The Challenge of Regionalization

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This space is a big fan of regionalization (see here and here), but we acknowledge the challenges involved. A recent report by the state on the potential of a Hamilton-Wenham tie-up highlights many of them.

First, an incentive program put in place to encourage regionalization would, curiously, penalize the communities for an actual merger. By going from the Hamilton-Wenham Regional School District (which exists currently) to a single, consolidated town, they will lose $500k+ in transportation reimbursements. This reduces the overall merger savings from $1.3m (against a budget of $42.9m) to $750k.

Second, the devil really is in the details of tax rate harmonization. Hamilton has a higher mil rate than Wenham, so a tax rate in between the two results in higher taxes for Wenham residents and lower taxes for Hamilton residents. Bet Wenham residents were not expecting that.

In order to avoid this situation, you would need to realize savings of roughly 3x what the state analysts were able to come up with. And you would have to return all of that to taxpayers. Even under this scenario, all of the benefits would flow to the Hamilton taxpayers.

Third, the plurality of the cost savings come from a reduction in police staffing. Because of some issues unique to the towns (a number of unfilled positions), this is probably feasible here. But would be challenging to replicate in many other places.

Lastly, the report also looks at increased regionalization, not a full merger. Again, many opportunities for savings are found but the devil is in the apportionment of costs — different ratios favor one community over the other.

The report is very well-done and quite thorough. I encourage you to flip through it. And I continue to believe the regionalization is an essential tool to deal with budget constraints. But, even with similar communities that already have a good working relationship, it is not easy.