Association for Public Policy Analysis & Management

I study special districts that provide a range of public goods and services under local control to communities in the United States. Proponents of local control argue that such institutional choice makes public goods provision more efficient and cost-effective, whereas critics caution a potential pitfall of local control due to limited expertise and management skill with low political responsiveness. By examining the extent to which formation of special districts bring benefits to local communities in two counties in Southern California, I quantify the spillover benefit of public good amenities capitalized into property values in the district neighborhoods. The findings show that the service provision under local control via special districts increase property values in the district neighborhoods significantly higher, compared to those immediately outside the district boundary. The fiscal cost-benefit analysis suggests that the magnitude of this property value benefit is so substantial that it dominates any disadvantage in the cost of service provision under local control, making special district a more cost-effective institutional choice for community governance than higher level municipal government.