What Illinois can learn from other states about supporting careful local government consolidation
Increased coordination and partnership across local governments in Illinois would make our communities more resilient in the future. As of April 2018, Illinois has 8,529 units of local government, according to estimates by the State of Illinois Comptroller, more than any other state. The presence of many smaller local governments may lead to more local participation and transparency. However, when many small, adjacent jurisdictions provide the same services, the results also can be higher costs and confusion for residents. In addition, the region’s local governments face revenue constraints driven by decreasing state and federal support. These conditions drive decreased capacity to provide services, lower staffing levels, and a backlog of infrastructure needs.
In their efforts to improve governance and service delivery, local governments in northeastern Illinois have long had a culture of creating partnerships. Many governments, including counties, townships, municipalities, school districts, and special districts, have found ways to share the cost of services or purchases, or in some cases, to consolidate units of local government. The State of Illinois should provide more support for local partnership efforts, as other states have seen the benefits of providing technical and financial incentives.
ON TO 2050, recommends encouraging partnerships for consolidating services or units of government based on the potential benefits, such as improved capacity and resources, greater efficiency, enhanced service quality, and cost savings. Such partnerships would allow communities access to professional staff and higher quality services than many smaller governments could provide on their own. The savings would potentially allow local governments to reduce costs or fund critical staff positions that enhance service. As part of implementing this recommendation, ON TO 2050 proposes that the State provide funding to local governments for service sharing and consolidation feasibility studies. This analysis explains the need for a program in Illinois, and provides case studies of four other states’ programs.
Why is state support important at this time?
In recent years, the State of Illinois has created statutory processes to consolidate individual units of government. But these processes have not been greatly used, particularly when the legislation was not sparked by a specific local government consolidation initiative. Taking advantage of these tools requires up-front investment in studies and sometimes equipment purchases, which local governments do not always have the expertise, available funding, or time to pursue. A state-funded grant program could more comprehensively support local efforts and establish best practices, such as feasibility studies or public engagement. With more state support, successful partnerships that lead to cost savings or improved services could be replicated and adapted by local governments across the state. For example, the six south suburban Cook County communities served by the Thorn Creek Basin Sanitary District have seen significant cost savings by consolidating sewage treatment. Best practices could be pulled from projects like Thorn Creek Basin as others considers partnerships and consolidation.
The State also has a role in bridging tax rate differences between local governments considering consolidation. In some instances, dissimilar service levels or tax bases may result in an increased property tax burden for taxpayers located in the district with lower levels of service or a higher tax base. After accounting for any expected long-term cost savings, temporary tax credits could offset the resulting tax differential and ease concerns of property owners about tax increases.
Considerations for Illinois
To support and promote local government coordination and consolidation, Illinois should consider the following potential elements of a state program:
Grants for planning studies: The State should provide grants to local governments for consolidation feasibility studies (similar to the state’s School District Reorganization program) that consider the fiscal and efficiency impacts of consolidation. Based on other states, a grant program might provide $50,000–$100,000 per project for planning studies.
Grants or loans for implementation costs: Similar to other states that provide assistance with implementation, the State could provide grants up to $1 million per implementation project, while a loan program might provide up to $100,000 per project applicant. Annual total loan program amounts could be subject to demand.
Temporary tax credits: The State should provide tax credits for a limited period to offset property tax differentials resulting from local government consolidation.
Outcomes-based approach: A grant or loan program should include requirements for a budget, work plan, and intergovernmental agreement in the application process, similar to other states, to ensure that local need and desire is clear. The program should study and report on metrics for tracking outcomes and measuring government performance pre- and post-consolidation, including enhanced services, improved infrastructure, and any state or local fiscal impact.
Priority to communities in disinvested areas with lower capacity: Communities in disinvested areas with lower government capacity —which may include low levels of revenues, staff, and/or tax base—should be given priority assistance through the program.
Experience administering grants: A state agency that already conducts outreach and provides training to local governments such as the Illinois Comptroller, should administer this program. An agency with experience in grant-making and administration, such as the Illinois Department of Commerce and Economic Opportunity or a Council or Commission within the executive branch of Illinois government could also be good candidates. Coordination with other state agencies that administer programs for local governments—such as the Illinois Treasurer, Illinois Department of Transportation, Illinois Department of Natural Resources, Illinois Environmental Protection Agency, and Illinois State Board of Education—is also a must.
Use regional, local and civic organizations: A state program should leverage current initiatives and organizations active in efforts at the local level for tasks such as designing a program, vetting applications, and providing technical assistance. In addition, counties, planning agencies, or civic organizations should be encouraged to partner with applicants, and provide technical and other assistance throughout the application, planning, and implementation process.
Many states have grant and loan programs to support consolidation efforts
Several states, such as Michigan, New York, Ohio, and Pennsylvania, have promoted and provided assistance for government consolidation by enacting legislation and awarding grants. These states’ programs are summarized in the table below. The following case studies examine how those states have led and funded programs to encourage partnerships for consolidation.
State programs to encourage local government consolidation
Program funding and award amount
Funding per project
|Michigan||Competitive grant program.||Municipalities and counties (special/school districts if partnered with eligible unit).||Shared service or consolidation analysis, legal fees, voting costs, office supplies, infrastructure, and equipment.||Fluctuated between $3.7 and $15 million annually.||No specified financial cap. Covers up to 25% for shared service or consolidation analysis and up to 100% for other expenditures.|
|New York||Competitive and non-competitive grants, tax credits, and a municipal restructuring fund for idea stage to implementation stage projects.||Municipalities, counties, local and regional district boards, special districts, school districts, and authorities.||Feasibility and planning studies, legal costs, equipment purchases, capital improvements, and transitional personnel.||$4 million in competitive grants, $492,345 in non-competitive grants, $9.7 million in tax credits, and $25 million available in municipal restructuring fund.||Competitive: Max $12.5k per applicant and $100k per project for feasibility studies. Max $200k per applicant and $1M per project for implementation costs.
Noncompetitive: Max $100k, with $50k for planning and $50k for implementation.
Annual property tax credit equal to 15% of levy post-consolidation.
|Ohio||Competitive grant and loan program.||Municipalities, counties, school districts, and authorities.||Feasibility studies, implementation, equipment, facilities, and system costs.||$9 million was available for grant awards and $36 million for loan awards, both annually.||Max $100k per feasibility study. Max $100k per loan applicant. Up to $100k per grant applicant and $500k per project for implementation costs.|
|Pennsylvania||Competitive grant program.||Municipalities and counties.||Planning and feasibility studies, equipment purchases, and new personnel (up to 50 percent).||Awarded $466,900 in FY 2017-18.||No specified financial cap. Covers up to 50% of eligible costs.|