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Saturday, April 12th, 2008

Unintended Consequences of Consolidation Legislation

Some time back, the Indiana General Assembly passed a law that gave localities great flexibility in designing and implementing governmental consolidations. This was meant to make things easier than what happened with the Indianapolis Unigov model, where it took special legislation to push through the merger. The new rules let two or more governmental units design a merger, then put it to their communities for a ballot for approval. This keeps things flexible and easy, ensures public support, and gets around a recent Indiana Supreme Court ruling that severely curtailed the ability of the legislature to enact special purpose laws for a given municipality.

This law was likely intended to facilitate city-county consolidation. However, as it has worked out, it is basically being used as an anti-annexation tool by rural areas. An example out of the Fort Wayne area provides a perfect example. Eleven townships and the municipalities therein have proposed a merger to form something called East Allen Communities. The vast majority of this territory is rural. However, the consolidation is structured such that the entire area will be considered incorporated. This means none of the territory can be annexed by Fort Wayne. Keeping Fort Wayne out and making sure the area cannot be subject to a city-county merger, is no doubt the sole intent of the merger. (Interestingly, the merger charter would appear to be unconstitutional, since there is one council member per township. Unless all townships have equal population and stay that way forever, it violates the one man, one vote principle).

A similar situation is playing out in Zionsville. Previously, residents of the unincorporated township areas had fought tooth and nail against annexation by Zionsville. However, after Whitestown made a gigantic annexation that included a portion of Eagle Township, the residents decided that Zionsville was the lesser of two evils. So now there is a proposal to merge Zionsville with Eagle and Union Townships. The backers struggle to show benefits to the taxpayers because there aren’t any. The sole purpose of this is to make sure Whitestown can’t annex any more territory. It is a merger in name only. In fact, there is a even a two-tier system where old Zionsville residents continue to get city services at a higher tax rate, while areas outside get county services at a lower one. (This is a troubling arrangement in its own right. Will the district boundary line be fixed by the terms of the merger? If so, it will put residents of the old city at a permanent tax disadvantage as the urbanized area expands. Can it be changed by the city council? If so, that would be nothing more than a functional equivalent of annexation. Is change automatic as urbanization thresholds would be reached? One would hope so.)

Arrangements such as these should not be allowed by the state. Flexible merger powers are a good thing, but they should not enable to rural areas to incorporate themselves in a way that would never be allowed under the current incorporation statute. Any territory which is not urbanized and will not be urbanized within a reasonable timeframe should not be allowed to be included inside a municipal boundary.

While I’m on the topic, I’ll bring up another dubious local government practice that seems to have become prevalent of late: fire territories. A fire territory allows two or more entities, normally a town and a township, to establish a joint fire service district, with proportional funding from each. Now this doesn’t sound like such a bad idea, but for any municipal taxpayer it is. Here’s why. Extending core municipal services like fire protection outside of the city limits on an a la carte basis creates two tiers of citizens: those who live in the town, receiving and paying for all city services whether they want them or not; and township residents, who get the menu plan, being able pick and choose just what services they feel like paying for, and enjoying a quality and cost level of services they would never be able to get except by being next to the town. It shouldn’t come as any surprise to discover that one township residents get the critical services they want like fire protection, their desire to be annexed will plummet.

Municipalities should jealously guard their services. Extending services is the only real lever that a city has to get people to agree to voluntary annexation. Give away your most precious services on a contract basis, and you’re done for. Plainfield and Brownsburg may discover this to their chagrin.

There’s a better way. If a town and township want to combine forces, the township could simply contract with the town for the service, with costs shared equitably, for a limited term only. Because this is a contract that would need to be reviewed periodically, there are opportunities to reconsider the appropriateness. One of the huge levers that Fishers has over Geist is that there is no Fall Creek Township fire department, and there is no way that the rump of unincorporated territory in the township could create its own fire department on a cost-effective basis. In this way, township residents in unincorporated areas are able to enjoy the benefits of high quality municipal fire service, but then have less ability to object if the town subsequently wants to annex them, which is only fair.

9 Comments
Topics: Public Policy, Regionalism
Cities: Indianapolis

9 Responses to “Unintended Consequences of Consolidation Legislation”

  1. SpeedBlue47 says:

    Another great post. I’ll make sure to direct people who come to my blog over here to see it. I’ll post it along with my thoughts sometime this weekend. Keep up the great work you are doing.

  2. thundermutt says:

    Unigov created that very same kind of arbitrage, with citizens living inside the “old city” boundaries paying twice for police protection (once for IPD and once for Sheriff), and for sewer service in the expanding townships (the treatment plant was already paid for by old city taxpayers, and it served them), and for improved arterials in the townships (the old city streets were long-since paid for, often by Barrett Law assessments).

    I would take some issue with the idea that exurban or rural areas should not be able to incorporate.

    If those suburban/rural townships in Allen County decide democratically to stay suburban/rural (or more likely, incorporate to keep local control over planning and zoning instead of vesting it in downtown Fort Wayne), then I say more power to them.

    Planners sometimes don’t consider the unintended consequences of their proposed policies very well. Exhibit A: The urban bulldozer “slum clearance” of the 50′s, 60′s, and 70′s which merely re-created slums as vertical and concentrated poverty warehouses. Exhibit B: Portland’s urban growth boundary, which has raised the cost of urban living well into the stratosphere.

  3. The Urbanophile says:

    Speed, thanks for the comments.

    Thunder, Unigov was exactly what I had in mind when I talked about a two-tier system and the problems thereof.

    Outside of New England, where the municipal map is for all intents and purposes frozen, incorporation is almost universally recognized as something that is for cities and towns only, not rural areas.

    I don’t have a problem with people who want to live a truly rural lifestyle. That’s why Indiana has places like Perry County that are far from the city where you can enjoy that. Believe it or not, I grew up in the country, so I can appreciate its charms as well as its downsides. What I’ve got a problem with is people who want to set up shop on the doorstep of the city, take advantage of everything that city has to offer, but then claim they want nothing to do with it.

  4. thundermutt says:

    In economics, that’s called the “free rider effect”.

    I’m fully aware of it as a Center Township taxpayer. I pay much higher property taxes to make up for all the non-taxable parkland and government facilities (city, state, and federal) and university buildings and hospital complexes and museums and stadia in Center which provide services to the county, the region, or the state.

    I’m not too fond of Carmel free-riding, either. The only way an elitist edge city like that makes economic sense is if a certain portion of the region’s educated professionals and entrepreneurs live there to be close to the economic engines of Indianapolis’ major employers and financiers. Otherwise, it’s just Richmond or Kokomo with aspirations and no means.

    People all over the region (Carmelites among them) claim they want nothing to do with Center and IPS. But they sure do love “their” Colts, “their” downtown, “their” museums, “their” canal, etc. and they expect to get here on “their” streets (and to have them be free of potholes and trash).

    Yes, I understand why “free-riders” are bad. But it’s inevitable. Could you imagine the outrage at folks in Marion County trying to tax the region or control land use and zoning in any part of the donut counties? (We should, where we own the water lines…but that’s another post.)

    Efficient as metro government might someday prove to be, it’s contrary to our notions of local control and the nature of local government. It even scares me…all those “shining cities on a hill” the planners imagined in the last half of the last century that just didn’t quite work out.

    I have some tangential thoughts on this matter that I’ll post to your Longworth review, because I don’t agree that agriculture is doomed in Midwestern states in the era of $100 oil, or that the future is tied solely to cities and to urbanization.

  5. stealthcommment says:

    In reading this insightful post, I was struck by the thought, “Finally—Ft. Wayne!” This wasn’t my recommendation for the city’s motto. But it could suffice if its rival down the road changes theirs to “Totally—Toledo!”

    Instead, I was thinking of the attention Ft. Wayne receives in this blog. Or the national media mentions FTW receives when compared to, say, Indianapolis. Mere symptoms of a larger disease. The problem seems to be a case of proverbial eggs in baskets.

    Here in Ohio we don’t have much to brag about. But there is one thing that comes to mind. Divide our 11 million population or 400 Billion economy by five. Each of the 3C’s accounts, very roughly, for about a fifth of these totals. Take another fifth and split it three ways and you describe Akron, Dayton and Toledo. The last fifth will cover Youngstown’s shrinking share, the other smaller metros and micropolitians, and the agricultural/rural sector, still substantial in the state.

    Now look at Michigan and Illinois where one metro speaks for greater than 60% of the population/economy. This doesn’t appear to be as much a problem for Chicago which is a mature world class metro. (“Alas, we thought that way too,” said New York City to a malfunctioning, unreformable New York State.) However, in Michigan mostly one city, and one industry, and one Union have a kung-fu grip on the mitten-shaped state.

    This is no dig at The Urbanophile as he can only read so many cities’ newspapers. But what of the Ft. Waynes, the Lexingtons, the Peorias, the Grand Rapidses? And many other urban areas of the midwest besides.

    Will a UNIGOVication of Fort Wayne/Allen County be enough to bring the city up to par with Indy? Remember that Fayette County unified with Lexington long before Louisville merged with Jefferson County. But that didn’t mean it caught up, relatively speaking, in development, population, influence. Could a slower burn process of relentless annexation do the job better than the once-off of city-county unification?

    This consolidation question may explain a lot in FTW’s case. But I think there more inputs to be considered for why Fort Wayne lags.

  6. The Urbanophile says:

    As you note, there are only so many cities one can cover. I usually limit myself to Midwest metros with over one million in the MSA.

    Lexington, KY is an interesting case, but probably not applicable to Ft. Wayne. Lexington is home to the University of Kentucky, and is also very close to the capital Frankfort.

    I actually think Ft. Wayne is holding its own. It doesn’t compare to Indy in terms of growth, but if you compare Ft. Wayne versus the rest of Indiana and versus similar Indiana metros, it is doing pretty well.

    There’s a pretty active Ft. Wayne blogging community. I’m not that familiar with it, but you might get a better sense of the challenges and opportunities that community faces from them.

  7. Donna says:

    thundermutt: you may have moved on to the Long post by now, but…A question: is there really any hard evidence that Portland’s UGB has raised the inside-boundary housing prices by significantly more than they have risen in any other downtown area? Home prices in Chicago, Seattle, and Philadelphia are all stratospheric, and to my knowledge none of them have growth boundaries.

    My parents have lived in PDX for 20 years, and I know it’s expensive there, but I really don’t think it’s moreso than other places.

  8. The Urbanophile says:

    Donna, it’s difficult to prove any one factor drives affordability. However, the other expensive cities that you cite are all bigger cities. How many small cities (e.g., Indy and Portland sized) are as expensive as Portland? The UGB would appear to intuitively play some role in driving up the cost of living there.

  9. thundermutt says:

    Donna, creating an arbitrary boundary has an economic effect. An urban growth boundary artificially constrains the amount of land available for development, which drives up the price of development “product” eventually. That’s Econ 1a, supply and demand.

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