Local governments optimize resources through service consolidation when populations decrease

Authored by Brian Kim

As the population of municipalities decrease, especially across the post-industrial Midwest and Northeast, local governments grapple with providing the same level of services to their residents often with reduced operating budgets and ability to borrow funds for infrastructure improvements. For some municipalities, this may also mean the loss governing authority to make legislative decisions not addressed by the state, also known as “home rule authority.”

Home rule authority

States have varying definitions of home rule authority within their state constitutions or legislative statutes that extend to municipalities, typically based on minimum population size. For example, Illinois has the most stringent requirement for establishing automatic home rule authority at a minimum of 25,000 residents, whereas the next highest is 10,000 in the state of Washington. However, smaller Illinois municipalities can achieve home rule status by a majority citizens’ vote at a local referendum. Further, Illinois is also “self-executing,” meaning the state permits local governments to form a locally approved charter and pass ordinances rather than the state enabling legislation or law. For example, home rule municipalities in Illinois can tax, issue bonds, perform economic development activities and make other decisions, such as privatizing water utility service and changing zoning requirements. Home rule allows Illinois municipalities more control over how they finance and run their communities, contributing to Illinois having more taxing bodies than any other state.

Based U.S. Census Bureau data, Illinois’ population has been shrinking for four consecutive years (2013-2017) and experienced a net population loss since the last census in 2010. Should these downward trends continue through the 2020 U.S. Census, some Illinois municipalities risk losing automatic home rule authority. Municipalities outside the population threshold can obtain home rule authority by local referendum, but they would have to bring the item to a citizens’ vote.

While home rule authority is a potential challenge for some municipalities, local governments across the country can take proactive measures to cooperate with other entities to supply essential governmental services. In the case of Illinois, as a result of the Intergovernmental Cooperation Act of 1970, a non-home rule municipality can cooperate with a home rule municipality or another local government (e.g., non-home rule municipality, any county, any school district) to share facilities or provide a government service or activity it is authorized to offer. These cooperative arrangements are generally built upon the principle that municipalities recognize long-term financial benefits and operating efficiencies in banding together to providing essential government services.

Structural and functional consolidation

There are two approaches to consolidating government services. “Structural consolidation” is the combination of two or more local governments that assume responsibilities belonging to the previously existing entities. Historically, this merging and/or dissolution of local governments has been a complex and time-consuming process, usually requiring a major referendum. Instead, “functional consolidation” can present more realistic and significant opportunities to share services and may fall along the lines of a:

  • Shared service or cooperative agreement in which one local government provides a service to another
  • Joint activity agreement in which two or more districts perform a joint service across overlapping districts

While short-term expenditures may increase, functional consolidation agreements can maintain or improve the service by providing a higher and broader level of service at a collectively reduced cost for the amount of services provided over the longterm. For example, Lake County, Illinois has explored various shared services, such as pursuing joint purchasing of goods and services or consolidating many 911 emergency dispatch centers into a few regional 911 centers.

Government service consolidation in action

While there is strong precedent for these practices in Illinois, other states have taken broader legislative measures or mandates for establishing a strong framework for government consolidation. In 2007, the New Jersey state legislature passed the Uniform Shared Services and Consolidation Act (with later amendments in 2011), which aimed to remove existing legal and political barriers to providing shared services. The state legislature in 2007 also launched the Local Unit Alignment, Reorganization and Consolidation Commission (LUARCC), a “bipartisan commission [established] to fairly examine the allocation of responsibilities among local government in order to determine: (1) which level of government is best suited to deliver a given local government service, and (2) when consolidation will reduce the property tax burden for pairs or groups of local units, and to make recommendations to the Legislature.” In 2013, the state Senate approved the Common Sense Shared Services Pilot Program Act, which implemented a pilot program for five counties to “evaluate the efficiency and functionality of the sharing of services of certain local personnel having tenure rights in office.” The establishment of LUARCC and the passage of legislative acts provide municipalities more flexibility and increased opportunities for shared services.

An interesting development has been underway in New York. In 2017, the governor and the state legislature enacted the County-wide Shared Services Initiative (CWSSI), a multi-million dollar investment for counties to explore shared services among a county and its cities, towns, villages and school districts. The CWSSI includes a provision mandating each county’s chief executive to lead a panel comprised of all city, town and village executives in the creation of a county-wide shared services property tax savings plan with an estimation of savings. Sample county plans submitted in 2017 have included:

  • Consolidation of wastewater treatment services between a city and county
  • Cooperative agreement between villages and counties for the villages to provide street sweeping services on all county roads within the villages
  • Villages working cooperatively to house a public works facility in one central location for all villages

These proposals provide for cooperative local government services without changing the formal local government structure. In some cases, local governments were already cooperating, but this initiative has led to a marked increase and the continuing evolution of state laws and regulations has helped to mitigate some of the barriers to shared service efforts.

Next steps for exploring service consolidation

Notwithstanding provisions of state requirements on home rule authority, local governments should continue to explore streamlining and modernizing local service delivery. One step many local governments take is a thorough enterprise-wide review of their operations to assess any opportunities to increase the effectiveness and efficiencies of constituent service delivery. These reviews often come with additional benefits for governments such as identification of budget cost opportunities, enhancement of existing policies and procedures, potential reorganization opportunities and service delivery alternatives. In doing so, these governments can reduce expenses and exert more control without heavily fixating on the impact of population decline or stagnation.

For more information on this topic, or to learn how Baker Tilly state and local government specialists can help, contact our team.