Towns Too Small to Succeed - Part 3

In the previous two weeks we have examined 1) why municipalities turned to their courts and police departments to raise revenues 2) why so many small municipalities exist in the first place. This week we will examine why the numbers do not favor these tiny municipalities. Yet, for the whole region to thrive, we need its smaller pieces to realize their full economic power.

Before diving in further, let me note that this is not a 'big government vs. small government' argument that we have put forward. Ultimately there is a size when government becomes too big and a size for when government becomes too small. For example, does it make sense for an imaginary 'city' of eighty people to have a full blown mayor, council, police department, fire department, and court system in the twenty first century? Likewise, does it make sense to simply hand over all local decisions to a distant and larger government with redundant layers of bureaucracy ? In either case, the answer is no.

Big Gov versus Small Gov is typically a fake choice—a false dichotomy. This fake choice is usually employed by parties and politicians as a tactic to emotionalize debates and distract from the underlying substance of an issue. The question becomes not how big or small government should be, but how effective, equitable, efficient, and accountable should government be? If you ask us, a government that is not equitable, efficient, or accountable is ineffective.

With that question in mind, we're now brought to the concept of 'economies of scale.' A quick google search will tell you that an economy of scale is, "a proportionate saving in costs gained by an increased level of production." To understand what this means, think of Costco (not Sam's Club #Kroenke). It's cheaper to buy in bulk because it's easier for the company to produce in bulk. Costco's costs decrease as the scale of their operations increases. However, there's still a limit to how cost effective it is for the company to produce in bulk. If they scale their operations too large, then their costs actually start to go back up.

Governments and businesses are extremely different animals. However, that does not prevent us from applying the same idea to their delivery of services. After all, governments still have operations that they must apply in order to deliver services to their citizens.

The question remains the same: how many resources does it take to deliver a basic product or service? In business these resources might be investment, raw materials, workers, plants, machines. In government it might be tax revenue, assessed land and property values, an educated workforce, departments, and computer systems. Another way to look at the question is by asking what population size will allow a municipality to provide services to citizens at the lowest cost?

municipalscale.png A study conducted in Ontario estimates that a municipality of 30,000 residents is about the ideal size. Another study places lower cost populations in the 17,000-21,000 population range. However, those numbers change based on many factors like population density (rural vs. urban) and the particular service provided.

In St. Louis we have 48 municipalities with populations of 5,000 residents or less. 43 municipalities sit on a single square mile of land or less. This hyper-fragmentation, combined with higher rates of density and lower rates of assessed property value, virtually guarantees the inability of these municipalities to raise enough resources in order to deliver basic services. Simply put, these towns are too small to succeed.

While it's easy to point the finger and blame the people in these municipalities, their cities are mathematically designed to fail. However, some cities, like those in the Normandy School District, have pooled some of their resources and services in order to better serve their citizens. We applaud this kind of collaboration.

However, it will take more towns and more people coming together in order to realize the full economic potential of our cities and region. In order to make St. Louis Strong we need Normandy, Chesterfield, Kinloch, Ladue, Baden, Central West End, Oakville, and Clayton all to be strong. The perceptions of our towns, and more importantly, the economic well-being of our communities and citizens are inherently tied together—whether we like it or not.

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