Tuesday 16 June 2009

Auckland Supercity - Part Two

Rheema Vaithianathan, Auckland University economist, worries that the Auckland supercity will lead to job losses and in particular will hurt the suburbs.

I'm worried that the opposite will happen.

Let's turn it over to Wendell Cox, in interview with Winnipeg's Frontier Centre for Public Policy
FC: You have written eloquently about urban amalgamations – can you summarize your views on that subject?

WC: Virtually all urban amalgamations have been justified on the basis that we are going to obtain economies of scale and lower costs in the long run, and everything will be better because things will be better coordinated. I don’t see any evidence whatsoever that places that are amalgamated, whether we talk about Toronto or Montreal or Indianapolis or Miami, are better governed than places like Paris, for example, that has 1,300 local governments. Or Chicago that has about 200 local governments or more, depending upon the special districts you might include. The basic problem with amalgamation is that the last thing it does is reduce costs. What ends up happening is you need more bureaucracy. You have conflicting labour contracts of the previous organizations. The previous municipalities get merged in such a way that the worst provisions and the most expensive provisions become the controlling provisions for all of the labour contracts. Again. if you look at the real experience on the ground in the United States where we have marvelous data, you find that the larger municipalities tend to have higher costs per capita than medium-sized municipalities. The smallest municipalities also have high costs, but probably the optimal size for a municipality is somewhere in the 50-100,000 population range, which says that Winnipeg ought to be six cities – not one.

FC: You have written that some of the most successful cities are the ones with the most municipal government units. Why is local or neighbourhood control so crucial?

WC: It is crucial because we tend to treat people we know and walk by on the streets more reasonably than people we don’t know. It just so happens that we are much more responsible in how we treat our neighbours and our friends and our relatives than those we don’t know. That is just human nature. The closer we can have City Hall to the people who live there, the more responsible the public policies are going to be and the more in-tune the interests of the residents are going to be with public policies.
So instead of getting efficiencies, we get ratcheting up of expenditures to those of the worst districts.

Cox goes into more detail here and cites my old home town of Winnipeg as case in point:
In 1972, Winnipeg merged 13 smaller municipalities into one large entity called Unicity. These municipalities had previously co-operated on a number of common issues, like arterial roads and water projects, through a Metropolitan Corporation, but had
reserved to themselves a wide range of municipal functions. They competed with each other to attract development and residents, a fact that exerted pressure to keep municipal costs down. Evidence shows the merger removed that bias and municipal costs “leveled” up to the highest spending level, the one reported by the central, core city, with about half of the urban area’s population. Reduced accountability on spending brought higher property taxes, soaring debt levels and less responsive government units. These factors contributed to Winnipeg’s relative decline against other cities, falling from Canada’s third largest city in the late 1960s to the eighth largest today.

Critics suggest that amalgamation stamped the soul out of neighbourhood communities when it moved decision- making power and local service-delivery choices into the hands of distant, more unconnected, politicians who responded in the new structure to the tightly organized provider groups that dominated the new organization. One result was higher property taxes. Prior to a dramatic reorganization of city government under city manager Gail Stephens, city staffing and compensation levels peaked among the highest in Canada (see Manitoba has Larger Public Sector than Most, Frontier Backgrounder No. 3, December 2000, www.fcpp.org)

Did Unicity otherwise meet expectations? University of Western Ontario Professor Andrew Sancton, author of the book “Merger Mania: The Assault on Local Government (McGill University Press, 2000, p. 62), summarized Winnipeg’s Unicity amalgamation
project as follows: “What is the lesson of all this? It is that 30 years after Canada’s most dramatic and comprehensive municipal amalgamation – in which virtually all the residents of the Winnipeg city-region were included – the area now confronts the same problems as everyone else: most of the growth is occurring outside the
municipal boundaries and there is need for new mechanisms for regional co-operation. No one is recommending further amalgamations.”
BK Drinkwater comments more on the report. I share his generalized concern about multiplier effects: surely there then are offsetting divisor effects. But that's all beside the point if the spending cuts never actually happen.

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