Perks of amalgamation limited: economist

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An economist specializing in municipal amalgamation says he understands why the city of St. John’s desire to absorb its neighbours isn’t mutual.

“I’m not surprised why the surrounding communities in the metro area would be opposed to an amalgamation,” said Adam Found, a Ph.D candidate at the University of Toronto.

However, he said, it might not be in the city’s best interests either.  From analysis of the Greater Toronto Area to the Halifax Regional Municipality, much of the recent academic literature on municipal amalgamations in Canada has suggested that combining forces often isn’t worth the trouble.

“Would they achieve economies of scale if they merged with the central city of St. John’s … the answer is probably no.”—Adam Found

After decades of talk and numerous studies, massive growth followed by budgetary crunches, St. John’s Mayor Dennis O’Keefe now says some form of amalgamation is inevitable. (Requests for an interview were not returned by TheIndependent.ca’s deadline.)

The St. John’s 2010-2013 Corporate Plan lists amalgamation as the no. 2 strategic direction, stating, “The city will continue to support and advance amalgamation of communities in the St. John’s [census metropolitan area] and capture the opportunities to reduce urban sprawl, capitalize on efficiency and effectiveness gains in the delivery of services, and reap the collective benefit of higher returns on investments and greater competitiveness nationally.”

The efficiency part of that equation has been the focus of Found’s research.  He said if Ontario is any example, it’s best not to bother, especially if the city thinks the move will alleviate budgetary pressures.

“My research has been very Ontario-centric,” he noted. “But to the extent that Newfoundland and Labrador requires their municipalities to deliver a similar set of services, I think the results would carry over.”

Economies of scale

For city councils, the allure of expanding the tax base and delivering services to more citizens is that doing so will be more efficient based on the principle of economies of scale, or the idea that there are cost advantages to providing a good or a service on a larger scale rather than a smaller one.

Found has discovered that while some services have strong economies of scale, others do not.

Generally speaking, government (upper management and council) and water distribution can be provided more efficiently with more people receiving services and forming the tax base. Roads and maintenance, a particularly contentious topic for St. John’s and Mount Pearl, are also part of this category.

Fire and garbage collection have a moderate economy of scale, and parks and recreation facilities and libraries have none.

Any efficiencies, however, max out at a population level about that of St. John’s, Found said.

“If I were to summarize the literature I would say scaled economies, if they exist, are for the most part exhausted by a 100,000 population,” he said. “Once you’re past that, either costs become flat, or they actually start going up.”

“At very small populations — sort of like the size of the small towns around St. John’s — yes, they probably could achieve some economies of scale if maybe a few of them merged together, but would they achieve economies of scale if they merged with the central city of St. John’s … the answer is probably no.”

Levelling up

The scale question, Found points out, implicitly assumes that levels of service are constant, but one of the things we see in municipal amalgamations is that efforts are made to bring services to the same level.

In amalgamations with a significant disparity between services, say, a rural and a urban area, ‘levelling up’ can be particularly costly, Found said.

“Harmonization usually means harmonization to the very top pay scale (for municipal employees), the very top benefit scale, not only that, the very top service level scale,” he said.

Sense of community

Usually, though, it’s not cost that is first mentioned by those who don’t support municipal amalgamation, it’s the the public perception.

The perceived loss of community, less localized government, and arguably weakened ability to tailor services to geographically-specific needs and wants are important factors for many, Found said.

“That is the largest impediment to get an amalgamation through.”