Politics of Municipal Consolidation
KeywordsMunicipal Government Political Trust Municipal Service Small Municipality Large Municipality
Municipal consolidation refers to reducing the number of municipalities and increasing their scale in terms of geography and population by combining two or more municipalities.
This section explains municipal consolidation (In this paper, the words “municipal consolidation”, “merger”, and “amalgamation” are used interchangeably). Municipal consolidations have been widely used as a tool for administrative reform at the municipal level in developed countries. Consolidation means “[t]he action or process of combining a number of things into a single more effective or coherent whole” (Oxford University Press 2016). Municipal consolidation refers to reducing the number of municipalities and increasing their scale in terms of geography and population by combining two or more municipalities. Municipal consolidations have been planned or implemented with the hope of increasing efficiencies and effectiveness in the provision of municipal services by taking advantages of economies of scale. Economies of scale refer to the reduction of production of average costs arising from an increase in the volume of outputs. In the context of municipal consolidation, municipalities can provide more public goods and services at a lower cost per capita as the population served increases.
The purpose of this paper is to concisely explain what is known about municipal consolidations. This paper begins with an overview of global trends in municipal consolidations as a tool for administrative reform at the municipal level. Secondly, it will explain the main motivations for and arguments against municipal consolidations. Thirdly, this paper discusses critical issues pertaining to the municipal consolidation. Finally, a discussion and conclusion are provided.
Trends in Municipal Consolidation
Worldwide, reforms of the administrative structures of municipal governments have attracted great attention among policy makers, politicians, and scholars. Such municipal reforms usually occur in one of two contrary directions: municipal fragmentation and municipal consolidation. While many developing countries have pursued municipal fragmentation and the creation of new municipalities aiming at better service delivery, stronger local civil society, and more democratic decision making, developed countries tend to reduce the number of municipalities by consolidation in order to take advantage of economies of scale. In the U.S., municipal annexation, which is the process of increasing the geographic size of city by including an adjacent unincorporated area, is the most common type of local boundary adjustment (Edwards 2008). Municipal consolidation in the form of city-county consolidation, which is a merger of a city and county into one unified jurisdiction, is rare (Feiock and Carr 2000; Leland and Thurmaier 2005). However, municipal consolidations are a major form of municipal reform in most developed countries outside the U.S.
According to the OECD (2014), half of OECD (Organization for Economic Co-operation and Development) countries have planned or implemented municipal consolidations in the last 15 years. For instance, in Japan, the central government promoted municipal consolidations after 1999. This nationwide municipal consolidation reform reduced the number of municipalities from 3,232 in 1999 to 1,718 in 2014 (Ministry of Internal Affairs and Communications 2014). In Demark, the 2007 structural reform of local government reduced Danish municipalities from 271 to 98 (Blom-Hansen 2010). In Finland, the number of municipalities was reduced from 560 in 1945 to 416 in 2005 and 320 in 2012 through voluntary mergers (André and García 2014). In 1989, the New Zealand government implemented a major reform of local municipalities, reducing their number of municipalities from 454 in 1980 to 86 in 1990 (New Zealand Parliament 2014). Some countries such as Belgium (1975), Norway (1957–1967), and Sweden (1952) implemented large-scale municipal consolidation before 1980. See OECD (2014) for a list of countries which have conducted municipal consolidation.
Municipal consolidations can be either compulsory or voluntary, depending on countries and states. For instance, in countries such as Denmark, Greece, Sweden, and Turkey, forced municipal consolidations have been implemented. In other countries such as Finland, Iceland, Japan, the Netherlands, and Norway, consolidation decisions are on local voluntary basis. In Australia and New Zealand, whether or not municipal consolidations are voluntary or compulsory depends on the individual states (André and García 2014). In the case of voluntary consolidations, the decision often relies on local referenda (OECD 2014). Even when a merger decision is on voluntary basis, that does not mean that the central governments do not influence merger decisions or provide no incentive for municipal mergers. For instance, the central government of Japan carried out the Great Heisei Consolidation from 1999 to 2006. Although the consolidation was decided on a voluntary basis often through a referendum process or other means, the central government promoted municipal consolidations nationwide by revising laws and giving strong fiscal incentives for consolidation. This led to the reduction in the number of municipalities from 3,229 to 1,821 within a 7-year period (Yokomichi 2007).
The consolidation process can be classified into one-shot or progressive consolidations (OECD 2014). The national government may require or encourage many municipalities to merge at the same time. For instance, the aforementioned Great Heisei Consolidation from 1999 to 2006 is an example of one-shot consolidation reform. The 2007 Danish structural reform of municipal governments is another example of multiple consolidations carried out at the same time, reducing the number of municipalities from 271 to 98. Alternatively, in the progressive case, consolidations are not carried out at the same time. In this case, individual municipalities are allowed to carry out consolidation sometimes at their own pace and sometimes with a deadline set in advance (OECD 2014). For instance, after the period of Great Heisei Consolidation in Japan, the number of municipalities was gradually reduced from 1,821 in 2006 to 1,718 in 2014.
Arguments for and Against Municipal Consolidation
Proponents of municipal consolidation have proposed several reasons in favor of amalgamation. Among the several potential advantages, the most frequently cited reason is taking advantage of economies of scale to improve the provision of municipal services (Dollery et al. 2007; Fox and Gurley-Calvez 2006). Economies of scale refer to the reduction of costs arising from an increase in the volume of outputs. Larger municipalities in terms of population are able to provide municipal services at lower per capita or unit costs. Consolidating municipalities can reduce fixed costs and administrative duplication. For instance, merging three separate water plants into a single large one can reduce fixed costs such as equipment and administrative expenses and thus produce water at a lower cost.
A second argument in support of municipal consolidation is that larger municipalities can develop more professional staffs and specialized departments that cannot be acquired easily by smaller municipalities (Dollery et al. 2007; Fox and Gurley-Calvez 2006). For instance, amalgamated municipalities are able to hire staffs with higher expertise in regional planning or economic development and create specialized sections for specific purposes. Such advancement in administrative capacities can enhance the effectiveness of municipal services, and it enables municipal governments to respond to more diverse demands from citizens. Thirdly, some proponents of municipal consolidation emphasize the benefits of having more coordinated regional planning and economic development as a result of consolidation (Fox and Gurley-Calvez 2006). Consolidation enables municipalities to plan and implement more coherent regional and economic development plans within the enlarged area encompassed by the merged municipalities, which were otherwise planned and implemented by separate municipal governments. Municipal consolidations can also implement unified regulations regarding land plans and economic activities within the consolidated areas. Uniform regulation lowers the cost for private companies and land developers who otherwise would have to deal with a number of separate local government entities and a diversity of regulations (Dollery et al. 2007; Fox and Gurley-Calvez 2006). This improves the business climate and thus may attract more business and investment into the local area.
While municipal consolidations have been pursued with the hope of achieving the aforementioned potential effects, there have been criticisms against consolidation. Opponents of municipal consolidation, who tend to support fragmentation of municipalities, often cite the positive impact of competition among small municipalities for better service provision. The underlying idea behind municipal fragmentation is that competition among small municipalities leads to better public service delivery at or near lowest cost (Geoffrey and Buchanan 1980; Goodman 2015). According to this argument, competition among local governments will provide the opportunity for citizens to choose the municipality which provides the services and assesses taxes that best fit their demands. In addition, in large municipalities, municipal services are not tailored to citizen preferences because officials in large municipalities may not be familiar with local circumstances (Steiner and Kaiser 2016). Therefore, amalgamated municipalities may not be able to respond to local citizens’ demands with sufficient details. Furthermore, efficiencies in service provision may be hampered by budge maximization in larger bureaucracies (Hanes 2015).
Another important criticism against municipal merger has been raised from the perspective of local democracy. The ancient Greeks considered as appropriate for a successful democracy jurisdictions that were large enough to be self-sufficient but small enough that citizens could get to know one another (Blom-Hansen et al. 2014; Larsen 2002). In modern political science, scholars have debated over jurisdiction size and the healthy functioning of democracy (Dahl and Tufte 1973). Opponents of municipal consolidation point out that people have less access to local elected representatives and the bureaucracy in larger municipalities (Vojnovic 2000). Such declines in citizen access can negatively affect various dimensions of local democracy, including interests in politics, political participation, political trust, political efficacy, citizen satisfaction, and functions of local councils (Hansen 2015; Kjaer et al. 2010; Steiner and Kaiser 2016; Vojnovic 2000). Therefore, these advocators claim that municipal consolidation might damage the quality of local democracy and encourage smaller municipalities.
Some Issues Regarding Analysis of the Effects of Municipal Consolidations
Despite the extensive arguments for and against municipal consolidation among policy makers and scholars, previous studies have not yet established conclusive results regarding the consequences of consolidation on the effectiveness and efficiencies of service provision (Allers and Geertsema 2014; Reingewertz 2012; Vojnovic 2000). Some studies find positive impacts of municipal mergers, while other studies find no evidence or negative impacts. Studies examining the effects of municipal consolidation on economic development are likewise scarce and have produced inconsistent results. Furthermore, there have been few empirical studies on the effects of municipal consolidation on the local economy covering nationwide reform data (Hanes and Wikström 2010).
Some studies find positive impacts of municipal mergers, while other studies find no evidence or negative impacts. Such inconsistency might be due to a failure to examine various contextual factors. For instance, the effects of municipal consolidation might be contingent on which entities merge or the composition of merger partners. The selection of the merger partner may affect subsequent merger effects. For instance, having a financially weak municipality as a merging partner may offset potential benefits of amalgamation such as improved efficiencies in spending.
Moreover, one may need to analyze municipal consolidation from the perspective of organizational behavior. Municipal mergers cause significant organizational change for those institutions affected by mergers. Local officials in the merged municipalities may not fully understand or accept the necessity of mergers. They may have anxieties or uncertainty about the changes and potential personnel loss that consolidations brings. Municipal managers in new municipalities need to manage resistance from local officials and successfully lead significant organizational change (Denhardt et al. 2015). Organizational merger is like a marriage. Compatibility of organizational cultures such as patterns of work behavior, beliefs and values, risk orientation, and achievement orientation are important (Denhardt et al. 2015). The degree of homogeneity in the organizational cultures of consolidated municipalities may also matter for municipal performance in the new, larger entity. New merged municipalities that have relatively heterogeneous organizational cultures among the partners may need more time to create a new organizational culture and to perform well than merged municipalities with relatively homogeneous organizational cultures.
Another issue that one needs to consider when examining merger effects is the role of leadership. Previous studies suggest that the mayor’s leadership and capabilities matter for organizational performance. A mayor’s qualities such as education, expertise, age, and experience can affect municipal performance (Avellaneda 2009). And so the consolidation effects might be contingent on the mayor’s capabilities. A mayor with relevant expertise and experience may mitigate negative impacts. In addition, a mayor with the appropriate qualities may accelerate positive merger impacts. Thus, the mayor’s leadership might condition the merger effects on municipal performance.
One of the other critical issues pertaining to the analysis of consolidation effects is that most studies tend to overlook the issue of the unequal distribution of advantages and disadvantages among merged units. When empirically measuring the effects of consolidation on municipal service provision and local economic development, previous studies tend to assess how consolidations affect service provision of and economic development in new municipalities as a whole. The unit of analysis is the post-merger jurisdiction. However, municipal consolidation may not uniformly affect all consolidated jurisdictions. When some municipalities are merged into a larger one, it is likely that some areas within the post-merger jurisdiction could benefit from the merger more than others. Perhaps, some jurisdictions can gain more efficiencies and improve the effectiveness of municipal services more than other jurisdictions within the merged unit. Consolidation may positively affect local democracy for residents living in the central areas, however it may increase political alienation of citizens living in the “absorbed” areas in new municipalities. A municipal merger may boost local economic growth in some areas, however the effect may not be uniformly experienced within a merged municipality. Perhaps the areas that were absorbed by the larger municipality may gain less from consolidation. One important factor in the inadequacy of the research focusing on the gap in benefits within merged municipalities is the absence of sufficient data in the pre-merger unit. After municipal mergers, most cities do not continue to collect data in the pre-merger unit. The data collection unit tends to be the post-merger unit rather than the pre-merger one. Most existing studies assessing merger impacts tend to rely on only post-merger unit data, which consists of aggregated data from merged municipalities. Therefore, it is difficult to analyze how, for example, economic growth or levels of democratic participation have changed in the same area before and after municipal mergers. We still do not know the empirical results of the issue of the unequal distribution of advantages and disadvantages among merged units.
This entry has provided an overview of municipal consolidation, its global trends, arguments for and against municipal consolidation, and some issues for future research agendas pertaining to the analysis of municipal merger effects. Municipal consolidation is defined as the reduction in the number of municipalities and increasing their scale in terms of geography and population by combining two or more municipalities. Municipal consolidation has been carried out with the hope of achieving improved efficiencies and effectiveness in municipal performance and better fiscal outcomes. While fragmentation of municipalities has been actively pursued in developing countries, municipal mergers have been a main means of municipal reform in developed countries. Almost half of OECD member countries have considered municipal consolidation as a significant tool to improve performance and fiscal conditions of municipalities.
Municipal consolidation can improve the provision of municipal services by taking advantage of economies of scale. Consolidations enable municipal governments to develop more professional staffs and specialized departments, which are expected to bring significant benefits to economic growth, urban planning, and social welfare at the local level. In addition, local governments are able to carry out more cohesive regional and economic development plans within the enlarged areas encompassed by the merged municipalities. However, policy makers and scholars who prefer municipal fragmentation are wary of the downside of consolidation. Municipal consolidations may reduce competition among municipalities, which may result in the loss of effectiveness and efficiencies in municipal services. Officials in enlarged municipalities may not be aware of local circumstances. Therefore, large municipalities may not respond to local citizens’ demands effectively. From a perspective of democratic politics, municipal consolidations may reduce citizen access to elected representatives and bureaucracies, which may negatively affect the democratic activity of local citizens.
Despite a trend in municipal consolidations in developed countries, scholarly works have not yet found conclusive results regarding the outcomes of consolidations. The lack of consistent results might be due to the failures in considering contextual factors. This paper suggested some future research agendas for examining the effects of contextual factors on municipal consolidation. Factors such as the composition of merger partners, organizational culture, and mayor’s leadership and capabilities should be included when one examines the effects of municipal consolidations on municipal service provision and their fiscal outcomes. In addition, the paper points out the importance of using pre-merger jurisdiction unit data, in addition to data from the post-merger jurisdiction. The effects of municipal consolidation might not be equivalent within merged units. Consolidation may enhance economic growth in some merged areas. However, other areas, especially those which are absorbed by a bigger municipality, may not enjoy the same level of economic development. Policy makers and scholars need to pay more attentions to the inequality of benefits or drawbacks of mergers within merged areas.
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