Trustees and Consolidation: Doubtful Savings, Real Costs
by RON REINKING, CPA
The coming Indiana legislative session will be historic in that it takes up the founding structure of government itself. Legislation will be introduced that would meld the township functions into a uniform structure governed solely by county officials — an idea that promoters would like you to believe is a simple matter of efficiency.
This would follow the recommendations of the governor’s Kernan-Shephard Commission. The commission presumes that centralization would “improve efficiency and reduce costs.” This presumption, central to the purported changes, is dubious at best and has little if any meaningful or definitive empirical support.
Translating such a vague concept into a significant change in the government structure is difficult. Overcoming legislative modifications and hurdles will be formidable. To assist in this endeavor, the services of a public relations firm, MySmartgov, has been employed, amply supported by the Chamber of Commerce, the Board of Realtors, economic development partnerships, unions and other institutions promoting consolidation.
Considering the dollars and energy spent on the public-relations aspects of consolidation over at least a decade, one would expect the MySmartgov website to have some hard facts. Indeed, it only substantiates the lack of serious study supporting the promises of efficiency and reduced costs.
In the FAQ section of the site, for example, the question is posed: “What cost savings are expected as a result of the recommendations?”
The answer: “There simply was not time to produce cost estimates given the short time frame allowed to develop the commission’s recommendations.”
This is a devastating admission considering the amount of money spent in support of this proposal. It belies the contention of supporters that consolidation is only unpopular because the public is uneducated on its benefits.
There is, of course, education on consolidation — just not the type that consolidation boosters would like the public to read or hear. In 2005, the state legislature commissioned The Indiana Policy Review, a publication devoted to the financial and economic workings of Indiana governments, and Dr. Sam Staley, a national authority on state and municipal governments, to conduct a survey of academic experts in the field of urban planning.*
The experts were asked to respond to the financial implications of consolidating city, township or county governments with specific attention given to the supposed success of UNIGOV in Indianapolis.
Those responding, based upon their studies, could not support a consensus there would be cost savings resulting in merging governmental units. Moreover, they could not agree there would be any tax savings. In addition, several there was concern that “cost(s) would increase significantly as lower paid county and small-town personnel were merged into the larger departments and salaries adjusted upward.”
This last is known as the “negotiating up syndrome” and will be common if the consolidation process plays out.
UNIGOV in Indianapolis is commonly believed to be a progressive move to incorporate efficiencies and cost savings through the consolidation of governmental units in Marion County. In fact, though, the 1970 consolidation between Indianapolis and Marion County was quite modest and limited.
In 2004, a study was undertaken called “Indianapolis Works” that attempted to show savings that could be realized by completing that consolidation. The report concluded that it would result in $36 million in savings for the taxpayer.
This claim was debunked shortly afterward. A legislative study committee commissioned the municipal consulting firm, Reedy & Peters, to examine the conclusions of the “Indianapolis Works” report. The firm concluded that the report grossly overstated the savings of consolidation. In fact, Reedy & Peters could only document about $5 million in real savings, much of which was comprised of voluntary opportunities for governmental units to share services independent of legal consolidation.
One finding in the Reedy & Peters report regarding townships was particularly revealing. The “Indianapolis Works” report, which was widely promoted in the legislature and the media in contrast to the Reedy & Peters debunking, trumpeted savings of $5.6 million. The actual, documented savings of township consolidation, however, was a fraction of that advertised, only$650,000, a number unreported by the established media.
It is unlikely statewide consolidation of townships in 2009 would produce a different result. Moreover, while Indianapolis’s limited UNIGOV experiment is held up as a model of efficiency resulting in taxpayer relief, a recent article in Forbes Magazine gives more reason for doubt. A survey of major U.S. cities finds that Indianapolis now is the fifth most taxing city in the nation using standardized tax criteria.
This all should be a warning to legislators to carefully inspect claims that consolidation of township services will result in long-term savings for taxpayers. Moreover, even short-term savings may come at the expense of personal attention and accountability.
The reality is that many Indiana citizens will find the proposal by the governor and his commission to restructure government wholesale is poorly researched and in the end unworkable. That may be the reason, come to think of it, that the latest initiative was announced the Friday before Christmas, the day of the year the fewest Hoosier have time to monitor Statehouse news.
Ronald R. Reinking, CPA, an adjunct scholar of the foundation, owns an accounting firm in Fort Wayne. He has written widely on local government restructuring and economic development. Contact him at the foundation firstname.lastname@example.org.* The winter 2006 edition of The Indiana Policy Review, “Local Government: To Consolidate or Not,” is available in a downloadable pdf format to foundation members, accredited academics and media at www.inpolicy.org under “The IPR Journal” tab (registration required).