Economic Development

Sizing Things Up

For years we've debated how big our local governments ought to be-- without factoring in economic development.
by | February 2003

Advocates of the new city-county merger in Louisville--which passed easily at the polls--said the merger was necessary to keep Louisville economically competitive.

Advocates of the San Fernando Valley's secession from Los Angeles-- which lost miserably on Election Day--said secession was necessary to keep the Valley economically competitive.

Admittedly, the contexts are a little different. Louisville was a stagnant city of 250,000 people; merging with surrounding Jefferson County (population 700,000) instantly moved it from the 64th largest city in America to the 16th. Meanwhile, the San Fernando Valley is a large area of almost 1.5 million people that would have been the 6th largest city in America if it had been created; the remaining city of Los Angeles, at 2.5 million, would have fallen back behind Chicago as third.

Yet the juxtaposition of these two moves--one to consolidate and one to break apart--raises an obvious question. When it comes to economic development, does size matter? Is bigger better? Or is smaller more beautiful?

This is new territory. Americans have debated how big their municipal governments ought to be for more than a century. But rarely has the debate revolved around economic development and economic growth. Rather, from the Progressive Era forward, it's been the province of government organization junkies, who have debated which size and form of government will encourage efficiency and responsive public officials.

These days, however, the discussion is largely about economic development. In Louisville, merger advocates argued that the city was too small: Although it was a city of tremendous assets, it was overlooked on the national stage because of its size. Large corporations wouldn't take a second look. And the multiplicity of local governments led to petty jealousies and infighting over economic development opportunities. Said one economic developer: "You often spent more time negotiating with the two governments, trying to get them to agree on what we wanted to offer, and who was going to take credit and how they were going to take it, than actually negotiating with companies to get them here."

At almost the same time, advocates of San Fernando Valley secession argued that Los Angeles was too big to be competitive. A massive bureaucracy at city hall in downtown Los Angeles was seen as unresponsive not only to residents of the faraway Valley but also to businesses seeking to locate or expand there. Nearby Burbank (population 100,000) was often held up as a model proving smaller is better, especially when dealing with the entertainment industry.

In each case, however, the voters decided that bigger was better. Louisville consolidation passed in 2000 and actually went into effect this year. San Fernando Valley secession got creamed, receiving only a third of the vote citywide in Los Angeles and barely winning in the Valley itself.

But it may be that, in and of itself, the critical question is not whether the city in question is large or small. In Louisville--as in so many other older cities stagnating in population--consolidation probably makes sense as a way to attract attention and reshape its image around the idea that it is a larger place.

There is no question that the San Fernando Valley would have benefited as well from the national attention it would have received as a new city. But would a city of a million and a half really have benefited from "downsizing"? After all, if the economic development model is Burbank, then maybe Los Angeles needs to be busted into 30 different cities.

Perhaps the issue, as pundit Joel Kotkin has suggested, is not upsizing or downsizing but "right-sizing" government to be responsive both to citizens and to businesses engaged in the local or regional economic development effort.

Some metro areas have dealt with the issues of size and petty jealousies without merging. Sacramento, for example, has often talked about city-county consolidation, and for many of the same reasons as Louisville. It has a central city with stagnant population growth, a series of growing suburbs in the county and a reputation that suffers from being in the shadow of larger metro areas.

Yet even without consolidation--indeed, while further cutting up governance by creating three new suburban cities since 1997--metro Sacramento has prospered. When it hit 1 million people a few years ago, it became a much hotter business location simply because it suddenly appeared on every location specialist's computer search.

And, of course, in some cases there are benefits to being big. Would New York and Los Angeles be the cities they are today without the consolidations a century ago (including the annexation of the Valley into L.A.) that made them so large? Maybe so. But on the other hand, if L.A. weren't so large, maybe nobody would want to locate their business in Burbank--or in the San Fernando Valley, either.

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