1956): 416-424. 29 ics/mgmt/gov-consolidation-local-governments.html. Oliver P. Williams, “Life Style Values and Political Decen- 25 Better Together, “The Will To Change.” tralization in Metropolitan Areas,” Southwestern Social Science Quarterly 48, no. 3 (1967): 299-310. 30 Lowery, “A Transactions Costs Model of Metropolitan Gov- ernance.” Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 39

Consolidation breaks down the jurisdictional barriers As has been the case with other city-county consoli- that sort people into different social worlds. dations, equity concerns are a primary motivation be- hind the push for consolidation in St. Louis. In both The Tiebout model also can explain why large-scale the historical and contemporary calls for consolida- income redistribution programs are not likely at the tion in St. Louis, equity has been a relevant factor. local level. In the Tiebout model, local jurisdictions Consistent with Hill,34 the initial separation between compete with each other for tax revenue sources (res- St. Louis County and the City of St. Louis was headed idents and businesses). Since high-income earners by businesses and land-owning elites.35 They wanted 31 and businesses are highly mobile and are the largest low taxes and a greater ability to generate wealth with sources of tax revenue, Tiebout competition prompts less government interference. local jurisdictions to underprovide redistributive ser- vices.32 While poor households would prefer more re- Consistent with Lowery,36 over time the separation of distributive services, with fragmented governments the city and county has fostered mistrust. Previous they can be more easily neglected as local jurisdic- failed attempts to reunite St. Louis governments have tions cater to businesses and wealthy residents. occurred in part because either the city or county felt like the other side was getting the better end of the When Tiebout competition functions, inequality of bargain and would become too powerful.37 For exam- income, wealth, and/or outcomes is the result. People ple, with the 1987 consolidation proposal, one mayor often sort into different jurisdictions (e.g., school dis- wondered if consolidation was “a secret, sinister plan trict) based upon race and income rather than govern- in the works that would … dismantle all headed ment efficiency. Even if jurisdictions are similar in by black elected officials in St. Louis County?” One incomes, deviations in preferences for locally pro- reason why consolidation has been difficult to vided goods such as education can lead to inequality achieve in the past is because of mistrust across juris- of outcomes. Local jurisdictions cater to businesses diction lines that is exacerbated by racial and income and wealthy elites rather than poor households. How- differences. ever, if the Tiebout model fails to function, the result can be even greater inequality. The exit of businesses Equity has been a concern historically, but it is also a and wealthy residents can leave behind jurisdictions concern with the current consolidation push in St. with a limited tax base from which even the most Louis. Better Together38 documents many of the dis- basic services will be underprovided.33 Consolidation parities in service provisions across municipalities in reduces equity concerns by drawing people out of St. Louis County. The disparities tend to run along ra- their homogenous racial and income-based bubbles cial lines. It also describes the service provision dis- into a more unified, equitable jurisdiction. parity across two municipalities: Des Peres and Pine Lawn. Des Peres has a population that is 94.3 percent white, with a median household income of $116,000.

31 Joshua C. Hall, “Fiscal Competition and Tax Instrument 35 Richard Bose, “Summary of ‘City-County Reorganization Choice: The Role of Income Inequality,” Economics Bulletin 8, Attempts According to Fragmented by Design’ by E. Terrence no. 12 (2006): 1-8; Joshua Hall and Justin M. Ross, “Tiebout Jones,” NextSTL, February 22, 2014, accessed July 2, 2018, Competition, Yardstick Competition, and Tax Instrument https://nextstl.com/2014/02/summary-attempts-city- Choice: Evidence from Ohio School Districts,” Public Finance county-reorganization-according-fragmented-design-e- Review 38, no. 6 (2010): 710-737. terrence-jones/. 32 Benedict S. Jimenez, “Separate, Unequal, and Ignored? Inter- 36 Lowery, “A Transactions Costs Model of Metropolitan Gov- jurisdictional Competition and the Budgetary Choices of Poor ernance.” and Affluent Municipalities,” Public Administration Review 74, 37 Bose, “Summary of ‘City-County Reorganization At- no. 2 (2014): 246-257. tempts;’” E. Terrance Jones, “Toward Regionalism: The St. 33 Michael Howell-Moroney, “The Tiebout Hypothesis 50 Louis Approach,” Saint Louis University Public Law Review Years Later: Lessons and Lingering Challenges for Metropoli- (2014): 103-126. tan Governance in the 21st Century,” Public Administration 38 Better Together, “The Will To Change.” Review 68, no. 1 (2008): 97-109. 34 Hill, “Separate and Unequal.”

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Residents enjoy amenities such as a high-end recrea- with smaller spillovers are more likely. With tional facility and zero-price trash and leaf collection. negative spillovers, public goods are overproduced; On the other extreme is Pine Lawn, with a population with positive spillovers, public goods are underpro- that is 97.7 percent black and a median household in- duced. And in cases such as air pollution programs come of $26,632. The municipality can no longer af- where the benefits are spread widely across a region ford a police department and restricted operating while the costs are concentrated, the public good may hours at a newly built park because of safety con- simply not be provided.41 cerns. According to Better Together, these two mu- nicipalities highlight the service provision disparities With fragmented government, the problem of spillo- that operate according to wealth and race. vers will be exacerbated. The solution is simple: ex- pand the size of the jurisdictional boundaries. Larger, 2.3 Spillovers consolidated governments can overcome spillovers by drawing jurisdictional boundaries coterminous Research has not only identified efficiency and equity with the area enjoying the benefits and bearing the as key benefits of larger, consolidated governments, costs of the public good.42 With larger jurisdictions, but also the ability of larger jurisdictions to internalize the costs and benefits of a project are contained within externalities; that is, the benefits or costs of activity in the region. In theory, the larger jurisdiction reduces one region that may spill over into other jurisdictions. spillovers, and public goods would be provided at the 39 Solé-Ollé identifies two types of spillovers. “Bene- socially optimal level. fit spillovers” result from public goods produced in one jurisdiction being used in other jurisdictions. A A primary motivation behind consolidation in St. radio or TV broadcast produced within one munici- Louis is related directly to the effects of spillovers. St. pality that are enjoyed by residents of other munici- Louis municipalities engage in tax exporting. Rather palities is an example of a benefit spillover. “Crowd- than taxing their own residents, municipalities create ing spillovers” result from citizens of one jurisdiction negative spillovers by attempting to have residents crowding into the public goods of another jurisdic- from other municipalities finance government in their tion. Recreational facilities, such as parks in one mu- area. It is a politically expedient maneuver as citizens nicipality that become crowded by commuters and in the municipality enjoy a lower tax bill. However, visitors from other municipalities, is a type of crowd- from a regional perspective, it is not optimal because ing spillover. This theory identifies why fragmenta- it can lead to expenditures that are out of line with tion exacerbates spillovers and how consolidation can voter preferences, since part of the cost of public ser- help contain spillovers. vices are borne by non-residents of an area. It also tends to orient government activity towards encour- 40 Williams explains how fragmentation creates spill- aging development towards larger projects that attract over problems. Local government leaders make deci- visitors and thus leads to more tax exporting. sions based upon the costs and benefits to their con- stituents. When evaluating policy, they do not con- Better Together43 identifies two ways in which tax ex- sider societal costs and benefits. If there is negative porting operates across St. Louis municipalities. First, spillover affecting residents outside of their jurisdic- municipalities battle over sales tax revenue. Local tion, government leaders often do not take these ex- sales taxes have been legal in Missouri since 1969. ternal costs into account. Thus, there will be an over- Over time municipalities adopted specific local sales provision of the public good in one jurisdiction be- taxes to such an extent that sales tax revenue is the cause the costs accruing to other jurisdictions is not largest source of funding for sixty-nine of St. Louis’s part of the local decision-making process. Fragmen- ninety-two municipalities. In contrast, nationally it is tation exacerbates the problem of spillovers, because property taxation that is the primary source for local

39 Albert Solé-Ollé, “Expenditure Spillovers and Fiscal Interac- 41 Richard D. Gustely, “The Allocational and Distributional Im- tions: Empirical Evidence from Local Governments in Spain,” pacts of Governmental Consolidation: The Dade County Expe- Journal of Urban Economics 59, no. 1 (2006): 32-53. rience,” Urban Affairs Review 12, no. 3 (1977): 349-364. 40 Alan Williams, “The Optimal Provision of Public Goods in a 42 Adams, “On the Variation in the Consumption of Public Ser- System of Local Government,” Journal of Political Economy vices.” 74, no. 1 (1966): 18-33. 43 Ibid. Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 41 government revenue. They also explain how the sys- jurisdictional lines would better contain the costs and tem may look appealing to an individual municipality, benefits.49 but is actually destructive for the region: “raising taxes on your own citizens is politically unpopular, 2.4 Development while attracting retail and spreading the cost burden Three reasons have been identified for why consoli- across a million potential customers levies an indirect dation can increase economic development in a re- tax on a far greater pool of people, many of whom do gion. First, consolidation increases comprehensive not have a vote in that municipality’s local elec- planning capacity.50 Larger governments can justify a tions.”44 Reflecting the concerns of Williams,45 bene- specialized department focusing on development. Ad- fits from government programs go to citizens of a mu- ditionally, rather than smaller governments compet- nicipality while the costs are borne by those outside ing with one another to increase development only in of the municipality. their jurisdiction, larger governments facilitate coop- Municipalities attempt to export taxes by increasing eration to maximize development across the broader their sales taxes and expanding their sales tax base. region. The battle over sales tax revenue has led to the ineffi- Second, consolidation simplifies the regulatory pro- cient use of Tax Increment Financing (TIF). TIF plans cess. With a single department to deal with, business typically offer tax benefits to attract businesses to lo- activity comes with less uncertainty and fewer costs cate in a particular region. Given the small size of St. of doing business. As Feiock and Carr point out, with Louis municipalities, TIF has been used not to attract a unified development department in a consolidated new businesses into the St. Louis region, but to entice government, businesses do not have to deal with ob- a business to relocate from one municipality to an- taining permits from multiple agencies, but only a sin- other.46 This benefits the municipality that attracts the gle department.51 By simplifying the regulatory pro- business and new tax base but at the expense of an- cess, consolidated governments foster business ex- other municipality from which the business fled. pansion. Sales tax exporting is not consistent with Adams,47 because jurisdictional boundaries do not contain costs Third, consolidation enables large regional develop- and benefits. ment projects. Consolidation leads to a large resource base that enables bigger projects to be financed.52 Pro- The second way St. Louis municipalities engage in jects such as mass transit systems and sports stadiums tax exporting is through municipal fines and fees. are regional in nature and are best financed through a Better Together argues that in municipalities that can- regional consolidated government. This is because if not generate sufficient revenue through local sales the benefits of a development project extend beyond taxes, fines and court fees are used as revenue sources the boundaries of a jurisdiction but the costs are borne instead. In 2009 a large shopping center in the munic- within the jurisdiction, then projects that are socially ipality of St. Ann closed. In response, St. Ann signif- optimal will not be undertaken.53 For example, a sole icantly increased traffic citations, and over the next municipality is unlikely to invest in a sports stadium four years, revenue from municipal fines and fees in- because the municipality would bear the full cost creased fourfold. Once again, local leaders considered while the benefits of being able to attend games or only the costs and benefits to their citizens;48 larger

44 Better Together, “The Will To Change,” 5. 51 Richard C. Feiock and Jered B. Carr, “A Reassessment of 45 Ibid (1966). City/County Consolidation: Economic Development Impacts,” 46 Better Together, “The Will To Change.” State and Local Government Review 29, no. 3 (1997): 166-171. 47 Ibid. 52 Ibid. 48 Williams, “The Optimal Provision of Public Goods.” 53 Richard C. Feiock, Melvin Dubnick, and Jerry Mitchell, 49 Adams, “On the Variation in the Consumption of Public Ser- “State Economic Development Policies and National Economic vices.” Growth,” Public Administration Quarterly (1993): 55-67. 50 Arnold Fleischmann and Gary P. Green, “Organizing Local Agencies to Promote Economic Development,” The American Review of Public Administration 21, no. 1 (1991): 1-15.

42 | Missouri Policy Journal | Number 8 (Spring/Summer 2019) watch on TV would extend beyond the boundaries of makes it costly (and difficult) for business owners to the municipality. effectively establish and operate businesses across multiple municipalities in the St. Louis area. Second, Each of the theoretical reasons outlined above has most of the small municipalities simply do not have a surfaced in the St. Louis consolidation debate. Con- dedicated development division to adequately deal 54 55 sistent with Fleischmann and Green, Gordon with business licenses and other requests from busi- points out that the small municipalities in the St. nesses. Louis area compete with each other from the same pool of state government funding. With consolida- Consolidation should enable large regional develop- tion, the municipalities could cooperate to receive a ment projects.60 Support for consolidation in line with higher level of state development funds. In addition the theory has surfaced in the St. Louis debate. In a to competing over state funding, St. Louis municipal- December 2017 newspaper interview, the president of ities also compete for businesses. Rather than eco- the St. Louis Blues hockey team argued that the diffi- nomic development to attract businesses from outside culty in securing financing for upgrades to the soccer the region, municipalities are using economic devel- stadium and ice hockey arena stemmed directly from opment to attract businesses from neighboring munic- government fragmentation.61 The difficulty of financ- ipalities.56 It is a zero-sum game. When one munici- ing large development projects extends beyond sports pality wins, another loses. facilities. Better Together62 argues that the existing municipalities are too small to enter the capital debt Comprehensive planning at the regional level would market to invest in basic development projects, such be a positive-sum game. Attracting new businesses as the improvement to roads and bridges. from other metro areas to St. Louis benefits the whole region. This competition with other regions rather 3. Theoretical Arguments Against Consolidation than local competition has also been part of the debate in St. Louis. Lyda Krewson, the mayor of St. Louis, There is a tradition of fragmented government in the contends that municipalities are arguing over in United States. Given strong sentiments among Amer- which local municipality a new project should locate ican citizens, it is not surprising that since 1815 only rather than thinking about how to compete with other 39 out of 166 proposed city-county consolidations metro areas.57 have been implemented successfully through a popu- lar vote.63 But the arguments against consolidation are The theoretical literature also suggests that the regu- not only felt by citizens: they have also been worked latory complexity that accompanies fragmentation is out by scholars over the last hundred years. Just like bad for business.58 The current regulatory systems in the arguments for consolidation, the theoretical argu- the area are highly complex and inefficient. Better To- ments against consolidation fall into four categories: gether59 has identified two problems with the status efficiency, equity, spillovers, and development. This quo. First, across the region, there are over ninety dif- section explores the research opposing consolidation ferent ways of obtaining a business license. Different licensing requirements across different municipalities

54 Ibid. 59 Ibid. 55 Colin Gordon, “Patchwork Metropolis: Fragmented Govern- 60 Feiock et al., “State Economic Development Policies;” ance and Urban Decline in Greater St. Louis,” Saint Louis Uni- Feiock and Carr, “A Reassessment of City/County Consolida- versity Public Law Review (2014): 51-71. tion.” 56 Ibid; Better Together, “The Will To Change.” 61 Brian Kelly, “Blues President Calls For St. Louis Govern- 57 Jo Mannies, “New Talk of City-County Merger Appears to ment Consolidation,” CBS St. Louis, December 11, 2017, ac- Energize Both Sides,” St. Louis Public Radio, December 11, cessed July 2, 2018, https://stlouis.cbslo- 2017, accessed July 2, 2018, http://news.stlpublicra- cal.com/2017/12/11/blues-president-calls-for-government-con- dio.org/post/new-talk-city-county-merger-appears-energize- solidation/. both-sides#stream/0. 62 Ibid. 58 Feiock and Carr, “A Reassessment of City/County Consoli- 63 Lawrence L. Martin and Jeannie H. Schiff, “City-County dation;” Jered B. Carr and Richard C. Feiock, “Metropolitan Consolidations: Promise versus Performance,” State & Local Government and Economic Development,” Urban Affairs Re- Government Review 43, no. 1 (2011): 167-177. view 34, no. 3 (1999): 476-488. Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 43 in each of these four areas. As before, we draw con- remote regions.66 A snow plow covering a region with nections between the research and the current debate a radius of 10 miles uses less fuel than a snow plow in St. Louis. covering a region with a radius of 20 miles. Addition- ally, a single larger jurisdiction may be efficient for 3.1 Efficiency some services but not for others. There are different optimal sizes for public goods provision.67 A school Scholars skeptical of the efficiency gains of consoli- district may be more efficiently provided at a highly dation have developed theories demonstrating the in- local level while a public utility company may operate efficiency of larger, consolidated governments. The more efficiently at a regional level. Providing all ser- arguments fall into one of three categories: A frag- vices at the same geographic level eliminates the pos- mented system of government: helps keep costs sibility of providing all services efficiently. down; benefits from increased competition; and most effectively provides what citizens want out of their lo- In terms of competition, there also are three reasons cal governments. for why larger, consolidated governments are theo- rized to be less cost-effective. First, “voting with your There are three reasons for why larger, consolidated feet” is costlier in larger, consolidated governments.68 governments are theorized to be less cost-effective. At the local level, if citizens are dissatisfied with gov- First, it is difficult to discern what the costs and ben- ernment in their municipality, they could vote with efits of any single service is if services are bundled.64 their feet by moving to another municipality. The If all local government services from public utilities threat of citizen migration incentivizes local govern- to parks departments were bundled together, it would ments to operate efficiently. However, at larger geo- be difficult to know what value to the individual each graphic levels, voting with your feet is costlier: Mov- service is providing. This leads to less public scrutiny ing to another state likely means leaving behind fam- over local service-provision, which reduces any in- ily, friends, and employment, unlike with moving to centives to keep costs down. an adjacent municipality. Second, with larger governments comes more com- Second, even if citizens do not move away from ju- plexity. Rather than a streamlined bureaucracy such risdictions with bad governance, competitive pres- as might be found with a smaller governmental unit sures still exist through voice69 and “yardstick” com- (think small ), consolidation can increase admin- petition.70 Citizens can voice their frustrations in town istrative costs as more hierarchical structures lead to hall meetings at the local level and propose alternative “bureaucratic congestion.”65 Having a dozen smaller policies. Through yardstick competition, citizens can bureaucracies is not necessarily less efficient than a compare their local government to nearby local gov- single, larger bureaucracy when it comes to dealing ernments. with a specific, local issue. Coordination among ad- ministrators may break down as the system becomes With a special district, such as a school district, a cit- too complex. izen can easily evaluate how their school district com- pares to a nearby school district. If their school district Third, providing services across larger geographic ar- is underperforming, they could vote against incum- eas is not necessarily more efficient. One simple rea- bent school board members in the next election. With son is that costs increase when servicing outer, more

64 Boyne, “Local Government Structure and Performance.” 68 Jeffrey S. Zax, “Is There a Leviathan in Your Neighbor- 65 Vincent Ostrom, Charles M. Tiebout and Robert Warren, hood?” American Economic Review 79, no. 3 (1989): 560-567. “The Organization of Government in Metropolitan Areas: A 69 Albert O. Hirschman, Exit, Voice, and Loyalty (Cambridge, Theoretical Inquiry,” American Political Science Review 55, MA: Harvard University Press, 1970). no. 4 (1961): 831-842; Boyne, “Local Government Structure 70 Timothy J. Besley and Anne C. Case, “Incumbent Behavior: and Performance.” Vote Seeking, Tax Setting and Yardstick Competition,” Ameri- 66 Boyne, ibid. can Economic Review 85, no. 1 (1995): 25-45. 67 Ostrom, Tiebout and Warren, ibid.; Robert Bish and Robert Warren, “Scale and Monopoly Problems in Urban Government Services,” Urban Affairs Review 8, no. 1 (1972): 97-122.

44 | Missouri Policy Journal | Number 8 (Spring/Summer 2019) fragmentation comes easier and more comparisons, or nation-wide problems. And once informed, it is which allows citizens to better understand the relative generally easier to communicate with local politicians performance of their governments and reward or pun- than it is with state or federal elected officials. Better ish politicians accordingly.71 informed, more vocal citizens are more likely to hold local governments accountable. Third, competition keeps local government budgets in check. Theory suggests that bureaucrats are budget- Third, with fragmented services, citizens are able to maximizers72 and governments are revenue-maximiz- precisely express their preferences for a particular ers.73 Without competition through fragmentation, lo- service.76 For example, if citizens pay a fee specifi- cal governments have incentives to continue to grow cally for waste removal, they can clearly determine their budgets through tax increases without increasing whether the fee is worth the service provided. Citizens service quality. Just as monopolies in the marketplace get the services they want and do not get the services lead to higher prices and lower quality, government that they do not want. There is no “full line forcing” monopoly leads to higher taxes and worse service where citizens pay one fee for a bundle of services, provision.74 Competition makes governments directly regardless of whether they value each service.77 With accountable for relative increases in taxes or reduced larger, consolidated governments, citizens have a service quality. harder time evaluating the value of each service and may be forced into paying for a service that they do In terms of providing citizens what they want out of not value. This is inefficient because citizens do not their local government, there are three reasons for get what they want. why larger, consolidated governments are theorized to be less efficient. First, the Tiebout model of com- Although the cost and competition arguments for petition (voting with your feet) is framed as a way of fragmentation are not features of the St. Louis consol- solving the preference revelation problem of public idation debate, citizens getting what they want out of goods. In the marketplace, people “reveal their pref- local government is a key aspect of the debate. Jones78 erences” for a good based upon whether they are will- argues that St. Louis residents value having cosmo- ing to purchase the good or not. With government, politan amenities nearby but with the small-town feel however, it is difficult to determine how much people that comes from small municipal governments. As the really value the services they are receiving since they Tiebout model suggests, migration into these smaller are typically financed through taxes rather than user municipalities has revealed a preference for small fees. But in the Tiebout model, moving or not moving municipal governments. is a market-like test that reveals people’s preferences for public goods. With more local governments there Another example pertaining to citizen preferences is more variety with public goods, thus enabling citi- comes from the failed consolidation attempt of five 79 zens to reveal and enjoy the public goods they desire fire departments in the center of St. Louis County. by moving between municipalities. One of the municipalities, Rock Hill, dropped out of the consolidation because their spending for fire pro- Second, citizens are likely to be better informed and tection would have increased from $75,000 to heard at the local level.75 Citizens find it easier to $100,000. Consistent with Boyne,80 consolidating learn about issues happening in their town than state

71 Pierre Salmon, “Decentralisation as an Incentive Scheme,” 77 Boyne, “Local Government Structure and Performance;” Oxford Review of Economic Policy 3, no. 2 (1987): 24-43. George A. Boyne, “Public Choice Theory and Local Govern- 72 William A. Niskanen, “Bureaucrats and Politicians,” Journal ment Structure: An Evaluation of Reorganisation in Scotland of Law and Economics 18, no. 3 (1975): 617-643. and Wales,” Local Government Studies 23, no. 3 (1997): 56-72. 73 Geoffrey Brennan and James M. Buchanan, The Power to 78 Ibid. Tax: Analytic Foundations of a Fiscal Constitution (Cam- 79 Tony Messenger, “Ellisville Mayor Who Rode Regionalism bridge, MA: Cambridge University Press, 1980). to Power Turns Against It,” St. Louis Post-Dispatch, July 30, 74 Bish and Warren, “Scale and Monopoly Problems.” 2017, accessed July 2, 2018, https://www.stlto- 75 Ostrom, Tiebout, and Warren, “The Organization of Govern- day.com/news/local/columns/tony-messenger/messenger-ellis- ment in Metropolitan Areas.” ville-mayor-who-rode-regionalism-to-power-turns-against/arti- 76 Bish and Warren, “Scale and Monopoly Problems.” cle_4e2cc9ac-5615-5a14-8257-ce3f3b706e82.html. 80 Ibid. Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 45 specific services rather than having one large consol- wealthy residents, poor residents may see their tax idation enables citizens to better determine the value dollars being used to finance public projects that are of the services they are receiving. Those in Rock Hill lower priorities for the community, such as a reno- could easily weigh the costs and benefits and decided vated opera house or light rail to a major shopping to forgo consolidation. However, with a single, area. Since poor residents typically have less political county-wide consolidation of all services, it would be power, they are likely to see their tax dollars benefit- difficult to evaluate the value of each service. This ting wealthier, more politically powerful residents.83 tends to drive up the costs of municipal services. This problem can be avoided by not consolidating. Although within the consolidation debate in St. Louis Another concern with consolidation negatively im- arguments have emerged supporting fragmented gov- pacting poor or minority residents is the loss of mi- ernment because of efficiency, Better Together raises nority public officials. Citizens care about racially concerns about local political participation. Ostrom, representative public officials,84 and this is easier to Tiebout, and Warren81 theorize that at the local level achieve in smaller jurisdictions where minority popu- citizens are better informed and better able to voice lations have voting power. Within larger jurisdictions concerns. Citizens keep elected officials accountable public officials are less likely to be racially repre- and can meet with local officials to have their voices sentative as minority voting strength is diminished.85 heard. The second equity argument against consolidation is Better Together finds that many of the small munici- that consolidation is not the only way to address eq- pal governments in St. Louis County have part-time uity concerns. There are more efficient ways, one be- staff with limited office hours. This makes it difficult ing state and federal redistribution programs.86 Local to meet with local representatives. Additionally, Bet- governments typically have not been involved with ter Together argues that with so many municipalities, redistribution as areas with mobile tax bases limit re- the media does not hold elected officials accountable. distribution attempts.87 With the media’s focus on larger jurisdictions, it is actually more difficult for citizens to be informed Local governments, even when aggregated up to the about their local government. county-level, are generally less efficient at operating redistribution programs than larger governments. 3.2 Equity There is an optimal level of government for each ser- vice, and redistribution services tend to operate best The theoretical arguments against consolidation at higher level of governments. based on equity grounds rest upon two ideas. First, consolidated governments may not act in the best in- Another way to address equity without consolidation terest of poor or minority residents. In smaller juris- is through the use of special districts. Special districts dictions with a majority of poor and racial minorities, covering multiple jurisdictions can provide both rich residents can vote to get the services they demand and poor residents with the same service quality.88 most.82 Mixed into a larger jurisdiction dominated by Equity concerns are valid, but the theory suggests that

81 Ibid. Symbols: The Attitudinal Dimension of Black Political Incor- 82 Elinor Ostrom, “The Social Stratification-Government Ine- poration in Local Government,” American Journal of Political quality Thesis Explored,” Urban Affairs Review 19, no. 1 Science 51, no. 1 (2007): 17-33. (1983): 91-112. 85 Joseph F. Zimmerman, “Metropolitan Reform in the US: An 83 Roger B. Parks and Ronald J. Oakerson, “Regionalism, Lo- Overview,” Public Administration Review 30, no. 5 (1970): calism, and Metropolitan Governance: Suggestions from the 531-543. Research Program on Local Public Economies,” State & Local 86 Elinor Ostrom, “The Social Stratification-Government Ine- Government Review 32, no. 3 (2000): 169-179. quality Thesis Explored.” 84 Mancur Olson, “The Principle of ‘Fiscal Equivalence’: The 87 Michael Craw, “Caught at the Bottom? Redistribution and Division of Responsibilities Among Different Levels of Gov- Local Government in an Era of Devolution,” State and Local ernment,” American Economic Review 59, no. 2 (1969): 479- Government Review 47, no 1 (2015): 68-77. 487; Melissa J. Marschall and Anirudh V. Ruhil, “Substantive 88 Parks and Oakerson, “Regionalism, Localism, and Metropol- itan Governance.”

46 | Missouri Policy Journal | Number 8 (Spring/Summer 2019) consolidation can worsen inequality and that inequal- The result for the St. Louis region would be even ity can be solved more effectively through means be- greater inequality. sides consolidation. 3.3. Spillovers Concerns about a loss of equity from consolidation has been part of the discussion in St. Louis. The pri- Although theoretical arguments exist for how consol- mary organization pushing for consolidation, Better idation can solve spillover problems, there are ways Together, is well aware of how equity concerns could for smaller local governments to overcome spillovers. prevent consolidation from gaining approval. In Sep- First, in the case of a local government providing a tember 2017, a board member of Better Together, Dr. public good with a positive spillover, grants from Will Ross, wrote an editorial in a local newspaper ad- higher levels of government could compensate the lo- 94 95 dressing racial concerns.89 Ross argues that many of cal government. Bish and Warren explain how this the issues that those in the black community are con- type of grant system could work with education. Ed- cerned about are regional in nature. Thus, consolida- ucation creates a positive externality as school dis- tion can actually improve the well-being of those in tricts cannot internalize all the benefits they produce. the black community. He also warns, however, that Students that receive an education may become pro- consolidation does not guarantee equity in political ductive workers in other jurisdictions. representation, and that those in the black community The second way for local governments to deal with should actively participate in shaping the consolida- spillovers is through the creation of special districts. tion process. There are different types of public goods with differ- 96 Whether those in the black community decide to par- ent optimal sizes of operation. Different public ticipate in and influence the consolidation process is goods come with different spillovers. Consolidation uncertain as black mayors in the northern municipal- into a single government does not, therefore, solve the ities are concerned about being pushed out of exist- spillover problem for each public good. A better so- ence.90 Consistent with Zimmerman,91 black mayors lution is to retain local autonomy but use special dis- are concerned with the dilution of minority voting tricts of different sizes for public goods with different strength following consolidation. spillovers. With public goods where there are large spillovers, then the optimal size of the special district Another relevant equity consideration in St. Louis is would be large. But with public goods where there are the feasibility of consolidation. Suburbs may view the small spillovers, then the optimal size of the special consolidation as an unfair way for St. Louis City to district would be small. share its debts and gain access to a larger tax base.92 Wealthy suburban residents and elected officials are The use of special districts is a small part of the third unlikely to agree to consolidation terms that make way in which local governments can overcome spill- them worse off. Consistent with Parks and Oak- over problems. Local governments can cooperate not erson,93 wealthy and politically connected residents only with special districts but also in a wide variety of are likely to try to shape consolidation in their favor.

89 Will Ross, “Regional Governance Benefits the African 92 Kevin McDermott, “Krewson, Stenger Back Latest Push for American Community,” The St. Louis American, September City-County Coordination,” St. Louis Post Dispatch, June 12, 28, 2017, accessed June 25, 2018, http://www.stlameri- 2017, accessed July 2, 2018, https://www.stlto- can.com/news/columnists/guest_columnists/regional-govern- day.com/news/local/govt-and-politics/krewson-stenger-back- ance-benefits-the-african-american-community/arti- latest-push-for-city-county-coordination/article_22ddc131- cle_0eb33bd2-a3fd-11e7-ab0d-eb1b83114e66.html. a438-54f6-845e-2d7c07688df5.html. 90 Jason Rosenbaum, “African-American Mayors Are Wary Of 93 Ibid. Push For Municipal Consolidation In St. Louis County,” St. 94 Ostrom, “The Social Stratification-Government Inequality Louis Public Radio, January 11, 2015, accessed June 25, 2018, Thesis Explored.” http://news.stlpublicradio.org/post/african-american-mayors- 95 Ibid. are-wary-push-municipal-consolidation-st-louis- 96 Ostrom, Tiebout, and Warren, “The Organization of Govern- county#stream/0. ment in Metropolitan Areas;” Bish and Warren, “Scale and 91 Zimmerman, “Metropolitan Reform in the US.” Monopoly Problems.” Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 47 creative ways. The Coase Theorem97 suggests that Consistent with Andrew105 and Feiock106 the ability private individuals can solve externality problems of local governments to cooperate has been part of the through negotiation. Similarly, Feiock98 argues that consolidation debate in St. Louis. In a recent newspa- local governments can overcome spillovers by collab- per article, Rebe107 argues that rather than fighting oratively solving spillover problems with formal and over a contentious consolidation, St. Louis would be informal agreements. Such agreements tend to be better off collaborating on specific region-wide prob- more politically possible and are better suited to deal lems. In the article, Rebe highlights how the region’s with the dynamic nature of spillover problems.99 New municipalities cooperated to form the Metropolitan agreements can be worked out as new spillovers St. Louis Sewer District in 1954. The charter for the emerge. And should the spillovers diminish or other district highlights the importance of cooperation to issues arise, these agreements can be amended or dis- overcome spillovers: “the problem has been shown to solved less painfully because there still exists an un- be one which cannot be solved within either City or derlying political body. County alone, but requires that it be treated as a whole. The City limits are but an imaginary line as far Examples of each of the three theoretical reasons for as disease and drainage are concerned.” Disease and the effectiveness of local governments in dealing with drainage are both examples of negative spillovers. spillovers have surfaced in the St. Louis debate. Con- However, rather than consolidation, the problem was 100 sistent with Ostrom, financing from larger govern- solved through local government cooperation. ments has been used in the St. Louis area before. With the building of a new sports stadium, 50 percent of the 3.4 Development financing came from the state government.101 Since the benefits of a major sports team may extend be- A large theoretical literature identifies the benefits of yond city and county boundaries, the state govern- fragmented governments in terms of efficiency, eq- ment was willing to contribute to the project. The uity, and spillovers. No body of theoretical research spillover problem was potentially solved through fi- identifies the benefits of fragmentation for develop- nancing from a larger government, although it re- ment, however. All that exists is the idea that through mains an open question whether the benefits to the competition local governance will improve and rest of the state were commensurate with costs. through better governance comes more development. Kim and Jurey108 summarize the connection between Consistent with Ostrom, Tiebout, and Warren,102 and fragmentation and development. First, fragmentation Bish and Warren,103 special districts of varying sizes promotes local government competition. Second, exist in the St. Louis area. The St. Louis area has one competition incentivizes each jurisdiction to provide regional arts commission but two districts for an attractive combination of quality services and low parks.104 Parks and the arts generate different benefits taxes. Third, with an attractive combination of quality and different sized special districts can most appro- services and low taxes, new businesses and residents priately internalize the unique spillovers of each pub- will be draw to the region. The result is more jobs and lic good. A full-scale consolidation would eliminate higher income. the ability of different sized special districts to deal with different sized spillover problems.

97 Ronald Coase, “The Problem of Social Cost,” Journal of 103 Ibid. Law and Economics 3, no. 1 (1960): 1-44. 104 Ibid. 98 Richard C. Feiock, “Metropolitan Governance and Institu- 105 Ibid. tional Collective Action,” Urban Affairs Review 44, no. 3 106 Ibid. (2009): 356-377. 107 Jake Rebe, “Effective Consolidation,” NextSTL, February 99 Simon A. Andrew, “Recent Developments in the Study of In- 20, 2018, accessed July 2, 2018, https://nextstl.com/2018/02/ef- terjurisdictional Agreements: An Overview and Assessment,” fective-consolidation/. State & Local Government Review 41, no. 2 (2009): 133-142. 108 Jae Hong Kim and Nathan Jurey, “Local and Regional Gov- 100 Ibid. ernance Structures: Fiscal, Economic, Equity, and Environmen- 101 Jones, “Toward Regionalism.” tal Outcomes,” Journal of Planning Literature 28, no. 2 (2013): 102 Ibid. 111-123.

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The above argument for development through frag- workers living in more urban, higher cost-of-living mentation has not been present in the St. Louis con- areas. Wage harmonization upward does not lead to a solidation debate. Those in favor of consolidation less expensive bureaucracy, but a more expensive have done so in part for development reasons. How- government. ever, those opposed to consolidation have not focused on development in their arguments. Consolidations also tend to increase public employee wages. If some employees associated with adminis- 4. Empirical Evidence trative duplication are let go, consolidation could still be efficiency-enhancing. Even so, just like no public Theoretical arguments exist in favor of and in oppo- employee wants to see their wages reduced, no public sition to consolidation for efficiency, equity, spillo- employee wants to lose their job. Unsurprisingly, ver, and development reasons. With the exception of consolidation does not eliminate administrative dupli- development, the consolidation debate in St. Louis cation. Either formally or informally, jobs for public contains arguments both for and in opposition to con- employees are maintained. The charters for both the solidation that relate to the theoretical literature re- Athens and Clark County, Georgia, and Wyandotte viewed. However, what real-world evidence exists for County and Kansas City, Kansas, consolidations, for understanding how consolidation impacts efficiency, instance, included provisions guaranteeing that no equity, spillover, and development concerns? This public employee jobs would be lost.111 While this section explores the empirical evidence because, be- could be a short-term effect if departing or retiring fore drawing any lessons for St. Louis, it is important employees are not replaced, in practice once consoli- to first understand what has happened following other dation occurs the impetus for a reduction in force is consolidations. reduced and overall staffing levels tend to stay high. In a more informal manner, during the consolidation 4.1 Efficiency of Kawartha Lakes, , new positions were Both in the St. Louis debate and theoretical literature, simply created for existing government employees to proponents of consolidation have argued that it leads fill.112 Although not formally codified in the charter, to greater efficiency. The real-world evidence sug- jobs were created so that no existing employee would gests that greater efficiency can be difficult to become unemployed. achieve, however. Because streamlining local gov- Another piece of evidence in favor of the efficiency ernment means either cutting government jobs or re- of fragmentation over consolidation comes from stud- ducing wages, bureaucrats are unlikely to favor a con- ying the bureaucratic complexity of consolidation solidation that does either one. Thus, it unsurprising governments. Reese113 finds that with the consolida- that in the real-world consolidation generally does not tion of twelve municipalities in , workers in lead to a more streamlined, efficient bureaucracy. For the now larger departments were burdened by “in- example, wages after consolidation tend to be harmo- creased red tape for both internal and external users nized upwards to the highest pre-consolidation pay of city services, slower purchasing processes, a back- scales.109 In their study of twenty-one consolidated log in dealing with permits, and a much longer hiring municipalities in Canada, Miljan and Spicer110 found process.” “Bureaucratic congestion” not only slows that government workers that had been earning government down, but it also can require costly new roughly minimum wage working in relatively low technology and retraining. Vojnovic114 studies how cost-of-living areas saw their wages rise to those of five municipalities in Canada adjusted to the new,

109 Richard D. Gustely, “The Allocational and Distributional 110 Lydia Miljan and Zachary Spicer, Municipal Amalgamation Impacts of Governmental Consolidation: The Dade County Ex- in Ontario (Vancouver: Fraser Institute, 2015). perience,” Urban Affairs Review 12, no. 3 (1977): 349-364; I. 111 Suzanne Leland and Kurt Thurmaier, “When Efficiency is Vojnovic, “The Transitional Impacts of Municipal Consolida- Unbelievable: Normative Lessons from 30 Years of City- tions,” Journal of Urban Affairs 22, no. 4 (2000): 385-417; County Consolidations,” Public Administration Review 65, no. Laura A. Reese, “Same Governance, Different Day: Does Met- 4 (2005): 475-489. ropolitan Reorganization Make a Difference?” Review of Pol- 112 Miljan and Spicer, Municipal Amalgamation. icy Research 21, no. 4 (2004): 595-611; Martin and Schiff, 113 Ibid, 600. “City-County Consolidations.” 114 Miljan and Spicer, Municipal Amalgamation. Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 49 larger bureaucratic structure of their consolidated produced greater inequality. The consolidation was government. He finds that four out of the five munic- meant to correct for inequality by using suburban ipalities had to invest in substantial employee retrain- property taxes to help pay for city services enjoyed by ing and new computers to deal with more complex ac- suburban residents. However, wealthy suburban resi- counting and payroll systems. dents were politically connected while poor inner-city residents were not. Although much of the real-world evidence provides a cautionary tale against relying upon consolidation to Unsurprisingly, the terms of the consolidation bene- achieve efficiency, there are examples of cost saving fitted suburbanites. Suburban property taxes were 115 through consolidation. Krimmel finds that consoli- used only to pay for county-wide services while city dated police departments in York and Lancaster property taxes were used to pay for both city and Counties in Pennsylvania have 28 percent lower costs county-wide services. compared to their nonconsolidated counterparts. Vojnovic120 provides another example of a tax in- 116 Additionally, McDavid finds that police depart- crease for poor residents following consolidation. He ments in Halifax, Canada, were able to reduce costs studies the consolidation of five relatively wealthy ur- through consolidation, without negatively affecting ban districts and six relatively poor rural districts in the crime rate. Consolidation can produce efficiency Canada. Before consolidation, the rural areas had gains for services such as police. Consolidations for lower service levels but also enjoyed lower taxes. services such as police do not require a single, unified However, after consolidation tax rates were harmo- government, however. Consolidation can be handled nized so that some rural areas saw tax increases of up on a service-by-service basis. to 80 percent, despite no clear increase in service pro- vision. 4.2 Equity 4.3 Spillovers The real-world evidence suggests that a few of the eq- uity concerns of consolidation have occurred in other There are numerous examples of institutional ar- cases. First, consolidation has diluted the voting rangements across the United States that effectively 117 strength of minority populations. Clarke finds that solve spillover problems. These institutional arrange- black voting strength in the center of the city was di- ments operate across a spectrum of formality. On the luted following the consolidation of Louisville and more formal end are fully consolidated regional gov- 118 Jefferson County, Kentucky. Similarly, Swanson ernments. On the less formal end are interlocal agree- finds that after the consolidation of Jacksonville and ments (ILAs). ILAs allow for local government au- Duval County, Florida, black voting power was di- tonomy while collaborating with other governments luted from 40 percent to 25 percent. to take advantage of economies of scale with the pro- vision of services. Second, consolidation sometimes has led to greater inequity in service provision by income level as the Although there are many examples, commonly used terms of consolidation are shaped by wealthy, politi- ILAs include 911 dispatch centers, libraries, and pest 119 cally powerful elites. Blomquist and Parks demon- control.121 One city that makes extensive use of ILAs strate how the Indianapolis city-county consolidation

115 John T. Krimmel, “The Northern York County Police Con- 118 Bert E. Swanson, “Quandaries of Pragmatic Reform: A Re- solidation Experience: An Analysis of the Consolidation of Po- assessment of the Jacksonville Experience,” State and Local lice Services in Eight Pennsylvania Rural Communities,” Po- Government Review 32 (2000): 227–238. licing: An International Journal of Police Strategies & Man- 119 William Blomquist and Roger B. Parks, “Fiscal, Service, agement 20, no. 3 (1997): 497-507. and Political Impacts of Indianapolis-Marion County’s Uni- 116 James C. McDavid, “The Impacts of Amalgamation on Po- gov,” Publius: The Journal of Federalism 25, no. 4 (1995): 37- lice Services in the Halifax Regional Municipality,” Canadian 54. Public Administration 45, no. 4 (2002): 538-565. 120 Ibid. 117 Kristen Clarke, “Voting Rights & City-County Consolida- 121 Wayne P. Miller and Abby Davidson, Interlocal Agreements tions,” Houston Law Review 43, (2006): 621. (Little Rock, AR: Arkansas Public Policy Center, 2015).

50 | Missouri Policy Journal | Number 8 (Spring/Summer 2019) is Detroit. Leroux and Carr122 show how forty-four world? The empirical evidence suggests that consoli- local governments in the Detroit dation rarely leads to significant economic develop- use interpersonal networks and local professional as- ment. Sometimes it actually reduces the rate of devel- sociations to collaborate on projects such as infra- opment, but usually it has no impact in either direc- structure improvements, waste disposal, and water- tion. shed management. Empirical studies finding no impact of city-county Healthy civic institutions in Detroit help build con- consolidation on development include Feiock and nections between local representatives. The result is Carr,125 Carr and Feiock,126 Carr et al.,127 and Faulk cooperation among governments rather than competi- and Schansberg.128 Examining the number of manu- tion. Another way healthy civic institutions can help facturing, retail, and service establishments both be- solve spillovers is with non-profit organizations. fore and after the Jacksonville-Duval County consol- Nunn and Rosentraub123 describe the operation of the idation in Florida, Feiock and Carr129 find no impact Alleghany Conference for Community Development of consolidation on growth in any sector. Expanding (ACCD) in Pittsburgh, Pennsylvania. Through pub- the number of city-county consolidations explored to lic-private partnerships, the non-profit organization nine, Carr and Feiock 130 find no evidence for faster helps with a variety of regional issues including air growth in any sector for any of the nine cases. Carr et pollution and flood control. al.131 expand the analysis to include the impact of con- solidation on employment and payroll. They find no An example of a more formal, although not fully con- effect with the Louisville-Jefferson County and the solidated, institutional arrangement is the council of Lexington-Fayette County consolidations in Ken- governments. Local governments maintain autonomy tucky. More recently, Faulk and Schansberg132 find but representatives meet regularly at the council of that consolidation with the Augusta-Richmond governments to discuss regional issues. Toledo pro- County, Kansas City-Wyandote County, and Lafa- vides an example: Since 1968 the Toledo Metropoli- yette City-Lafayette Parish did not lead to a signifi- tan Area Council of Governments (TMACOG) has cant increase in employment or the number of busi- sought to: “(1) provide a forum for regional govern- nesses. ance, (2) facilitate networking for local officials, (3) provide shared information, (4) coordinate issue res- While the majority of city-county consolidations ex- olution, (5) plan for regional transportation needs, and plored had no impact on economic development, (6) plan for regional environmental resources and wa- Hall, Matti, and Zhou133 do find a positive impact of ter quality.”124 the Lafayette City-Lafayette Parish consolidation on per capita personal income, total employment, and 4.4 Development population. But they also find negative impacts on per capita personal income, total employment, and popu- Consolidation is theorized to accelerate development lation stemming from the Augusta-Richmond County by providing comprehensive planning capacity, a and Athens-Clarke County consolidations in Georgia. simplification of regulations, and a greater capacity Different development impacts across different con- for regional development projects. Does consolida- solidation attempts suggest that the details of how tion actually improve local development in the real

122 Kelly LeRoux and Jered B. Carr, “Prospects for Centralizing 128 Dagney Faulk and Eric Schansberg, “An Examination of Se- Services in an Urban County: Evidence from Eight Self-Orga- lected Economic Development Outcomes from Consolidation,” nized Networks of Local Public Services,” Journal of Urban State and Local Government Review 41, no. 3 (2009): 193-200. Affairs 32, no. 4 (2010): 449-470. 129 Ibid. 123 Samuel Nunn and Mark S. Rosentraub, “Dimensions of In- 130 Ibid. terjurisdictional Cooperation,” Journal of the American Plan- 131 Ibid. ning Association 63, no. 2 (1997): 205-219. 132 Ibid. 124 Ibid, 214. 133 Joshua C. Hall, Josh Matti and Yang Zhou, “The Economic 125 Ibid. Impact of City-County Consolidations: A Synthetic Control 126 Ibid. Approach,” WVU Working Paper No. 17-08 (2017). 127 Ibid. Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 51 consolidation is implemented are important. Consoli- average resident. Areas that are a good value (i.e., ser- dations that are widely opposed tend not to be suc- vices received relative to taxes paid) see that in- cessful, as the political bargaining necessary to get creased value capitalized into housing prices, which people to change their minds often undermines the then lead to the property taxes received (not the rate) very reason the reform was implemented. An example increasing, a virtuous cycle. When local governments would be guarantees that no public sector employees are incentivized to find tax-exporting industries, too will lose their jobs as a result of the consolidation, alt- much attention is paid to courting big projects that at- hough the raison d’etre for the consolidation was to tract consumers from across the city. Cities that suc- achieve cost savings through eliminating duplicate cessfully export a large share of their tax burden look positions. good in the eyes of residents because they can enjoy high service levels at a low cost. This encourages 5. Lessons for St. Louis from the even more areas to pursue tax-exporting strategies, Academic Literature something that may work for one area initially but does not work on a regional level. This negative cycle The situation that St. Louis residents find themselves seems to exist in parts of St. Louis today. While it is in is not unique. A number of areas in the United good for the citizens of the area, it is bad for the region States have seen local government fragmentation as a as a whole. key source of municipal dysfunction. The typical gov- ernmental form that is advocated is city-county con- Just because problems exist, however, does not mean solidation that creates one unified county-level gov- city-county consolidation is necessarily the only or ernment, but other forms of consolidation have also best solution to the problems facing the residents of been suggested and implemented depending on the St. Louis County. From our own original research on region. Much of the literature focuses on city-county city-county consolidation134 and our review of the ac- consolidation, however, because all of the United ademic literature on regionalization and consolidation States is covered by county (or county-equivalent) of municipal services135 we highlight five important governments. They are naturally small, due to the fact lessons regarding city-county consolidation that citi- that in many cases their creation was predicated on zens and policymakers in St. Louis City and County reducing the burden on citizens needing to travel to should consider when attempting to move forward the county seat. As such, they seem to be the natural from the status quo. stopping point when the discussion of eliminating or combining local governments begins. It is therefore Lesson One: City-county consolidations have not natural that discussions in St Louis have focused on been a panacea to the underlying problem that moti- city-county consolidation. vated consolidation efforts.136 While many of the studies analyzing specific consolidations focus on There exist many good arguments and evidence that economic development, it is important to remember the fragmentation of local government in St. Louis that governments that are able to satisfy demands for has and will continue to produce sub-optimal out- local publicly provided goods at a lower tax cost comes. The use of court fees to finance local govern- should stimulate economic development as people ment, for example, goes against numerous principles and businesses are attracted to value creation. The fact of effective local governance. The same is true with that incomes, population growth, and employment the widespread use of sales taxes rather than property opportunities frequently decline following city- taxes to fund local governments. When combined county consolidation is strong evidence that fragmen- with excessive fragmentation, the result is too much tation was not necessarily the biggest issue facing the attention paid to tax exporting and not enough to area but rather part of a larger problem. providing the tax and spending mix preferred by the

134 Hall, et al., “The Economic Impact of City-County Consoli- 135 Joshua Hall, Josh Matti, and Yang Zhou, “Regionalization dations.” and Consolidation of Municipal Taxes and Services,” Review of Regional Studies 48, no. 2 (2018): 245-262. 136 Ibid.

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Lesson Two: Many of the problems facing those liv- consolidation and reduces the likelihood that it will ing and working in St. Louis County are not the result solve the underlying issues that motivated consolida- of fragmentation per se, but rather how fragmentation tion. As we detail elsewhere,138 city-county consoli- interacts with local government funding in Missouri. dations in Georgia were extremely contentious. Ath- The fact that local governments in Missouri were pro- ens-Clarke County Georgia, and Augusta-Richmond hibited from using the sales tax to raise revenue prior County Georgia had multiple failed consolidation at- to 1969 makes it clear that this is a local problem cre- tempts before finally getting a majority of voters to ated by state policy and therefore is going to require favor consolidation. In both cases, convincing enough state action to fix. It is true that fragmentation has ex- voters to support the consolidation referendum re- acerbated the problem related to how local govern- quired changes to the consolidation charter that led to ments in Missouri are financed, but city-county con- the consolidation not achieving the goal of greater solidation will only mitigate issues related to how lo- economic development. The biggest of these changes cal governments in Missouri (specifically St. Louis was upward public employee wage harmonization County) are financed, not eliminate them. To cite but and guarantees that no public employee jobs would be one example, beggar-thy-neighbor policies will still lost. exist, but there will just be less of it as consumers will have to come into (or leave) the County. The lack of public opposition to city-county consoli- dation makes it more likely that consolidation will Some part of the solution is likely to require state pol- achieve its goals and seems to be a prerequisite for icy action that changes how local governments obtain successful city-county consolidation. On the other revenue. If Missouri policymakers returned to the pre- hand, the more organized opposition to consolidation 1969 prohibition on local governments utilizing the is, the greater the likelihood that political compro- sales tax, for example, it would eliminate the dispari- mises will be made that undermine any potential ben- ties and inefficiencies of the current system. What efits of reform. In the face of widespread opposition would local governments replace it with? One option to large-scale consolidation, piecemeal consolidation would be that the state could allow for county sales and/or regional agreements are preferable as they can taxes to be distributed to local governments on a per be structured to be less divisive, such as in the con- capita basis. Alternatively, the county sales tax could solidation of fire departments. be combined with a consolidation of some services to the county level, reducing the service burden on local Lesson Four: Not all consolidations are created equal. 139 governments concomitant with their lower tax reve- Leland and Thurmaier distinguish between crisis nue, but achieving economies of scale and efficien- consolidations and opportunity consolidations. Areas cies in areas like transit and fire protection. In Ohio, that consolidate due to a crisis, primarily financial, for example, regional transit authorities are funded frequently fail to improve (economically) following through county-level sales taxes, reflecting the fact consolidation. In many cases it is better to stay with that the optimal service area for public transit is much the status quo than to accept a deal in the midst of a larger than the typical city government. Funding local crisis because “something is better than nothing.” Our governments through a regional tax also could reduce research suggests that no change is often better than the incentive to uses fees, fines, and tickets to pay for consolidations that occur in response to a crisis. local government. More important to St. Louis, however, is that many Lesson Three: City-county consolidations are deeply consolidations merely involve merging a city center unpopular.137 The hatred and mistrust associated with with an unincorporated, more rural, county area. consolidation efforts significantly raises the costs of While St. Louis County has unincorporated areas, it also has multiple, developed municipalities.140 This

137 Martin and Schiff, “City-County Consolidations;” Miljan Regionalism: Economic Imperatives Versus Political Impedi- and Spicer, Municipal Amalgamation; William Lyons and John ments,” Journal of Urban Affairs 23, no. 5 (2001): 557-571. M. Scheb, “Saying ‘No’ One More Time: The Rejection of 138 Hall, et al., “The Economic Impact of City-County Consoli- Consolidated Government in Knox County, Tennessee,” State dations.” & Local Government Review 30, no. 2 (1998): 92-105; Donald 139 Leland and Thurmaier, “When Efficiency is Unbelievable.” F. Norris, “Prospects for Regional Governance Under the New 140 Mannies, “New Talk of City-County Merger.” Missouri Policy Journal | Number 8 (Spring/Summer 2019) | 53 creates a large number of veto players and vested in- widespread consolidation is unpopular and fails to de- terests that make large-scale consolidation from the liver on more efficient government. The fact that there bottom up very difficult to achieve. Capps141 actually is no silver bullet, however, does not mean that taking calls for a statewide ballot or the Missouri Legislature no action is optimal. One of the great strengths of the to weigh in to avoid these political issues. The diffi- United States is our large number of local govern- culty with bypassing local voters is that while there ments. The literature has highlighted some of the are fewer veto players, the solution is not likely to be many ways that communities can collaborate to save one that will represent important trade-offs between money and achieve scale efficiencies without consol- local autonomy and fiscal responsibility. idating. In addition, our analysis of the St. Louis case highlights how any significant reform is likely to in- Lesson Five: If the goal of consolidation is to elimi- volve the Missouri Legislature as many of the local nate disparities across areas of the city in funding or government funding issues are problems created by services, eliminating local governments can some- state policy and only exacerbated by political frag- times give the illusion of the disparities being elimi- mentation in St. Louis County. nated when often things are much worse due to shifts in political power. Consider two equally sized school districts that spend $10,000 and $15,000 per pupil, re- spectively. If those two districts consolidate, then av- erage spending is now $12,500, so it appears that the disparities have been eliminated. The real question, however, is how has spending in the section of the combined school district that used to spend $10,000 changed? In many cases, it does not improve or even gets worse. There are two reasons why this is the case. First, aggregation of data obscures the problem and reduces political pressure to do something about it. Second, poorer areas tend to have lower voter turnout and thus voters in the poorer part of the consolidated school district have less political power after consoli- dation. 6. Conclusion No one can deny that there are numerous issues facing local governments and their citizens in St. Louis County. Fragmentation, combined with the taxation powers and funding allocated to local governments by the Missouri State Legislature, has contributed to a number of issues related to communities engaging in activities with negative effects on citizens other than their own. The significant use of speed traps, or ex- cessive fines, to raises a significant portion of munic- ipal funds is but the most egregious example. Our analysis of the past several decades of academic scholarship on regionalization of municipal taxes and services and city-county consolidation suggests that

141 Kristin Capps, “For Anything to Change, Missouri Should Consolidate St. Louis,” The Atlantic Cities, August 19, 2014.