Are Municipal Mergers Good For Taxpayers?

August 14, 2013

For overburdened property taxpayers in New Jersey, it’s hard to not welcome the idea of merging municipalities. After all, many politicians in the state couch their proposals to merge municipalities or share services with fuzzy sounding rhetoric about “efficiency”, “savings” and getting rid of “redundant services” in order to deliver taxpayers desperately sought-after relief.

There’s only one catch: often times merging municipalities fails to live up to that promise–and, in fact, can actually result in higher taxes and spending for local property taxpayers.

According to Justin Marlowe at Government.com, 10 such mergers have taken place over the past 30 years and “rarely” have they saved taxpayers money.

Second, it turns out that consolidations rarely save money. In fact, for the majority of citizens directly affected in these cases, consolidation has meant higher taxes and spending. Some cities consolidated because a larger government could improve local infrastructure. This has usually meant new debt and new taxes to repay that debt. Others offered generous pensions and health-care benefits to employees pushed out in the consolidation, thus saddling the new government with expensive legacy costs. In the consolidated town of Oak Island, N.C., per capita spending is two or three times higher than before consolidation, and that’s by design. Consolidation allowed this coastal community to offer new services needed to build a vibrant tourist economy.

In New Jersey, Trenton has been the primary force pushing for mergers and shared services; Senate Bill S2 being the latest example (see our Bill Tracker for more on S2).

But the data right here in New Jersey also show the folly of merging municipalities and establishing communities with larger populations. The per capita cost of operating cities like Camden, Trenton and Newark is always far higher than in our small towns while these cities also receive large sums of aid subsidized by taxpayers outside their precincts (see here for NJ data). In a nutshell, all politics is local and taxpayers benefit when governments are smaller and more accessible to the people.

Merging municipalities and sharing services is, at best, akin to using a stick of gum to plug a hole in the Hoover Dam and will not solve our high property tax problem. Real property tax relief will only come when Trenton ceases tying the hands of local government with an endless stream of mandates such as cost-inflating prevailing wage and binding arbitration–and when the state scraps its unfair, unjust distribution of school aid dollars that is literally robbing rural and suburban taxpayers to subsidize our 31 failing former Abbott districts.

You can read the rest of Justin’s piece on municipal mergers here.

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