Consolidation Success in Lieu of Size

A study of municipal spending in New Jersey revealed small cities are not always the best candidates for consolidation strategies

What Happened?
A recent analysis of municipal spending throughout New Jersey revealed the size of cities is not a direct indicator of whether consolidation strategies will boost efficiency or reduce costs.  Forcing small municipalities into larger organizations may not always drive lower property taxes.

Researchers at Rutgers University’s Local Government Research Center conducted a study comparing municipal spending across New Jersey to see if consolidation is always the answer for small, struggling cities. The study found that smaller municipalities are no more expensive than some of the larger municipalities in the state – contrary to the theory that small municipalities were driving up property taxes. The study showed:

  • New Jersey does not have too many general governments when compared to the other 49 states, 35 of which have more total governmental units and special districts per 10,000 people
  • The cost per capita of municipal government does not significantly vary between large and small municipalities in New Jersey
  • There are significant differences in the cost for municipal government when two factors are considered:
    • Each municipality’s New Jersey Department of Education District Factor Group
    • The type of municipality based on the state’s police character classification

Based on the findings, the researchers argue that decisions regarding municipal consolidation should be based on other factors besides the size of governmental units. In fact, forcing municipalities to consolidate may result in minimal savings at best, and may generate unexpected costs or losses during implementation to one of the two cities involved.

The Right Type of Sharing
When cities embark on consolidation strategies or shared services agreements, there are many factors to consider to ensure improvements in efficiency and cost-savings. According to the World Economic Forum, building out aspects of a sharing economy should unlock value in assets already in place as well as drive resiliency and innovation. To determine where to start sharing, the forum recommends:

  • Building awareness within the government of shared services or consolidation options
  • Figuring out what assets the city owns and could be shared
  • Analyze current policies to see what regulations restrict sharing opportunities
  • Starting on a small scale to experiment with processes and new policies before embarking on a larger initiative

Shared economies go beyond public services. Some cities are actually deregulating certain sectors of their local economy to welcome competition that offers delivery of services at lower costs. Seattle, for example, deregulated its transportation and hospitality sectors which opened doors for direct competitors of existing taxi and hotel monopolies to enter the mix.

A sharing economy is typically the result of entrepreneurialism blending with IT innovation. The World Economic Forum suggests public agencies work collaboratively with private sector IT experts to ensure market fairness and efficiency, while incorporating shared economy principles into governmental projects. This means designing new regulations to both support components of a sharing economy while proactively protecting against violations.

Why Share?
EfficientGov has reported on a variety of shared services stories, many of which result in significant savings and improvements in efficiency.

About the author


EfficientGov Staff

EfficientGov is an independent information service providing innovative solutions to fiscal and operational challenges facing cities and towns around the world.