Benefits and Considerations of Shared Services in Local Government

^{Written by Joseph Luppino, VP/Government Banking Officer}

Local Governments in New Jersey have a history of adopting a “Home Rule” governance. The Home Rule Act, enacted in the NJ Constitution in 1917, grants municipal governments broad authorities to adopt ordinance and regulations providing for public welfare, public safety, and land use laws. This act is a major source of authorization for local autonomy in the State of New Jersey.

While home rule has the benefits of establishing local control/oversight for local government services, it is expensive. Bergen County, with a population 966,000, has 70 municipalities and over 74 local and regional school districts within its 276 square miles; many argue this creates redundancy of services and results in high real estate taxes. In comparison, Fairfax County in Virginia has 1.1 million in population, 407 square miles has only 20 towns within its borders. According the The Tax Foundation’s Analysis of Census Bureau’s data, New Jersey's average effective property tax rate compared to home value is 2.23%, the highest in all 50 states and the District of Columbia. Virginia in the same study was ranked 29th out of 50 states.

What are the benefits of Shared Services?

The high tax burden has put pressure on local officials, administrators and CFOs to find solutions. One answer can be entering into Shared Services with a neighboring municipality or county. Examples of successful Shared Services include:

• County 911/Dispatch Services
• Joint/Shared Municipal Courts
• Shared DPW Services & Equipment
• Shared Municipal Officers (CFO’s, Tax Assessors and Collectors)
• County to County Shared Jails and Juvenile Detention Centers
• County Health Officer and Animal Control Services

One important resource available to municipalities and counties is the Local Efficiency Achievement Program (LEAP), administered through the Division of Local Government Services (DLGS). Since 2021, the State awarded $13.6 million to help municipalities and counties initiate and implement shared services to reduce costs and improve services. The grant awards will assist in the design and implementation of shared services initiatives. Local governments have been awarded grants ranging from $100,000 to $250,000 for implementation of joint dispatch services for public safety, sanitation & public works equipment, county jail consolidation, and transportation and school feasibility studies. See the Department of Community Affairs website on Shared Services for a more complete list.

So what are the essential elements to engage in successful Shared Services Agreement?

1. Elected Officials must be the driving force of the shared service.

2. A retirement or vacancy in a director or department head position such as the retiring police chief makes sharing or jointly providing a service much easier to pursue.

3. Both sides of the joint services need to understand the financial, capital requirements and employee reasons for and impacts of the shared services.

4. A feasibility study is recommended prior to pursuing a shared services. The study will provide the governing body, CFO and Administrator with insights into the operation and identify financial, capital and personnel resources required for the agreement.

5. Involve the employees who may be affected by the shared services. They may have recommendations for the venture.

6. Do not recreate the wheel by choosing services that do not lend themselves for shared services.

7. Both parties in the sharing venture must win or gain something - either a lower cost for the same service or an improved service.

8. Finally, public input should be considered at the initiation of the study process and this can be accomplished by having a public hearing or appointment of citizen members on study team.