When Smaller is Better – California Contract Cities

Commentary, Municipal Government, Frontier Centre

Amalgamation is a dirty word in Ontario. The Conservative government of Mike Harris is forcing through a merger of the six biggest cities in the Toronto area to create something it refers to as "Megacity". The goal is to save money by — here we go again — "eliminating overlap and duplication".

But there is no proof that making an organization bigger saves money. In fact, there is evidence that jumbo-sized organizations, particularly those in the public sector, deliver services more expensively as they grow. Why? They generally come to require complicated management systems and more layers of administration, fat policy manuals and rulebooks galore. As they expand, the top becomes ever further removed from front-line services provided by staff to the citizen, who is theoretically their customer.

The large administrative superstructures that evolve from amalgamations have strong incentives to retain tasks and activities within themselves to justify their own existence. A natural and completely rational internal bias develops against other, less costly means of service delivery. Even when it can be shown that outside contractors and local non-profit community groups can provide better service at lower cost, for example, activities are kept in-house.

Unfortunately, the Harris Government seems to unfamiliar with the problems created by Winnipeg’s 1972 amalgamation of 13 municipalities into Unicity. That experiment, whose gloomy 25th anniversary is being "celebrated" this year, has resulted in unnecessarily high tax levels, comparative overstaffing, and a less responsive, top-heavy service-delivery structure.

Since they are so complicated, big organizations tend to perform less effectively. Thus, the Harris government’s Megacity policy, which is based naively on an overly optimistic view of government, will turn out to be a massive mistake.

So how does one make local government work better and cost less? Ironically, the answer may lie in the opposite direction from the one taken by our own policy-makers. One successful model shows that the key may be, in fact, smaller, more localized civic organizational structures.

The vast megalopolis that is southern California consists of dozens of small inter-connecting urban communities. Urban planners hate the lack of planning it represents. Some communities are "old-line, full-service" cities that deliver services directly through their own in-house workforce — the kind Canadians are familiar with. However, many other cities – 53 in the County of Los Angeles area alone – have embraced the contract system. That is, they contract out the task of providing municipal services to other communities, or to regional governments, or even to the private sector.

The governments of these "contract cities" are more responsive to their citizens’ (customers’) promptings than the ruling bodies of urban centres administered in the traditional top-down Megacity-Unicity way. Keeping control away from distant bureaucratic entities has paid off big in the form of dramatically lower costs and taxes.

Consider the southern California resort town of Dana Pointe, population 35,000. The cost of service to its residents is about a third less than that paid by people in a so-called traditional "full service" city where government employees deliver most services. Dana Pointe contracts all its services from local businesses, designing contracts to match demand with service levels. When tourist season ends, the city buys fewer services. The philosophy is one where government steers, not rows. Actual service delivery is left to the competitive marketplace, which can provide services at up to half the price of the traditional model.

Unsurprisingly, the contract city model requires a smaller, probably more professional staff. Only twenty-five civic managers run Dana Pointe. They design, monitor, and manage contracts to provide services to their customers-the residents. A traditional, full service city would employ hundreds of full-timers at significantly higher cost to citizens.

As our policy-makers struggle with old concepts of civic government, particularly with the delusion that bigger governments are better governments, perhaps its time for some of them to visit Dana Pointe and experience community governance from the bottom up.