Merging Municipalities: Is Bigger Better?

This paper is part of the IMFG Papers on Municipal Finance and Governance series. For a full list of papers, please visit http://bit.ly/2ylAa2D.This paper reviews different ways in which the formal governance of metropolitan areas may be restructured, such as through two-tier structures, voluntary cooperation, special districts, and municipal mergers. The paper includes a case study of the amalgamation in Toronto, which involved the merger of six municipalities and the upper-tier municipality of which they were formerly a part. The authors review this amalgamation in light of its effects on municipal costs, local taxes, governance, and citizen participation and conclude that while the city’s amalgamation solved no problems, it may have had some benefits. These include a stronger presence in economic development, a fairer sharing of the tax base among rich and poor municipalities, and the opportunity to equalize local services so that everyone can enjoy a similar level of services. On the whole, however, twotier structures may be more effective in allowing municipalities to reap the benefits that come with large size, while retaining the responsiveness typical of smaller municipalities.Institute on Municipal Finance and Governanc