New Cities, Local Officials, and Municipal Incorporation Laws: A Supply-Side Model of City Formation

Abstract

This article develops a framework for analyzing when and why municipal incorporation laws impede or facilitate boundary changes that benefit special interests. This goal is achieved by shifting the attention from demand-side factors-such as wealth, race, and heterogeneity of tastes-behind the formation of municipalities to actors who supply them: city, county, and state officials. I develop a theoretical model that shows that there is an inverse relation between the number of jurisdictions and the size of the constituency of those public officials who review incorporation petitions. I also find that: (1) ceteris paribus, more new municipalities are formed in counties with a large volume of retail trade, and (2) neither state nor local officials can block fiscally motivated incorporations.

The role of income in the formation of new cities

“…There have been a number of studies explaining the number of local governments (e.g., Nelson 1990;Kenny and Schmidt 1994;Fisher and Wassmer 1998) or the emergence of new cities or special districts (e.g., Miller 1981;Burns 1994;Musso 2001;Tkacheva 2008). Although there is some recognition of the potential for redistribution in this literature, there has been only one study (Musso 2001) that tests the prediction that richer neighborhoods are more likely to form a new city than are poorer neighborhoods.…”

Why New Cities Form

“…On the regional level, Miller's (1981) analysis of several Lakewood Plan cities in Los Angeles demonstrated that many new cities incorporated to limit property tax burden on homeowners and businesses, and limit the size of government bureaucracies and welfare programs (the new cities also wished to avoid annexation attempts by the city of Los Angeles). Similarly, Tkacheva (2008) found that more NIMs are formed in counties with a large volume of retail trade. By capturing the retail trade assets, the newly formed city can increase its service level while reducing or maintaining its taxes (i.e., by shifting cost of services to those outside the municipality that patronize the retail establishments).…”

New Cities of Color

“…Burns (1994) found that the primary motivations for incorporation include racial exclusion and tax avoidance. Similarly, Tkacheva (2008) noted, “Both qualitative and quantitative accounts of boundary changes have argued that residents alter municipal borders to increase the racial homogeneity of their communities” (p. 164).…”