Contracting out local road and park services: economic effects and their strategic,contractual and competitive conditions

ABSTRACT

The economic rationale for contracting out local services is increasingly contested by empirical research. This article aims to contribute to this literature, first by scrutinising the economic effects of contracting out in local road and park services and, second, by exploring how characteristics such as markets, contracts, municipal strategies and contracting history influence these outcomes. Drawing on original survey data from Danish municipalities, we find that competitive tendering has on average reduced costs. Further analysis shows that savings are not associated with lower quality, thus indicating that ‘quality shading’ was not taking place. Another finding is that municipalities that repeatedly contract the services experience smaller savings, suggesting that competitive tendering is subject to declining marginal returns. Finally, we find that larger municipalities and those emphasising expenditure cuts realise larger savings, whereas the characteristics of markets and contracts do not seem to explain variations in cost savings.     

The Effect of Fiscal Decentralization on the Financial Condition of Municipal Government

This study examines the effect of fiscal decentralization between states and their local governments on the financial condition of municipal governments. There are strong theoretical arguments on both sides of the federalism debate about the benefits for and against decentralization. Most of the research in this area investigates economic and social welfare consequences of fiscal decentralization. There is limited research, however, on the effects of fiscal decentralization on the financial health of local governments. Using data from the nation’s 150 largest cities, this study finds that intrastate fiscal decentralization results in weaker financial condition for municipalities in those states.     

What Should We Do? Public Attitudes about How Local Government Officials Should Confront Fiscal Stress

Despite strong scholarly interest in the topic of fiscal stress, little attention has been paid to understanding how the general public thinks local governments should respond to situations where declining revenues endanger service levels. This study reports findings from a survey of 660 residents undertaken between November 2006 and January 2007 in the US state of Michigan to examine their support for eight potential strategies to cope with fiscal stress in five different local government services. We find that the public has a surprisingly nuanced perspective about these strategies and on their use for different services. Our findings may provide local policymakers with some insights about how to respond to fiscal stress.     

Inter-municipal cooperation in the case of spillovers: evidence from Western German municipalities

ABSTRACT

This paper examines the question: Does the existence of regional spillovers have an impact on the emergence of inter-municipal cooperation (IMC) in tourism marketing? We use data from a survey conducted among Western German municipalities merged with official statistics regarding municipalities’ fiscal, political and demographic situation, as well as tourism-related characteristics. We are the first to apply a hazard model explaining the emergence of IMC. This method has serious advantages over the previously used methods. Surprisingly, our results show that especially municipalities with the opportunity to free ride start IMC more likely than municipalities without this opportunity. Apparently, under certain circumstances, municipalities are better off starting IMC than free riding.     

Crucial Decisions By Small Towns and Villages: Why Did Some Municipalities Choose to Merge But Others Did Not During the Nationwide Wave of Municipal Mergers in Japan?

This article focuses on the nationwide wave of municipal consolidations in Japan that took place from 2003 to 2006 and examines why some municipalities merged but others did not. The central government did not legally force consolidations but instead provided municipalities with fiscal incentives. I argue that small municipalities were reluctant to merge because they would lose generous transfers from the central government as well as decision-making powers once they unified with their larger neighbors. Fiscal incentives by the central government significantly raised the cost of remaining intact and induced a large number of fiscally weak municipalities to merge.     

Measuring Municipal Fiscal Condition: The Application of U.S.-Based Measures to the Context of Thailand

This research attempts to apply U.S.-based measures in order to examine municipal fiscal conditions in Thailand. Fourteen municipal governments located in the central and eastern regions of the country are explored, utilizing data from FY 2001 to 2006. The findings show that the selected measures of revenue-raising capacity and expenditure provide a sensible picture of Thai municipal fiscal conditions when compared to U.S. cities during past decades. Large, highly populous central cities as well as semi-rural, residential areas are fiscally weak. By contrast, suburban and industry-based cities are fiscally healthy. This study provides a foundation for the design of intergovernmental transfer systems that takes into account the local fiscal conditions and helps to extend the external validity of existing analytical tools.     

Public Nursery School Costs and the Effects of the Funding Reforms in Japan

Using a panel dataset of 983 municipalities across Japan, this article investigates the impact of the funding reforms in 2004 on public nursery schools’ operating costs. We found that municipalities responded differently to the reforms, depending on their fiscal strength and city scale. In areas with relatively large populations, fiscally stronger municipalities were likely to spend less on public nursery schools in the wake of the reforms, while municipalities in smaller cities spent more. Besides, municipalities that were not compensated for the loss of the national subsidy reduced expenditures in large cities. In small cities, on the other hand, such municipalities actually increased expenditures.     

Hardening Budget Constraints: A Cross-National Study of Fiscal Sustainability and Subnational Debt

This study explores the financial sustainability of subnational governments in four different countries. Scholars argue that subnational fiscal capacity helps local governments deliver better public services and provide public goods, which in turn helps to promote economic growth. While administrative control by the central governments contributes to reducing moral hazard from the soft budget constraints, bottom-up strategies to manage fiscal profligacy also need attention. The study first provides understanding about the characteristics of central-local governance and management of subnational government debt of each country. Then, we test our hypotheses regarding local fiscal capacity and administrative control, including political-economic factors that may affect debt spending by local governments. Our findings show that subnational fiscal sustainability improves when the central governments have clear rules to intergovernmental transfers in place and more (market) liberal policies, meanwhile when subnational governments have a more fiscal capacity and less intergovernmental transfers they are able to manage their debt more soundly.     

Adjustments in municipal fiscal crises. Are they different according to the gender of the mayor?

The literature on gender has attempted to explain the differences between the public outcome depending on whether the ruler is male or female, on the basis that men and women have different preferences. This scientific research has not yet examined issues related to fiscal crises, and our research aims to fill this gap. In a context of generalised economic crisis, our research examines if the gender of the mayor affected the fiscal adjustment policies carried out by municipalities with fiscal deficits in the Spanish region of Galicia. Our paper suggests that although gender of the mayor does not seem to have affected the level of adjustment in total current expenditure, it does seem to have influenced the way in which social and non-social spending were adjusted. Our study also highlights that female mayors are associated with lower levels of tax revenues and this could slow the adjustment processes of fiscal imbalances.     

The Determinants of Local Government's Financial Transparency

This paper contributes to the scarce literature on government transparency by analysing the impact of political and socio-economic factors on municipal financial transparency. Our sample covers the 100 largest Spanish municipalities in 2008. Compulsory publicity and transparency are key to public management (rule-of-law theory). Our data show that Spanish municipalities are providing financial information beyond the legal requirements, thus exceeding the compulsory disclosures required by the rule-of-law theory. The more taxes and more transfers per capita, the more financial information is disclosed and, accordingly, the higher the transparency is. Therefore the municipalities are not taking advantage of fiscal illusion or principal–agent effects, since they are not concealing higher levels of taxes and transfers from citizens. Furthermore, left-wing parties are more transparent than right-wing ones. Finally, the population also has a positive effect on the achievement of financial transparency.     

Political Fragmentation and Fiscal Status: Evidence from Municipalities in Israel

Abstract

This article analyses the link between fiscal balance and political fragmentation. While a large body of literature states that political fragmentation leads to fiscal deficits, others suggest that political fragmentation is associated with political competition, which tends to improve fiscal balance. These hypotheses are tested using budgetary and political data of municipalities in Israel for the years 1998–2006. The results suggest that both hypotheses may be correct, depending on voting behaviour. In Arab municipalities, where residents vote according to clan affiliation, low levels of political fragmentation are associated with large debts. On the contrary, in Jewish municipalities, low levels of political fragmentation are associated with small debts, since in these cases, coalition formation requires less spending and is easier to sustain.     

Identifying and Coping with Fiscal Emergencies in Ohio Local Governments

Abstract

This study examines the reasons fiscal emergencies occur in Ohio local governments and the strategies that local governments use to recover. In Ohio, fiscal emergencies have regularly occurred predominantly at the local level. This study aims to reveal the internal process that both bring on and ameliorates fiscal emergencies. Previous studies failed to differentiate between fiscal stress and fiscal emergencies and did not include the role of the Ohio Fiscal Emergency Law in assisting local governments in restoring long term fiscal health. This study finds fiscal emergencies in Ohio were caused by: (1) the increased costs associated with unfunded state-mandated programs and, (2) major economical downturns brought on by local plant closings. Local governments were found to have responded in the short run by strategies such as targeted expenditure cuts and in the long run by increased the use of economic development.     

The Role of Civic Engagement in Trisectoral Governance Approaches as Factors for Success in East German Municipalities

The demographic diminution and the special economic situation in the East necessitate flexible strategies that make use of all available on-site resources. This includes taking into account economic concerns in governmental and developmental strategies for the public sector as well as improved integration of ‘active citizens’, for whom the government must provide adequate basic parameters in order to assure lasting and effective participation. In this context, the following article presents the findings of a study on East German municipalities that clarifies the obstacles and specific potentials of a stronger cooperation between the various societal sectors that is characterised by trisectoral governance.     

Electoral Rules,Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities

We exploit a discontinuity in the rules of Brazilian mayoral elections to investigate whether political competition has a causal impact on fiscal policy choices. In municipalities with fewer than 200,000 voters, mayors are elected under a plurality voting system. In all other municipalities, a runoff election takes place between the top two candidates if neither achieves the majority of votes. Our results suggest that political competition induces more investment and less current expenditures, particularly personnel expenditures. The impact is larger when incumbents can run for re-election, suggesting incentives matter insofar as incumbents can themselves remain in office.     

A Survival Analysis of U.S. Municipalities in Fiscal Distress

This article uses survival analysis to investigate fiscal distress in U.S. municipalities. We hypothesize that fiscal distress is positively correlated with revenue concentration and debt usage, and negatively correlated with administrative costs and entity resources. We develop a model that can predict the likelihood of fiscal distress and correctly classify up to 86 percent of the sampled governments. The model enables users to analyze the impact of a change in the risk factors. Fiscal distress can be reduced most effectively by increasing tax revenues as a percent of total revenues or decreasing total debt as a percent of total revenues.     

Drivers and barriers of inter-municipal cooperation in health services – the Norwegian case

Inter-municipal cooperation in service delivery is widespread, as is the notion that this type of cooperation is primarily driven by economies of scale. However, the empirical results appear to be inconclusive, suggesting that additional explanatory factors are needed to explain why municipalities cooperate. This study aimed to identify the factors and conditions that influence the level of inter-municipal cooperation in health services by exploring a broad set of explanatory factors that go beyond simple economic concerns. In addition to confirming that a small population-size and fiscal stress constitute important drivers of inter-municipal cooperation, the results from this study also demonstrates the need to consider geographical location and heterogeneity relative to neighbouring municipalities as potential barriers to such cooperation.     

Economic resilience after the Great Recession: an examination of unreserved fund balance in Michigan counties

ABSTRACT

This paper examines fiscal slack, in the form of unreserved fund balance, as a tool used by local governments to enhance economic resilience. It adapts ecological, engineering, and organisational definitions of economic resilience and investigate their relevance to local financial management in the United States after the Great Recession in 2008. Using group-based trajectory modelling, we identify different strategies of fund balances used by Michigan counties. The change of fund balance does not delineate any pattern theorised by the resilience concepts. We also find different factors that motivate local officials to manage their fund balances differently. The study suggests a nuanced understanding of fiscal slack used by local governments for economic resilience that goes beyond unreserved fund balance.     

Fiscal and political determinants of local government involvement in public-private partnership (PPP)

ABSTRACT

In this article, we estimate the main determinants of local government’s engagement in public-private partnership (PPP) projects using logistic panel regression. We use data from 2478 municipalities and cities in Poland from 2009 to 2016. The results show that municipalities with higher levels of indebtedness have a higher probability of opening PPP tenders while local units that are more dependent on central grants or receive more European grants are less engaged in PPP. We also found that the mayors of municipalities and cities with stronger electoral competition engage in PPP with a higher probability. These results are important for discussions on the efficient use of PPP. They show that local government decisions made in conditions of fiscal constraint and political struggle can blur the PPP’s value-for-money aim.     

The effects of fiscal decentralisation on the strength of political budget cycles in local expenditure

In this article we analyse the effects of political business cycles and fiscal decentralisation on the expenditure categories of Polish municipalities. We find convincing evidence demonstrating the impact of strong political business cycles in almost all expenditure categories, particularly for the categories of expenditure relevant to electoral success, such as infrastructure and social programmes. We find evidence that transfers to municipalities increase the strength of the electoral cycle.     

Assessing the impact of a corporate headquarters relocation in a metropolitan region: the case of J.C. Penney

The objective of this paper is to analyze the impact resulting from the recent move of the J. C. Penney Corporation to the Dallas-Fort Worth metropolitan area and the resulting implications of this move on the local communities. This impact is analyzed in a spatially disaggregated manner to identify the location of the impact inside the area, particularly in regard to location of generated service employment and population, and the fiscal effects that they will have in the cities and counties of the region. The metropolitan area is divided into several hundred appropriate geographical zones, and the impacts are studied for these zones. Such disaggregated studies, as opposed to conventional total impact studies, would be more helpful to public and private sectors in their decision making process in regard to developmental issues. Furthermore, the fiscal effects of such development on the regional municipalities also will be studied.