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Fallout: The Financial Crisis

California cities join forces

Marketplace Staff May 20, 2010
Fallout: The Financial Crisis

California cities join forces

Marketplace Staff May 20, 2010


Tess Vigeland: One of the solutions corporate America has to hard times is the merger. So why not apply that idea to cash-strapped local governments? That’s what the cities of Glendale, Burbank and Pasadena are considering. The three cities nestled against the San Gabriel mountains north of Los Angeles are discussing whether they should consolidate everything from administrative costs to pooling their public transportation efforts.

For some perspective on whether this just might work, we turn to Jeffrey Sellers, who teaches public policy at the University of Southern California. Welcome.

Jeffrey Sellers: Thank you.

Vigeland: Well, I guess my first question is, is it possible to consolidate three, fairly major cities like this, and have everybody come out on equal footing?

Sellers: Yes, but it’s rarely been done before. Most cases of consolidation have resulted in relative equity, but when there’s any question about it, it becomes a political hot potato, and it often will defeat any serious effort, partly because of the issues of equity. But also, because a larger organization is often more inefficient and more difficult to administer.

Vigeland: Is there any example of where this has worked well?

Sellers: We have isolated examples, I’ll have to say, in various parts of the country. Minneapolis in the state of Minnesota is often taken as an example of at least a partial consolidation that was successful. The state government succeeded in setting up a metropolitan council that deals with all kinds of infrastructure issues and also redistributes tax money.

Vigeland: For the Twin Cities.

Sellers: For the Twin Cities and the surrounding metropolitan area.

Vigeland: What about the cost savings then? Is it possible to save, if this actually does save money?

Sellers: Sure, think about it in terms of just buying paper clips. If you’re buying for yourself, you can buy in small quantities, but if you buy for the whole family for a longer term, you can get a discount. That’s more or less the same logic that cities apply.

Vigeland: Is there any data showing how much money this can save?

Sellers: Actually, there’s relatively limited research right now on these kinds of arrangements. We have some theories that suggest that you can save a substantial amount — and in fact, the recent Nobel Prizes in economics were partly about these kinds of savings that companies or governments could get. So this is an area where there’s a lot of theorizing going on, and increasingly, researchers have looked at it empirically. But we still don’t have very settled findings about how much efficiencies can be gained.

Vigeland: Why not just become one city? I was playing around with this earlier, perhaps, Pasaburdale? Or Glendenabank? Something like that?

Sellers: Well, exactly. People have asked that question a lot, and it’s hard to ask cities like Pasadena, home of the Rose Parade and CalTech and all sorts of local icons, to give up their identity. Can you imagine the Rose Parade being held at Pasaglenburbank?

Vigeland: No. I certainly can’t. The broadcasters on New Year’s Day would not have fun with that, would they? Do you think the recession means this could become a trend in other parts of the country?

Sellers: Well, it seems that the kinds of economic ups and downs that cities have experienced over the last 10 years, actually, have accelerated this trend. The cities in California, in particular, are strapped not just because of the local finances, but they’ve also been hit by the budget cuts at the state level, as a result of the budget crisis. They have seen continuous cuts in the tens of millions of dollars over the last couple of years.

Vigeland: And it’s quite obvious to everyone that that is not going to get any better any time soon.

Sellers: That’s for sure.

Vigeland: Jeffrey Sellers is a professor of political science and public policy at the University of Southern California. Thanks so much.

Sellers: You’re welcome.

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