Hidden Government

The time has come for more accountability in special district governments.

ARTICLE | Mar 20, 2017

Special districts (SDs), according to the 2012 U.S. Census of Governments, are the most common form of government in the United States. SDs total more than 38,000—nearly half of all city, town, and county forms of government and an increase of 461 percent since 1942.

Estimated to spend more than $100 billion annually, SDs are the fastest growing segment in U.S. government. This trend is likely to continue when the 2017 Census of Governments is released this year. (Since 1952, the U.S. Census Bureau has conducted a Census of Governments of all state and local government organization units every five years, for years ending in 2 and 7.)

Local Governments by Type, 1942 to 2012

The U.S. census defines SDs as "independent, special purpose governmental units that exist as separate entities with substantial administrative and fiscal independence from general purpose local governments." SDs may focus on one key area or a range of issues, including managing buildings, libraries, hospitals, transportation, health, welfare, education, natural resources, parks and recreation, sewerage systems, solid waste, housing and community development, water systems, and public utilities.

A Means to an End

Since the New Deal era, these SDs, often known as authorities, have grown in number as local governments confront government limits on financial matters, including multiyear loans and contracts that are forbidden in some states, statutory limits on increases in ad valorem taxes, and locale-limited government investment in long-term improvements.

In some cases, the impetus for the creation of the SD was a perceived need for a specialized and expertise-heavy oversight organization that could borrow money, buy and sell property, and enter into contracts in a more efficient and businesslike manner than the local government itself.

SDs are perceived by many as "small government." When local officials are fearful of an encompassing, full-service government agency to handle regional matters, SDs spring up in response to this need for some government service but without the over-arching control that large, centralized governments typically provide. Whether you believe local government in the U.S. is fragmented or differentiated, SDs contribute to this large puzzle, especially in metropolitan areas.

SDs have multiplied because, in general, they have been considered a means of achieving public purposes and removing a burden from local elected officials and public managers. These districts can result in "out of sight, out of mind" and "one thing off our plate" attitudes from local government officials, as long as the work rocks along.

Troubling Issues

It is, however, often at times of crisis—especially economic crisis—that local governments become aware of just how over-leveraged or underfunded SDs can be, and, in some cases, how far they have drifted from their core missions.

In communities across the nation, local taxpayers have had to assume responsibility for SD bonds the county or city had backed as a routine matter. The 2012 report Ghost Government, issued by the Kentucky Auditor of Public Accounts, discovered that SDs spent almost as much per capita as the state's portion of local school district programs and in total expenditures, more than state funding for both roads and Medicaid costs.

When SDs raise rates for services to improve the bottom line, residents often have little or no recourse, as local governments frequently maintain a hands-off attitude where SD authorities are concerned. Neighbors in different districts may pay vastly different taxes or rates for services, depending on the SD that directs the services or sets the millage rate.

Corruption may go undetected if there are no formal or shared auditing processes in place. Conflicts of interest, especially those related to economic development, are also difficult to identify when projects are considered virtually secret until they are complete.

Elected officials who find their SDs in trouble may be asking themselves how things went downhill so quickly. Often, the disconnect between the democratically elected body and the special district is vast because of the intentional independent nature of these organizations. Recognizing SDs as vital sectors of government, a process that has begun in some states, is a first step in enhancing accountability.

Shadow Governments

The gulf between elected officials and SDs is reflected in the lack of public awareness about what the districts actually do and what services they provide. Indiana University-Perdue University Professor Larita Killian explains that "the proliferation of special districts obscures responsibility, making it difficult for citizens to link specific services to the entities that provide them," reducing opportunities for democracy and limiting the public's ability to hold SDs accountable.

The late UCLA politicial scientist John Bollens in 1957 described SDs as "shadow governments." And in 1992, Professor Donald Axelrod wrote, "The new mandarins that run public authorities are above the battle. Wrapped in their golden cocoons, they are insulated from voters, governors, and legislatures. Normal checks and balances, accountability, and control do not apply."

Although many SD governments have elected governing boards, the lack of participation by the electorate means that many of these agencies are effectively operating without "adult supervision." While municipal election turnout is notoriously low in the United States—typically 25 percent of those eligible, according to an October 2014 Governing article by Mike Maciag—SD elections have much lower turnouts. In many elections reviewed by the authors, turnout was in single digits or elections were cancelled due to lack of opposition.

Texas, which ranks third behind Illinois and California in the number of SD governments, has a slew of municipal utility districts that were initially appointed by developers; subsequent elections for board members have drawn only two to three percent of eligible voters.

Other boards are semi-democratic, with appointments or nominations made by elected officers. In some communities, boards first appointed more than 50 years ago continue to be self-perpetuating with little local government oversight or direction.

Impact on Local Government

Should the way SDs operate really matter to the average resident or the local government itself? Some authorities say it does, in part because of the public-private nature of these organizations and the fact that SDs are in many cases one or more steps removed from the democratic process.

Author Christopher Goodman, writing on local government fragmentation in a 2013 article in Public Finance Review, suggests that the "[c]oncentration of spending in single purpose districts leads to higher levels of per capita expenditures."

Professor Killian, in a 2011 edition of Accounting and the Public Interest, expresses concerns that "[t]he proliferation of special districts has the potential to increase government costs, redirect the allocation of scarce resources, remove debt and expenditure practices from the public eye, and reduce democratic controls over elected officials."

In their 2015 study of municipal transparency in Portugal published in Public Management Review, Professors Nuno Da Cruz, Antonio Tavares, Luis de Sousa, and Rui Marques worry that a dearth of reporting from local governments deprives residents of the right to public information that provides "citizens with information so they can act as "armchair auditors" that participate in the policy process, promote accountability, improve the quality of government decision making, and help prevent and mitigate corruption." Without access to SD information, the resident role in public life is diminished.

Democracy in SDs may also be challenged by the competing goals of the SD, that is, the public nature of the organization versus the business-oriented mission, creating blurred lines between public and private responsibilities. For those SDs that have eminent domain authority, the U.S. Supreme Court's 2004 Kelo v. City of New London decision opened-up broad authority for districts to condemn property for "economic development" purposes.

Decisions made by SD boards are not always public. The Tarrant Regional Water District in Fort Worth, for example, has purchased large tracts of private property in a potential one billion dollar project with little public input.

In some cases, lack of transparency has resulted in publicly owned operations being turned over to private business without approval of any democratically elected body. Accountability for funding when a project ends may not be clear, leaving millions of dollars in public investment to be managed by a group of residents with little or no responsibility for reporting.

Accountability Wish List

Local and state government officials may want to rethink their expectations of special district transparency and accountability in light of the continuing growth of SDs and their responsibilities to their residents.

Though many of these authorities operate almost completely independently, when public funds are used, American values dictate that there must be some public accounting for the processes and approval related to those expenditures. When these policies are not in place, they should be considered by the appropriate level of government.

Publicly available website. One reasonable demand that state and local governments can make of SDs is that reporting be equivalent to their own public expectations for reporting by the most cost-efficient, cost-effective, and accessible means: a public website.

If a district is small and has a singular purpose, its Web pages could be attached to the local government's Web presence. Websites do not reach everyone, of course, but they do create access to information that would otherwise be unreachable by the vast majority.

Pew Research reports that 65 percent of Americans use the Internet for accessing government information, justification enough for the website requirement. Larger SDs might be expected to have a stand-alone website. At minimum, these items should be part of the website:

  • The mission of the SD.
  • The scope of services of the organization.
  • Authority member names, responsibilities, terms, and contact information.
  • Location of offices or other administrative contact.
  • Ethics and conflict-of-interest policies.
  • How members voted on decisions, and if there were recusals due to conflicts of interest.
  • Policies and procedures for operations.
  • Authority openings and means of appointment.
  • Meeting dates, times, and places.
  • Budget meetings.
  • Current and past budgets.
  • Debt reporting.
  • Audits.
  • Strategic planning information.
  • A link for open records requests.
  • If funding other organizations, who received funding and a description of progress on projects, including any defaults on loan repayments.
  • Meeting agendas and how a resident can get on the agenda.
  • Current minutes and minutes archive of meetings.
  • Performance measures as linked to the mission and strategic plan.

A focus on E-democracy and Government 2.0. Refers to the idea that governments promote democratic interactions with residents through the Internet. Contrast this to e-government, which some interpret as more one-way communications from government to the public.

Providing opportunities for resident engagement is increasingly an important public expectation. Democracy by its very nature is messy. With enhanced transparency efforts, SDs may find that their meetings are more contentious and that demands for information increase.

Public organizations have an obligation to provide the types of transparency that promote accountability in local governance. SDs should not be an exception to the rule.

Local government participation in special district planning.The private nature of many SDs has effectively limited public participation in decision making about issues that may range from purchase and sale of property, to tax rates for community development, to funding awards to private developers. Local governments can support SD efforts for public input and transparency by sharing SD information on their own Web pages and participating in planning events to help ensure that the democratic process is alive and well.

E-sunshine laws vary across the states, of course, but the principles of open government remain constant in the United States. Confirming that SDs are fulfilling their core missions and are held accountable—for finance, compliance, and performance in particular—can go a long way toward ensuring that our democratic values are practiced, not just espoused.

 

Advertisement