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Municipal mergers could cut costs, boost federal aid

Steve Bergsman
Inman News

Recently, I wrote an article related to the high cost of owning property in Florida. I noted that in the Miami area, the cost of property taxes and insurance equate to a veritable second mortgage. The editor for that publication, who lives in New Jersey, sent me an e-mail saying things were no different in her state.

It's not just New Jersey and Florida where homeownership has gotten more expensive, but almost everywhere else as well. The problem is that local and state governments need more money, and the only way to get that is to increase one of three types of taxes: income, sales or property.

For some reason we tend to accept higher income and sales taxes, probably because they are not so apparent as the lump-sum thousands of dollars we all have to pay in property taxes.

Governments, unlike private industry, consistently expand and rarely contract, so the need for capital is an ongoing problem that is exacerbated in times of recession. But governments, if they did act more like private companies, could avoid having to tap the taxpayer for more dollars.

One of the many motivations for a corporate merger is the extent to which such a combination would generate cost savings. For example, when beer companies Coors and Molson planned to merge back in 2004, executives at the two firms touted $175 million in savings that would result from the merger.

Even if that number was an outright exaggeration bandied about to get shareholders to vote for the merger, if 75 percent of the fib was accurate that still generated a large savings.

What has that got to do with governments raising property and other taxes?

The answer is: instead of beating up the citizenry for higher taxes, neighboring cities and even counties should merge, thus creating one government and one bureaucracy instead of two. Indeed, higher populations also attract more federal dollars, especially to the hard-hit education sector.

So, instead of raising taxes, governments should merge to effect cost savings.

Take a look at New Jersey, where my editor lives. According to the Tax Foundation, New Jersey's state and local tax burden is the highest in the nation and also ranks No. 1 in terms of the highest property tax. In 2008, residents and business owners in New Jersey paid a per capita tax rate of $2,642, or 4.88 percent of the state's average income.

As the Tax Foundation summed up, New Jersey had "the third worst individual income tax, the 10th worst sales tax and the worst property tax."

In November, the New Jersey electorate threw out its incumbent Democratic governor, Jon Corzine, in favor of Republican Chris Christie, partly because Corzine was unable to get control of state expenses and bring down taxes. After the election, one local newspaper columnist wrote: "Last week, we elected Republican Chris Christie as governor. Can he cut the high taxes, spending and political manipulation of the economy that are bankrupting our state?"

Maybe Christie should look at the embedded costs of the state's fractured local governments. Geographically, New Jersey is a small state of just 7,836 square miles, but it boasts 21 counties. Let's compare that to my state, Arizona, which is 113,909 square miles, but counts just 14 counties.

Of course, you might say New Jersey is more densely populated and therefore needs more counties, but that's not necessarily true. If two small counties combined, it could actually result in a more efficient government.

Oh no, you counter, a New Jersey county probably has three times as many cities as an Arizona county. That, again, is the point: There are so many small cities in New Jersey, each with its own bureaucracy competing against its neighboring municipalities, that it triples if not quadruples the entire cost of governing the state.

It's not as if New Jersey hasn't pondered this question. There is in existence a group called the Local Unit Alignment, Reorganization and Consolidation Commission that is supposed to submit recommendations on municipal consolidations.

Apparently, it has been a little slow to get results. According to an April 2009 column in the Times of Trenton, "the commission filed a report, but it contained no recommendations that could be mobilized against soaring property taxes in the near future."