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Monday
May022011

Consolidation is the wrong response

Consolidation is the current least-painful way to avoid dealing with the underlying financial problems of our cities and towns. But like consolidation in the banking sector, municipal consolidation will only amplify the underlying fragilities inherent in our development pattern. A better solution would be to embrace the innovations - and failures - that would come from thousands of local experiments in adapting to our current financial situation.

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Our state and local governments are in a bit of a pickle. The gravy train from Washington - which was not all that great, really - has stopped running. The good old days - which weren't really all that good, in retrospect - are long gone. "Recovery" seems a distant dream. And on top of it all, the electorate (that's us) seems mad as hell and unwilling to wait for any type of long-term "transformation" to take place. What's a decent local politician to do?

The first thing to try is to borrow money, spend the rainy day fund and cook the books a little hoping this whole thing will blow over soon. Been there and done that.

The next thing is to borrow seriously more money, try some "stimulus" in the form of more spending and/or less taxes, and basically inject some adrenaline into the heart of the economy to try and bring it back to life. Charging....clear.....charging....clear....

Now we are at the point where we start to talk about changing the way we do things. In other words, we've come kicking and screaming into the "transformation" phase. But this is the early transformation phase, that part of the cycle of decline where we try and change without really having to actually change. And what better way to make non-substantive change than consolidation.

Consolidation is a response to the notion that our problem is essentially one of efficiency. The idea is that local governments are not efficient enough and therefore we can increase efficiency by combining them into fewer governments. Like the banking sector, fewer players means more efficiency.

And like banks, fewer players will amplify fragility.

Take school consolidation as an example. Consolidating schools is something that has been going on since the early 1900's, but it became one of the "solutions" to the budget problems of the late 1970's and early 1980's. And while there is little argument that consolidation of schools allows for greater efficiency, it comes at a cost.

Many of today's school districts are geographically huge, especially in rural areas. Increased size means more bureaucracy and more red tape, increasing the distance between teacher and administrator, between classroom and parent. Multi-million dollar bonds to construct large, centralized facilities made more sense before $4+ gas. The reality today is that, no matter how high fuel costs go, we'll be busing kids for miles each way, unable to walk away from these massive investments we've made (no pun intended). We have exploding childhood obesity and, again, no way to avoid forcing our children into hours of sedentary bus riding each day.

And most importantly, by consolidating schools, we traded innovation for efficiency. In a day when we desperately need innovation in how we educate our kids, our schools systems seem calcified, unable to change course in any substantive way, despite the fact that we are falling behind in many key areas.

The need for innovation is the key reason why we should not be seeking the consolidation of local governments.

Lack of efficiency is not our problem. Lack of innovation is. And not the type of innovation that manifests itself in saving a few dollars on paper clips. What we need is the type of innovation that provides different responses to the same stresses.

Our biggest problem as a nation right now is that our places are generally all vulnerable to the same things. That is because we have all used the same cookbook (standard zoning) and the same Mechanisms of Growth (government transfers, transportation spending and debt) to get to where we are now. Fundamentally, our cities are all pretty much the same. When gas prices rise, our cities struggle. When growth slows or stalls, our cities go into decline. When government aid goes away, our places start to implode. This lack of resilience will only be covered up by consolidation, the day of reckoning pushed off and made more difficult as a result.

Instead of consolidation, we should embrace the core strength of our system; an ability to innovate. This means loosening the controls we have placed on our cities and towns thus allowing local officials to try different solutions to the problems they face. The correct response is not to become more parochial, it is to become less.

So why can't we do this? The reason is clear: we can't deal with failure. We hear the report about the one city that does something really stupid and we rush to pass legislation to ensure it never happens anywhere again. We see a senseless policy outcome and we create all kinds of rules to deal with it. We see a city near failure and we feel obligated to bail them out. We currently have no mechanism to wring success out of failure.

But clearly, if we want innovation, we have to embrace failure. After all, what percentage of businesses fail? What percentage of species fail? Natural systems - like economic systems - evolve, adapt and create only in an environment where failure is allowed. If we want innovation, we have to allow failure.

Does this mean we have to let some cities fail? Yes, but that need not mean that a percentage of our people are condemned to live in ruin. What if we took failing cities and put them in a sort of receivership? What if we gave a bonus to the communities that were most successful if they agreed to "adopt" one of the failing communities and walk them through a restructuring? This is just one idea - there are certainly more.

Consolidation will not get at the core problems that our cities face. The near-term increases in efficiency will mask the lack of innovation and the homogeneous outcomes that make all our cities vulnerable to the same Black Swans. If we want to build resilience and find solutions to our problems, we need to embrace the chaos - the innovation along with the failure - of natural systems and create a framework where local governments can experiment with responses to the current crisis.

 

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Reader Comments (5)

It would be much easier for towns and cities and the smaller bodies of government to innovate and become more resilient if they actually had control over the taxation of their residents. As it is, the huge bulk of our personal tax liabilities go (pretty much automatically) to the Federal and State governments. While some municipalities do levy their own additional taxes, they're pretty paltry in comparison, lest the citizens balk and move elsewhere. With towns and cities having to beg the Feds and State government to get that tax money back, whether in the form of direct aid or various projects and programs, the process gets distilled down to the absurdly general and formulaic prescriptions that have homogenized most of the country.

To wrest control of our environs back from the bureaucratic upper levels of government would require reversing the taxation scheme we have now. Make the Feds and the States beg the local municipalities for their collected tax monies. We got some good stuff built by the top-down method of governance, but it came at the expense of local investments, and it's simply ground to a halt as nobody can come to a consensus on what our priorities as a nation are. Now it's time for more local investment, building resiliency, improving quality of life, and doing it with our own money rather than shipping it off to some unknown location where it gets mixed together and redistributed by some arbitrary formula.

Building a consensus on what to do with those taxes is much easier at the city or small town level than at the State or Federal level, so things can actually get done and we can see the results of the various experiments in governance. With tax money in the control of the local units of government, it will enable much more self-sufficiency and eliminate a lot of cross-subsidization. However, the real trick is figuring out how to do such a thing. As I mentioned before, local taxes can't simply be raised because that would be on top of the State and Federal taxes already in place. To try to reduce the bureaucracy at the top to bring more control to the bottom would be a monumental task, but one with many benefits.

May 2, 2011 | Unregistered CommenterJeffrey Jakucyk

Amen. Ten stars and two thumbs up for that comment, Jeffrey. Absolutely right on, IMO.

May 2, 2011 | Unregistered CommenterCharles Marohn

Consolidation is only one of a handful of options. There are economies of scale for certain types of public good. The real answer in dealing with the cost (both from an accounting and economic perspective) is ask ourselves why we do what we do, in the first place. Second is, if we do what we do, how can we do this better and with less resources.

May 6, 2011 | Unregistered CommenterScott Dadson

Consolidation is one of the great strengths of European and Asian cities--that is, the consolidated Eurasian cities are able to plan on metropolitan scales we here can only dream of (see, for example, the planning that comes out of London or Paris, and compare to the typical U.S. city). In other words, opposition to consolidation per se is rather like tilting at windmills.

The issue is probably better framed in terms of overconsolidated units and underconsolidated units. And the scales have to match the reality on the ground. In the Philadelphia metropolitan area, for example, the inter-county competition for jobs has greatly weakened the metropolitan area as a whole, by flinging too many jobs too far from major transit nexuses. And to make things worse many politicians and policy wonks in the area like to frame the issue as city v. suburbs--when in reality it should be a cooperative metropolitan region, at which point it can operate in the right scale of competition (Philadelphia v. Boston or Philadelphia v. Baltimore, for example). In Europe and Asia, the largest cities aren't just consolidated--they're their own states (or whatever the local word is for first-level political divisions is).

To put it bluntly, a city needs to have a consolidated urbanized area, or be unconsolidated to the point the core is effectively its own city--the most consolidated cities in the country, in the Sunbelt, were the ones which were most successful in the past half-century--or at least the ability to undertake consolidated transportation planning (Boston and San Francisco are good examples of this: highly unconsolidated metropolitan areas with highly consolidated transportation networks). There is no in between--Australian cities, contrary to Eurasian cities, work because of their lack of consolidation. Most American cities are only half consolidated, and so paths to their success would seem to either involve shedding unsuccessful sections of the urban area, leaving only the core, or consolidating to the entire urbanized area, allowing for superior growth management (read: the imposition of a single zoning code across the urban area). Our political networks date from a different era, and are optimized to different needs--which is where the problem really stems from.

May 8, 2011 | Unregistered CommenterSteve S

Jeffery, I like your thoughts in general, although I have concerns that this reinforces inequalities and can lead to distortions in migration patterns (especially around schools, which is one of the reasons the suburbs got so much growth.)

You can also get into downward spirals where no one wants to live somewhere because the crime is high, and the crime is high because they can't hire enough police, because tax revenues are down, because no one lives there.

May 11, 2011 | Unregistered CommenterNicholas Barnard
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