Determinants of public service expenditures in fast growing local governments of Michigan

This study analyzes the factors that determine the variations in per capita public service expenditures of forty six fast growing local governments in the State of Michigan. Fast growing local governments were defined as cities and townships that had 5,000 or more residents by 1990 and had grown by at least 1,000 persons between 1980 and 1990. All the seventeen cities and twenty nine of the fifty two townships that qualified as fast growing communities in the state were included in the study. Categories of public services considered in the study included general government, public safety, public works, public services, health and welfare, and recreation and culture.;The study was based on US Census population figures of 1980 and 1990 and the 1994 population projection of the Michigan Department of Management; public service expenditures from the Comprehensive Annual Financial Report (1981 to 1995) of the local governments; state equalized value of properties (1981 to 1995) of the all the communities; public safety data of 1990 and 1995 for all cities and townships in the study; and roads and streets expenditure for selected communities. An expenditure decision model of local governments was developed assuming that the general objective of local governments is to provide the best possible public services (maximizing service benefits) with minimum expenditures. A rigorous method of data preparation for the purpose of such analysis was developed and a Fixed Effects econometric model was employed to analyze the huge panel data sets.;The empirical results showed that: in terms of 1995 constant dollars, per capita public service expenditures of fast growing communities in Michigan vary widely; cities and townships of different population sizes have different expenditure patterns (while cities with smaller population size spend more than cities with larger population size, townships with larger population size spend more than smaller townships); and communities located in Southeast Michigan spend more than those in the rest of the state. More importantly, while the explanatory power of all variables varied across community groups, the per capita state equalized value of total property was found to be a consistently significant variable in explaining the variations in expenditures of local governments. The more wealth, the more spending.;The general policy implication derived from the empirical findings was that more people could be added to the existing smaller communities to decrease per capita expenditures. If small communities were to grow to achieve economies of scale in utilizing the existing service infrastructures, they need not contribute to sprawl since sprawl refers to low density development, not growth in population. If redirecting population growth into smaller size communities is to be actualized, the savings that could be obtained from the joint impact of increased population and a dense new residential development could be substantial.