Government and Human Resources

Consolidation analysis not conclusive

But there’s no evidence the ‘holy grail’ of government mergers has boosted economy.

December 8, 2012
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Members of the Kent County Community Collaboration Work Group got the bottom line regarding consolidations between metro areas from the W.E. Upjohn Institute for Employment Research last week.

Although the results weren’t conclusive, the findings didn’t offer overwhelming evidence for merging a county with a city, as the One Kent Coalition proposed last year for Kent County and Grand Rapids.

George Erickcek and Brian Pittelko, both of the institute, analyzed the before-and-after data from nine metropolitan areas that went through consolidations, including the one that some here believe is the “holy grail” of governmental mergers — the one that united Indianapolis and Marion County, Ind.

What they found was the economy in four of the nine grew somewhat a decade after consolidation, by an average of roughly 2 percent. But when the merged areas were compared to 190 control-group cities that didn’t go through a merger, the consolidated areas grew at a rate of less than 2 percent economically.

However, the merger that brought Indianapolis together with Marion County was one of the five that didn’t record economic gains across employment and personal income of its residents.

“That was as close to zero as you can get,” said Erickcek of the merger’s employment gains. “And we got nothing on income growth.”

Erickcek also said the manufacturing base didn’t grow following the Indiana merger, which began in 1968. The area did, however, make some positive strides in education. Erickcek added that when the control group was limited to metro regions only, and the smaller cities were removed from the analysis, there still wasn’t an economic gain from that consolidation.

As for the other merger some here have pointed to — Louisville and Jefferson County, Ky., — the economy there grew by 1.5 percent over 10 years, but only by 0.3 percent over the same time period when compared to the control group.

“Economic growth may not be the best yardstick to use to measure a good government,” said Erickcek, who added that he and Pittelko “tortured” the numbers and remarked that the data was limited. “It’s not conclusive either way. We cannot say ‘yea’ or ‘nay’ about consolidation.”

The Right Place President and CEO Birgit Klohs said the Indianapolis merger is perceived by some here to be the holy grail of consolidations and that there is something wrong with us here because we’re not Indy. “It’s the perception that everything is easier there than it is here,” she said.

Klohs added that perception has been built around the time-value of money in, say, the amount of time it takes a business to get the permits it needs. In some of the regions she competes with to attract new employers, Klohs said the areas receive those approvals at a quicker pace and it’s not about the fees companies are required to pay for permits.

Grand Rapids City Manager Greg Sundstrom, though, said some here consistently have keyed in on the fees that are charged and he felt that focus has to change.

“Part of it is we have to stop focusing on the fee and instead look at the quality of the product that is delivered,” he said.

To support his comment, Sundstrom mentioned Apple, the most successful computer company on the planet. Even though Apple’s products are the most expensive, the pricing doesn’t impede sales because it is known for delivering quality.

Grand Rapids Township Supervisor Michael DeVries said many people may not know that local units can’t do a lot to speed things up. “A lot of the things that governments do are dictated at the state level,” he said. For instance, the state has set the processes for a city to approve brownfield status for a developer or award an industrial tax exemption to a manufacturer. The latter has to follow six state-required steps.

Erickcek said perception not only plays a part in government services but it also has a big role in a lot of things, even if a perceived notion isn’t accurate. His example of a misperception that has become gospel in many circles is that there is a shortage of highly skilled workers. Erickcek said readily available data proves that isn’t true. “There is not a labor shortage,” he said.

Erickcek also said the Upjohn Institute could explore the relationship between the costs for and the efficiency of delivering services if it is requested to do so. At an earlier meeting of the work group, Erickcek said a big stumbling block to consolidation is found on a personal level. “It’s a matter of personalities. It’s difficult to get people to trust each other,” Erickcek repeated last week.

“You have to have a high level of trust to move ahead,” added Sundstrom.

County Commission Chairwoman Sandi Frost Parrish organized the work group about a year ago in response to the One Kent Coalition’s consolidation proposal. After a year’s worth of monthly meetings, the 13-member panel plans to file a report on its findings as early as next month.

Erickcek said he would provide the group with a written report regarding his consolidation findings. The cost to merge those governments wasn’t part of the analysis.

As for the Indianapolis-Marion County merger, the two are reportedly trying to merge their police departments.

“That’s something we have to consider. Forty-four years later and they’re still working on consolidation,” said Klohs.

“I don’t want to be Indianapolis. I want to be Grand Rapids,” said DeVries. “I want to be better than Indianapolis.”

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