Costs Of Local Public Services Research Articles

Cost assessment of urban sprawl on municipal services using hierarchical regression

In Europe, especially in the Valencian Community, Spain, the growth of cities in the last few decades has brought with it a major paradigm change, shifting from a compact to a sprawling urban model. Although it is known about its important environmental, social, and economic effects, there is no clear and unequivocal measurement of the impact of urban sprawl on municipal spending. The impact of the sprawling city on public finances and on the cost of local public services is clearly one of the conditioning factors that should be assessed when making urban development decisions. Based on a measurement of the sprawling city, our aim is to calculate the effect of urban sprawl on the local administration’s expenditure and particularly on the cost of basic public municipal services. These are obtained through a statistical model with cost functions that can assess the increase in spending prompted by urban sprawl for municipal current expenditure. The proposed model is novel in the field of urban planning and is based on a Bayesian hierarchical model with the ability to include modeling constraints among the expenditures variables and handle missing values accurately. With this paper, we show that urban sprawl has a significant and positive effect on the unit cost of local public services, which results in an inefficient urban growth model from the economic point of view. The effect is not transferred homogeneously to the budget. There are spending items that are more sensitive to urban sprawl like expenditure on security and public transportation and community wellbeing, which primarily covers waste collection, elimination, and treatment; sanitation, and water supply and distribution; road cleaning; and public lighting.

Factors related to municipal costs of waste collection service in Spain

Actual cost of services of local entities (CESEL, in Spanish) is the name of a new official source of statistics in Spain, provided by Ministry of Finance and Civil Service, which intends to bring some transparency to a very obscure question: the real costs of local public services, in this case, the collection costs of municipal solid waste (MSW). The study analyzes the factors that determine solid waste collection costs in 2014, using a cross-sectional dataset of municipalities of the Spanish Mediterranean Arch and Madrid, with special reference to urban development. The results of the regression reveal a positive relation between waste collection costs and factors such as higher wages, coastal municipalities, tourist areas, population and separated collection; in contrast, the increase in urban population density contributes to lower costs of MSW collection, as well as indirect management of the service is cheaper than direct public delivery.

The effects of market concentration on costs of local public services: empirical evidence from Dutch waste collection

ABSTRACTDifferent concentration indexes are calculated for the Dutch waste collection market and all show that this market was highly concentrated in 2002, 2006, 2010 and 2014. The estimation results in 2002 show that private collection is cheaper but high concentration increases costs of private collection and therefore (partly) offsets the advantage of contracting out. In 2006, the savings gained from privatisation and also the effect of concentration disappear, probably due to the introduction of a VAT-compensation fund. In 2010, for an area with a radius of 30 km, high concentration increases costs, but for larger areas, this effect mostly disappears. For 2014, in most estimations, this concentration effect disappears. If we include fixed effects for a panel, the cost advantage of inter-municipal cooperation is larger than that of private production and concentration effects also disappear. Overall, these estimation results are rather independent of the concentration indexes used, if we investigate several indexes as an alternative for the Herfindahl–Hirschman index.

Corporatization and Firm Performance: Evidence from Publicly-Provided Local Utilities

This study investigates the effects of the corporatization process – i.e., the transformation of a municipal firm into a limited liability company – on the production costs of local public services whose ownership is maintained by the local government. Theoretical analysis predicts that, even without privatization, corporatization is a potentially effective way to improve efficiency (Shleifer and Vishny, 1994; Stiglitz, 2000). We explore this issue by using information on a typical local utility, such as the bus service provided by public transit systems in Italy, which experienced a reform of the governance towards the corporatization structure during the ’90s. The results on a sample of 33 local bus companies over the period 1993-2002 show that, even if public ownership persists, the transformation of a municipal enterprise into an autonomous company – corresponding to the first stage of the corporatization of local utilities in Italy – or into a limited liability company exerts a reducing impact on production costs.

The Failure of External Control on Public Utilities

Although on average the cost of local public services is quite high, the same cannot always be said about their quality. Why is this so? This paper suggests that the answer lies in the failure of external control systems. Specifically, four types of risk have been identified: (1) standardisation that is either lacking or incongruent; (2) inappropriate relationships between controllers and the controlled; (3) cases of erosion and resistance to control; (4) incoherence between control aims and methods, and the skill of controllers. The research method was based partly on an analysis of literature and partly on empirical observation. Initially, a thorough examination of articles on the subject published in the main international journals was carried out. Then empirical research (limited to the Italian situation) was added to support the research hypotheses, and which led to the paper’s conclusions. The results may be significant from two points of view. Firstly, although in recent years financial scandals have been very much in the news (the cases of Enron, Argentine bonds, football club scandals) literature has not yet systematically dealt with control failure. Secondly, the conclusions may be of support to public administration policy-makers or to controllers who need to improve their professionalism and diligence.

Does Urban Sprawl Increase the Costs of Providing Local Public Services? Evidence from Spanish Municipalities

This paper examines the impact of urban sprawl, a phenomenon of particular interest in Spain, which is currently experiencing this process of rapid, low-density urban expansion. Many adverse consequences are attributed to urban sprawl (such as traffic congestion, air pollution and social segregation), although this paper is concerned primarily with the rising costs of providing local public services. The initial aim is to develop an accurate measure of urban sprawl so that its impact on municipal budgets can be tested empirically. Then, an empirical analysis is undertaken using a cross-sectional dataset of 2500 Spanish municipalities for the year 2003 and a piece-wise linear function to account for the potentially non-linear relationship between sprawl and local costs. The estimations derived from the expenditure equations for both aggregate and six disaggregated spending categories indicate that low-density development patterns lead to greater provision costs of local public services.

Does Urban Sprawl Increase the Costs of Providing Local Public Services? Evidence from Spanish Municipalities

This paper examines the impact of urban sprawl, a phenomenon of particular interest in Spain, which is currently experiencing this process of rapid, low-density urban expansion. Many adverse consequences are attributed to urban sprawl (e.g., traffic congestion, air pollution and social segregation), though here we are concerned primarily with the rising costs of providing local public services. Our initial aim is to develop an accurate measure of urban sprawl so that we might empirically test its impact on municipal budgets. Then, we undertake an empirical analysis using a cross-sectional data set of 2,500 Spanish municipalities for the year 2003 and a piecewise linear function to account for the potentially nonlinear relationship between sprawl and local costs. The estimations derived from the expenditure equations for both aggregate and six disaggregated spending categories indicate that low-density development patterns lead to greater provision costs of local public services.

Revenue sharing and local public spending: The Italian experience

Our statistical results confirm the hypothesis of a general upward shift in the spending function between 1971 and 1975. Both the constant and most coefficients of our estimated spending functions increased since 1971 indicating an increase in both the average and marginal propensity to spend. We have further determined that the political color of the local administrative unit has become a significant determinant of local spending with leftist administrations tending to spend more and that the leftist administrations' response to the revenue sharing reform has been more pronounced. Finally, it appears as though there has been little difference in response to the revenue sharing expansion between the large and smaller local governing units. Our conclusions must, however, be qualified to the extent to which our spending functions do not measure all exogenous influences on public spending between 1971 and 1975. Although we have controlled for various influences on the demand for public services including political influences through the dummy variables representing the political color of the giunte, it remains possible that other exogenous influences on public spending, such as the lobbying efforts of the labor unions, have exogenously affected spending. Finally, since we use expenditure data, we cannot determine whether any observed increases in per capita spending have been translated into increased service levels. In fact, increments in per capita expenditures may be associated with any combination of increases in quantity, quality, or reduction in the level of efficiency in the productive process. We have, however, conducted some further analysis to determine whether or not the observed increase in expenditures actually constituted a response to demands for new social programs or merely an increase in the relative share of labor costs in existing programs. Decomposition of aggregate expenditures into its component parts for both our samples indicated a clear trend towards a change in the mix of programs supplied by the local governments since 1971. For both samples we observed an increase in the share of the budget going to various instructional programs including child care and public kindergartens. For the provincial capitals instructional programs' relative importance rose from 16.2 to 19.9 percent of total expenditures while for the small suburban communes of Torino, the corresponding rise was from 17.8 percent to 22.6 percent. Further, we observed a sharp drop in both samples of the share of expenditures going to general administration. Much of the increased demands for public services has been concentrated in the area of instruction so the observed change in the composition of expenditures seems to suggest that local governments have responded to the increased demands. Further, we observed an increase in the share expenditures going to public security for the provincial capitals. Analysis of wage data for our samples indicates that increased unit labor costs were not a cause of the increase in real per capita expenditures. In fact, for the period under consideration average cost per public employee actually declined somewhat after adjusting for the effects on inflation. It seems likely, therefore, that the measured increase in per capita expenditures since 1971 does represent an increase in public services and a response by local governments to increased demands for particular services. The rigidity of revenue shares built into the Italian system of local finance and their failure to keep up with inflation after the reform coupled with the lack of constraints on spending decisions has clearly contributed to the incredible growth of local public deficits since 1971. Real local per capita public expenditures in Italy since 1971 have grown over and above what one would normally expect after adjusting for the effects of various demographic, socioeconomic and political influences. We have interpreted the effects of the reform as those of providing incentives to meet increased demands for local public services without comparison of marginal costs and benefits of such increased service levels. The increase in budget deficits has contributed to increases in the rate of inflation which has served as the mechanism in Italy to reallocate resources to the local public sector. Although the Italian experience with general revenue sharing is surely colored by the institutional peculiarities of the Italian system, especially the inflexibility of the revenue shares and the absence of effective constraints on local public spending, one may use the Italian results to offer some insights into the possible effects of increased revenue sharing in other nations. It is clear that any revenue sharing plan must be accompanied by some sort of mechanism to allow at least minimal comparison of benefits and costs of local public services at the local level to avoid the kind of explosion of local public budgets observed in Italy since the reform. The Italian system has financed increased public services in part through inflation creating a situation where local governments not increasing expenditures ran the risk of paying for more than their share of public services in other localities. Although the risk of local budget deficits is minimal in, for example, the United States due to various statutory constraints, the process by which resources would be reallocated to the local public sector in the absence of spending constraints could be similar but consist of increased (and perhaps explosive) allocations to the general revenue sharing fund without adequate consideration of the marginal benefits of increased local expenditure. As a concluding comment, it may be noted that there is a general consensus in Italy today that the reform of local finance was misguided. Local finance in Italy has recently been ‘re-reformed’ with restraints on local borrowing and limits on deficit spending by local governments.