Towns Rethink Self-Reliance as Finances Worsen

[question everything]

MAY 27, 2009

Towns Rethink Self-Reliance as Finances Worsen

By BOBBY WHITE
WSJ

As the recession batters city budgets around the U.S., some municipalities are considering the once-unthinkable option of dissolving themselves through "disincorporation." Benefits of this move vary from state to state. In some cases, dissolution allows residents to escape local taxes. In others, it saves the cost of local salaries and pensions. And residents may get services more cheaply after consolidating with a county.


In Mesa, Wash., a town of 500 residents about 250 miles east of Portland, Ore., city leaders have initiated talks with county officials about the potential regional impact of disincorporating. Mesa has been hit by a combination of the recession and lawsuits that threaten its depleted coffers, leaving few choices other than disincorporation, said Robert Koch, commissioner of Franklin County, where Mesa is located. Two California towns, Rio Vista and Vallejo, have said they may need to disincorporate to address financial difficulties; Vallejo filed for bankruptcy protection last year. Civic leaders in Mountain View, Colo., have alerted residents that they are left with few options but to disincorporate because the town can't afford to pay salaries and services.

Incorporation brings residents a local government with the ability to raise money through taxes and bond issuances. It also gives them more control of zoning decisions and development, and usually provides for local services such as trash pickup and police as well. Dissolving a town government, on the other hand, often shifts responsibility for providing services to the county or state. A city's unexpired contracts usually remain binding, and residents are still obligated to pay off any debt. But long-term commitments such as pension liabilities and day-to-day services such as sewage and water can be folded into services run by the county, public-policy experts say.

Disincorporations are rare, usually resulting from population declines that leave too few residents to support the government. The most recent in California occurred in 1972, when stalled growth and political instability led Cabazon to dissolve itself, according to the California Association of Local Agency Formation Commissions. In Washington state, the last one occurred in 1965, when Elberton gave up its autonomy after 70 years, according to the nonprofit Municipal Research and Services Center in Seattle. Today, some small municipalities are exploring the step to escape some financial burdens that have been exacerbated by the recession.

(snip)

A group of residents of Spokane Valley, Wash., have a different motive for their campaign to disincorporate the city of 90,000 near the Idaho border: They want to keep their city's government from increasing taxes and fees that would finance construction of a modern downtown district. The growth plans are too costly and break from the region's tradition of bucolic living, said Susan Scott, owner of Larks Storage in Spokane Valley, and one of the disincorporation campaign's planners. "Too many people are hurting from how bad the economy is doing," she said. "We just can't put up anymore with what the government wants." Spokane Valley Mayor Richard Munson said that the city is providing services in a cost-effective manner, and that only a minority of citizens want to disincorporate.

http://online.wsj.com/article/SB124337975286456249.html (subscription)

Printed in The Wall Street Journal, page A2

[Phoebe Loosinhouse]

1. An alternative would be for towns and cities to band together in regional co-ops

and spread the expenses.

I lived for a long time in Rhode Island, a beautiful little state on the precipice of a fiscal abyss due to unfunded pension liabilities, and assorted other fiscal inconveniences. Its a little state with many small towns and cities and ONE major city - Providence. The first thing that would strike anyone looking at Rhode Island is how incredibly inefficient it all is. Each little town with it's one or two elementary schools, one middle school and one high school has it's own central school administration with a Superintendent, Assistant superintendent, support staff, etc. - repeated all throughout the state. I live in a city right now that has dozens of elementary schools, middle schools and high schools, and we also have ONE superintendent for the whole system. The inefficiency of the Rhode Island public school system is nothing short of stunning.

The entire state is so small, you could split it in 4 quadrants and pool all the resources for police, fire, education, municipal services, etc. I am sure that the Rhode Island model of redundancies is repeated throughout all states and that regionalization of some services would be a great help to overburdened taxpayers.

[question everything]

2. I have wondered why, recently. RI has been compared to Michigan

as far as high unemployment and bad economy. Perhaps this is a reason.

But, as you've noticed, RI is small and it would be easy for several local governments to merge. The examples in the story are from the West where, except for large Metro areas like LA and Seatle-Tacoma, the cities are far apart.