• Revisiting the Idea of Shared Services
  • November 21, 2012 | Author: Jon P. Clemons
  • Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cincinnati Office
  • Continued cuts to municipal budgets have been a fact of life in recent years. However, some of their gravest effects may have yet to unfold. Since the economic crisis began, residents have seen services cut, the labor force has experienced hiring freezes, and everyone is looking for quick-fix strategies to cope with shrinking revenue. Federal stimulus money softened the blow, but many cities and villages have resorted to tapping rainy day funds, not replacing exiting personnel, and have otherwise become as lean as possible. This has led to the delay of maintenance and repairs and a decline in infrastructure, as necessary capital improvements go unfunded.

    The State of Ohio's Budget for the Fiscal Years 2012-2013 offers little relief. While the economy may show signs of slight growth, as argued heavily during the recent election campaigns, experts in public administration caution against an expectation that local governments will return to pre-recession conditions. Michael Abels, a former city manager in Deland, Florida, and currently a professor of public administration at the University of Central Florida, notes that many newly created jobs are low-wage and low-benefit, which translates into increased demand on public services with lower accompanying tax revenue.1

    With little left to trim, it's time again to take a look at new solutions to balance budgets. One popular approach has been to increase fees for services, which 43% of respondents to a National League of Cities survey reported doing in 2012, while a significantly smaller number reported raising income or sales tax rates.2 Obviously there are limits to this approach, and residents are not likely going to support these measures.

    Others have turned to combining services to take advantage of economies of scale, seeking to lower costs and increase return on investment. This concept of shared services is not new, although it remains more popular in theory than in fact. Sharing services can include comprehensive measures like the merger of city and county police departments. Such a merger permits the creation of a single radio dispatch command, crime lab and streamlined police force as well as the potential for significant cost savings. However, these grand measures are not without controversy, and can engender tremendous resistance.3 Sharing services often involves ceding some level of authority, and many communities and officials are reluctant to do so.

    For instance, in October of 2011, Hamilton County, Ohio, announced plans to spend $100,000 on a task force to explore sharing services with the City of Cincinnati.4 Nearly a year later, the project had yet to get off the ground, and Cincinnati's Mayor informed Hamilton County that, due to concerns over outsourcing and privatization, Cincinnati was no longer interested in exploring collaboration.5 This is just one example of the kinds of obstacles that may arise when negotiating a proposal for share services.

    Despite these obstacles, reluctance to surrendering some autonomy should not preclude municipalities from taking a long look at how combining services might help their bottom line, and thereby, their citizens. What can other cities and towns take from the experiences of other shared services ventures? One lesson is to start small. Not all examples of working with the city next door involve giving up authority or merging departments.

    For instance, the City of Chelsea (MA) joined with its larger neighbor Boston, in purchasing LED lights for Chelsea's 1,400 streetlamps. Leveraging its newly-increased buying power, Chelsea saved as much as $250,000 on the purchase. Columbus, Ohio, and other cities have also joined with the Ohio Department of Transportation to purchase road salt, improving purchasing power and lowering costs.6

    Joint purchasing programs are just one such example of inter-municipal cooperation. Cities considering such programs should start small and focus on uncontroversial cooperative measures. As savings are realized and trust is built with other participants, more expansive cooperative programs can be explored. Combining services could be with an adjoining city or county, or with a corporate partner, able to take advantage of greater resources, technology and scale.

    Sharing services will be vital for the fiscal health of many communities. Such sharing can address outsourcing tax collections, combining purchasing programs, or departmental mergers. The important consideration is to begin looking, in earnest, at the advantage of opportunities to combine services for financial benefits.

    1Raasch, Chuck. Recession-battered cities combine services, USA Today, Oct. 19, 2012, available at
    http://www.usatoday.com/story/news/nation/2012/10/18/recession-hit-cities-combines-services/1634301/

    2National League of Cities 27th Annual City Fiscal Conditions Report, available at
    http://www.nlc.org/find-city-solutions/center-for-research-and-innovation/finance/city-fiscal-conditions-in-2012

    3The challenges confronted in the merger of the Louisville (KY) Division of Police with the Jefferson County (KY) Police Department illustrate the resistance to such mergers. See Langhorne, Thomas B. Louisville merger: joining forces, stormy affair marriage of cultures difficult, Evansville Courier and Press, Aug. 22, 2010, available at
    http://www.courierpress.com/news/2010/aug/22/joining-forces/

    4Coolidge, Sharon. County: $100,000 for "shared services" task force, Cincinnati Enquirer, Oct. 31, 2011, available at
    http://cincinnati.com/blogs/politics/2011/10/31/county-100000-for-shared-services-task-formce/

    5Prendergast, Jane. Mallory pulls plug on shared services study, Cincinnati Enquirer, Sept. 21, 2012, available at
    http://news.cincinnati.com/article/20120921/NEWS/309210184/Mallory-pulls-plug-shared-services-study?nclick-check=1

    6ODOT Press Release. ODOT saves $10 million in salt costs for upcoming winter, Sept. 17, 2012, available at
    http://www.dot.state.oh.us/news/Pages/ODOT-Saves-$10-Million-in-Salt-Costs-for-Upcoming-Winter.aspx
    ; Department of Public Service, City of Columbus, Nov. 9, 2012, available at
    http://publicservice.columbus.gov/snow/