Fiscal Implications of City-City Consolidations

Abstract

There is a rich literature on the fiscal implications of municipal consolidations. Almost all of it is focused on city–county consolidations. City–city consolidations, although rare, are an even better setting to test the claim that municipal consolidation reduces local government taxing and spending. We examine this claim with data from six city–city consolidations since 1985. We find that, in fact, most city–city consolidations result in higher taxing and higher spending on core operations and salaries. Consolidation produced lower overall spending in three of the six jurisdictions, but mostly because it was accompanied by lower intergovernmental revenues and changes in debt management. All this suggests the economic theory of consolidation would be more salient if it considered a broader array of benefits and costs that are not directly reflected in tax and spending rates.