Friday, February 19th, 2010

Replay: An Examination of City-County Consolidation

[ This piece will serve as a warm-up to a forthcoming series on the downsides of the consolidation of US city and county governments. I updated it from the original with a bit of information about the current mayoral election in Louisville. ]

H. V. Savitch and Ronald K. Vogel of the University of Louisville authored the paper “Suburbs Without a City“, analyzing the merger of Louisville and Jefferson County, and in the process making many good observations about or relevant to other consolidated cities like Indianapolis and Nashville.

Savitch and Vogel make the argument that the primary goal and pratical effect of merger was to re-align power relationships to put the levers of power in the hands of the business, political, and media elite. Among the changes leading to this were:

  • A strong mayor, weak council system.
  • Dissolution of the city of Louisville while retaining smaller suburb cities
  • Dilution of the voting power of minorities
  • A transfer of the locus of political power from the old central city to suburban Jefferson County

In their words, “Reformers frequently support consolidation because they assume rather than make an effort to prove its benefit…changes in local governance are often about power not bureaucratic efficiency or effectiveness. More often than not, power shapes the reception of ideas and determines who has voice in community debates. Bringing this to public attention is difficult, and elites often respond with hostility to attempts to distinguish between power and better government.” Rather than a Ruskian city without suburbs, they believe Lousville has become suburbs without a city.

They also make the argument that merger has not and will not improve efficiency or result in cost or tax savings. It is also explicitly non-redistributionist in that wealthier areas are firewalled off from having to support the less well off areas, and in fact if anything the reverse is true.

All of these features are, in so many words, said to have been imported from Indianapolis’ Unigov. I believe there is some degree of parallel between these mergers, so the experience of Indianapolis under merger is something that bears examining.

In 1969 a unique political alignment put Indianapolis and Indiana under the unified control of Republicans. Then Mayor Richard Lugar was able to push through a legislative city-county consolidation called Unigov. Key features of Unigov:

  • A county-wide mayor, with a combined 29 member city-county council.
  • Administration, planning and zoning, parks, and infrastructure development were consolidated.
  • School districts, police departments, and fire departments were not consolidated. Subsequently, police departments were merged.
  • Cities and large towns (four total) were excluded from merger, but still allowed to vote for mayor. Smaller towns were semi-included in merger, but remained legal entities and retained some powers.
  • Townships were unaffected, as were all special purpose districts.

As you can see, this was in a sense a merger in name only. Many of the most important government services were not merged.

Louisville’s merger followed a similar script, with some updating.

  • A county-wide mayor with 26 council members
  • Administration, planning and zoning, parks, and infrastructure merged
  • Police and fire departments of city and county merged
  • All other incorporated municipalities excluded, including 83 incorporated towns and 19 suburban fire departments.
  • Schools were previously consolidated in the 1970’s and so were unaffected
  • Special districts unaffected
  • An “urban service district” established to provide for higher taxes in the old city limits to pay for services only delivered there.

As you can see, this is broadly similar, with a lower degree of consolidation of municipalities, but a higher degree of departmental consolidation.

As in Indianapolis, the population of the outlying county had grown to be larger than that of the old city. Thus, merger transferred the balance of political power from the “city” to the “suburbs”. In Indianapolis, this led to nearly three decades of Republican dominance, and the political marginalization of minorities. The old city of Indianapolis effectively ceased to exist as a political force, outside of downtown interests. The authors suggest a similar fate awaits Louisville, saying “the city’s autonomy, its power, and its unique qualities have been homogenized into a larger entity.”

In the case of Lousville, there was a strong desire to consolidate power into a strong-mayor. Jerry Abramson went to work for a law firm after leaving office the first go-round. It was his law firm that was the primary backer of merger. A partner in this firm actually drafted the enabling legislation. In a sense, he wrote his own job description for his comeback. This reinforces elite control over the government because of the large amounts of money needed to effectively campaign for office in the consolidated city.

This was acknowledged in a recent article in the Louisville Courier-Journal:

“When he’d campaign for mayor in the old city, Abramson said he would often find himself going door-to-door and talking about issues in living rooms. After merger, those discussions happened in public meeting rooms, because the campaign had to reach more people more quickly.” and “None enjoys the name recognition of Abramson, and there is a wider range of voters and concerns to consider.“This is a completely different animal,” Shea said of running a campaign for mayor of a merged government. “There is distance and defined constituencies all over the city and county. It has to be a personal campaign. Because the city and county have grown so much, if you don’t have a pre-eminent candidate like Abramson, you have to deal that in a much more intimate way.”

Also, a large city government is so complex and difficult to manage that even an outsider would be dependent on the entrenched power structures to do anything, and so would end up co-opted. We see this happening right before our eyes in Indianapolis. Outsider Greg Ballard was elected mayor in a stunning upset. Now we hear the shrieks of outrage as he turns to establishment Republicans on his transition team. But fundamentally, he has no other option. There are literally hundreds of appointments that the mayor has to make, and as a lone outsider without a posse to bring along with him that has the experience necessary to do the jobs, he has to turn to establishment players. The large size of the city council also makes it difficult for individual reformers to make a difference. This sort of thing is exactly why no one has ever reformed Washington and no one ever will.

I won’t go into the details of the case for saying merger was to entrench the power of the elites. Read the article for yourself. While they don’t actually say so, it is clear that authors do not much care for merger and especially this aspect of it. Indeed, the term “elites” itself is pejorative and indicates their point of view. They dismiss merger as not the driver of above trend growth in Indianapolis and Nashville, and also suggest that the City-County Compact could have served indefinitely in place of merger.

I agree that merger in both Indy and Louisville was primarily designed to rewrite the power map. I tend to agree that merger in both Indy and Louisville had a tendency to reinforce the power of the elites. But that is a sort of secondary impact. Rather, I believe the most important thing merger did in both places was to make sure that all the elites were together in the same boat. This aligned their personal interests and makes it much less likely that there would be infighting in the upper classes. It is this lack of infighting itself as much as anything that leads to the dramatic increase in the elite’s power.

What is the practical effect of this? Is it good or bad? As with anything, there are pluses and minuses. On the positive front, it has really enabled the leadership of Indianapolis to rally around key decisions and ambitions. This cannot be underestimated as a source of strength in that community. When dreams of downtown retail appeared dead, and several blocks just empty holes in the ground, Indy was able to rally behind completion of the Circle Centre Mall. Look at the comparative ease with which Indianapolis built first Conseco Fieldhouse and next Lucas Oil Stadium. You can pretty much bet that any major civic project in Indy is going to get done, and at a minimum will not be torpedoed squabbles amongst civic leaders.

The downside is just the flip side. There is less serious scrutiny of any proposal in Indianapolis than in many other cities. Once a decision is made, community leaders close ranks behind it. The result has been a generally lower quality of project than in places with a more robust tradition of civic debate.

The contrast with Louisville could not be more telling. Louisville has long been a city characterized by high levels of mistrust and bickering. In many ways, they were the gang that couldn’t shoot straight. I have always said that in Indianapolis almost nothing gets criticized by the establishment, no matter how bad it is, whereas in Louisville everything is subject to intense bickering, no matter how good.

The situation there now seems to have reversed itself and is more closely following the Indianapolis model. After seemingly decades of debate over building a new downtown basketball arena, one is finally breaking ground. There has been a veritable flurry of new downtown development, much of it receiving significant of tax subsidies. I don’t think it is any accident that the use of TIF districts skyrocketed after merger. This has really jump started downtown development. I do not believe most of these projects would have happened without merger.

Thus far, quality has only suffered at the margins. The arena has a poor design and an inflated price tag, for example. But projects like Museum Plaza [now apparently dead] are first class. When elites dominate a political structure, as with an aristocracy, the focus of civic virtue is on the character of the rulers. In that regard, Jerry Abramson is more in tune with quality of development than Bart Peterson, who is stronger as a deal marker with his real estate background. When Abramson finally moves on, we’ll see what happens in Louisville.

On the matter of governmental efficiency, I have long been a skeptic that consolidation brings the cost savings touted by proponents. If that were the case, federal government services would be a paragon of efficiency. The larger the bureaucracy, the less efficient it usually is in my experience. This is true not only from a cost perspective, but a speed one. How often do we observe in a corporation or other entity that good decision making is very difficult, and that even good, motivated people are ineffective at making things happen. Smaller, more entrepreneurial companies are famously more nimble and responsive.

This is something that should be kept in mind as Indiana looks to reorganize local government in an attempt to rein in property taxes. While I am a big supporter of abolishing townships, I don’t believe that this will, by itself, result in material cost savings to the taxpayer.

The last point, regarding the anti-redistributionist nature of merger, is one worth noting. While political power is redistributed away from central city residents, especially minorities, in a merger, redistribution of resources from well-off suburban areas to less well-off inner city areas is not done. In fact, there are explicit steps generally taken to make sure this doesn’t happen, and if anything the flow goes the other direction.

Unigov retained the township structure where services such as poor relief that benefit largely inner city residents are not contributed to by suburbanites. Similarly, the inner city school district was left intact. People inside the pre-Unigov city limits paid for the Indianapolis Police Department, but people outside did not. However, everyone in the city paid for the Sheriff’s Department, which only patrolled suburban areas. The consolidated services are those like infrastructure, where the balance of spending will be to the suburbanized areas. If anything, Unigov forced poorer, inner city residents to subsidize the suburbanites in the outlying townships.

Nashville included a similar two-tier structure with an “urban service district” paid for only by central city residents. And Louisville has taken a page from the same playbook. The old city of Louisville is to be designated an urban service district where only taxes raised from that district will provide certain city services. Well-off suburban enclaves such as Prospect were excluded from merger, and can vote to provide premium services for themselves without regard as to equity elsewhere in the county.

To me the most interesting case is downtown development. Major civic attractions such as sports teams, etc. that benefit the entire county or region are located there. Yet much of the freight for paying for these community wide assets falls on the residents of the old inner city only. How is that?

One of the main vehicles for doing this is through Tax Increment Financing or TIF. Those who read my blog know I am generally skeptical of TIF’s, though think they can be useful in certain circumstances. When a certain area is declared a TIF, the current tax revenue is frozen for a long time, often 20+ years. All new taxes from new development in the district goes into special TIF fund. The money in this TIF fund is spent for the benefit of the district. Usually it is pledged for debt repayment on bonds that are issued up front to subsidize a big project in the TIF.

TIF’s hurt the central city urban services area because they take valuable property off the general tax rolls there. Let’s take a hypothetical example. An urban service district provides garbage collection paid for solely by central city taxpayers, funded by property taxes. TIF’s freeze the level of taxes collected in part of that taxing district for years and years. This means residents outside the TIF’s have to pay more to cover increased costs of services over time. TIF proponents argue that no development would have occured without the TIF bond, and while that might be true in certain blighted areas, it most certainly is not true in major downtowns. Since downtown is the major tax base in the urban core, this impoverishes unconsolidated services districts.

Indianapolis is a heavy user of TIF’s downtown. Louisville had typically avoided them, and TIF laws are stricter in Kentucky than in Indiana. But since merger, Louisville has gone on a TIF orgy. It has TIF’d much if not most of downtown to support the arena, the Haymarket District, the City Center project, and Museum Plaza. I don’t think it is any accident that Louisville’s appetite for downtown TIF’s has only manifested recently in the wake of merger. The city used to have to worry about the overall health of its inner city tax base. Now it only worries about the county-wide tax base, where downtown TIF’s have less of an impact. Because former suburbanites dominate the city now, the fiscal health of the urban services district is not the principal concern.

There is one aspect of Louisville’s merger that is very different from Indianapolis and very troubling to boot. Not only did every municipality other than Louisville remain intact during the merger, after a 12 year moratorium, they will be free to annex. Conceivably they could even annex territory inside the old city of Louisville itself. As the authors note, “In theory and in practice, small cities can annex parts of the former city of Lousiville. This raises some disturbing questions. First, if the former city of Louisville is supposedly protected by ‘local consolidated government’, how can parts of it be annexed? Second, what is to prevent smaller municipalities from combining with more affluent neighborhoods of the city and cutting it up? Last, would not annexation result in cherry picking parts of the city and shedding its least desirable neighborhoods to a much larger and impersonal megastructure?”

In effect, merger in Louisville meant the dissolution of the city of Louisville combined with a reoganization of county government. This is in marked contrast to Indianapolis, where most small cities were, for practical purposes, subsumed into the new consolidated city, and where all future annexations in Marion County are forbidden because the entire county outside of the excluded cities is considered part of the incorporated city of Indianapolis.

I don’t agree with everything the authors write. Nevertheless, this is a great paper with a lot of points to ponder and I would consider it required reading for anyone interested in the rationale for and consequences of merger.

This post originally ran on December 15, 2007.

7 Comments
Topics: Public Policy, Regionalism
Cities: Indianapolis, Louisville, Nashville

7 Responses to “Replay: An Examination of City-County Consolidation”

  1. Anon says:

    Let’s assume there is no cost saving from consolidation. I would still argue that everyone is better off. While elites might channel tax dollars to cronies for overpriced civic projects, in the end they are still business people. Entrepreneurs and corporate site selectors can work with them. On the other hand, when the central jurisdiction is run by “community organizers,” private employers will drift away and not be replaced. The inner city residents have a better chance of being employed and receiving municipal services in the long run if the county is a functioning business environment rather than a donut or dying region.

  2. Alon Levy says:

    I don’t think it’s obvious that larger bureaucracies are less efficient. The example of Washington actually goes the other way: the feds may be corrupt and inefficient, but the local governments are even worse. The federal government is ideological and has diffuse power base, which means that decisions are based on general principles and lobbyists have to spend considerable effort on corrupting the process. Local governments are the opposite: the same developers and business interests stay in power, because the local power structure is small enough that a few people can dominate it. On the local level, an individual or a small group of individual can buy elections; on the federal level, campaigns are so expensive candidates need to raise money from a diverse set of sources.

    For the same reason, at the federal level the President tends to be cleaner than Congress.

  3. Alon, I think you are making the point. At the federal level, only large corporations, unions, and other extremely well financed interest groups – i.e., power elites – have any ability to influence the system, whether it is corrupting or no. In small local governments, even organized neighborhood groups can get the city’s attention.

    Though I will say that the higher up the food chain you go, the easier it has been to push through new policy directions.

  4. Free lunch says:

    Nearly every government proposal is intended to consolidate power – that is a given!

    Infrastructure is not even consolidated. All local roads are under the jurisdiction of the respective excluded and included cities, as well as all (excluded) or some (included) of the other standard municipal services.

    And even with planning and zoning, three of the four excluded cities have their own Boards of Zoning Appeals and their respective councils make zoning recommendations to the MDC.

    And TIF’s are just another way for developers, etc to steal money from other taxpayers, with the help of the government (Corporatocracy), so that they can be further enriched. And don’t tell me they are taking risks; there is no risk involved when someone uses and abuses other people’s money.

  5. Alon Levy says:

    Aaron: yes, but those elites that are capable of influencing government have conflicting interests, and have since the 1960s.

    For example, take unions and business. On the local level, both have a vested interest in beggar-thy-neighbor policies and in promoting the status quo. But on the federal level, which sets minimum wages, labor regulations, and laws governing union behavior, their interests are opposed. This brings ideology into politics, and thence the voters. In fact some of the cleanest governments in the world make law by having representatives from unions, business, and government meet together and hash out details on wages and benefits.

  6. Gingerman says:

    Good post Aaron. I’ll check out the paper.

    In the meantime, I’d say that in any practical sense, the “consolidation” in Indianapolis and Louisville are in name only and are worth virtually nothing.

    Without appreciable efficiencies and cost savings resulting from a substantial combination of governance and administrative functions, I see no justification for the exercise.

    Moreover, I find it extremely short-sighted that poorer segments of a region should subsidize wealthier areas.

    Precisely the reverse should be the case, should be a principal object of consolidation: bringing everyone closer to the middle, economically. The region as a whole will benefit from lifting everyone’s boat together, and the region will be weighed down to the extent that any one part of it lags significantly behind the rest.

  7. Tom Jones says:

    It seems strange to give so much credence to two people who are the professional \expert\ who opposes government modernization throughout the U.S. They’re like the psychiatrist who shows up at the murder trial to explain why every one else is wrong. For mid-sized cities struggling to compete in this economy and with disproportionate public sector costs and inefficiencies. It’s easy to find research to support either side of most governance questions, but the 100 cities looking at consolidation indicate how desperate our communities are for practical solutions than academic navel-gazing.

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