Are Special Districts Strategic Complements or Strategic Substitutes?

class: center, middle, inverse, title-slide

.title[
# Are Special Districts Strategic Complements or Strategic Substitutes?
]
.author[
### .pull-left[Christopher B. Goodman, PhD] .pull-right[Deborah A. Carroll, PhD]
]
.institute[
### .pull-left[<br/>School of Public & Global Affairs<br/>Northern Illinois University] .pull-right[<br/>Government Finance Research Center<br/ > University of Illinois at Chicago]
]

---

class: center, middle

### What happens to service delivery by general purpose local governments when a special district enters the public service marketplace?

---

## Motivation

.large[
- Special districts and general purpose local governments (cities, counties, and towns/townships) exist in the same local governance ecosystem
  - Many of these governments do similar functions
- Are these local government actors independent?
  - Much evidence of interactions and collaborations among the same type of governments
  - Some evidence of interactions and trade-offs between vertically-aligned general purpose governments
  - Little empirical evidence of the role of special districts
]

---

## Theoretical Propositions

.large[
We rely heavily on (and extend) the theoretical relationship between cities and homeowners associations (Helsley and Strange 1998, 2000; Cheung 2008)
]

.large[.content-box-red[
**Strategic Substitutes**: "strategic downloading", municipal governments reduce their spending on a service in response to spending by private (or special district) government in the same service area
]]

--
 
.large[.content-box-blue[
**Strategic Complements**: the presence of special district spending spurs general purpose local government spending, e.g. water and/or sewer districts create the need for regional treatment facilities at the county level 
]]

.large[Which effect dominates, if any, is an empirical question.]

---

## Empirical Model

.large[
- Time Period: 1972 - 2017
- Unit of Analysis: County
- Data Sources: 
  - Census of Governments
  - Bureau of Economic Analysis
  - U.S. Census Bureau
  - Surveillance, Epidemiology, and End Results program
]

---

## Identification Strategy

.large[
`$$\begin{align*}\underbrace{\text{ln}\ g_{it}^{\text{city}}}_{\text{general purpose government spending}} = & \underbrace{\beta g_{it}^{\text{spdist}}}_{\text{special district spending}}   +   \underbrace{\delta X_{it}}_{\text{control variables}} + \\ &  \underbrace{d_i}_{\text{unit fixed effects}}  +  \underbrace{d_t}_{\text{time fixed effects}}  + \\ & \underbrace{d_{rt}}_{\text{MSA}\times\text{year fixed effects}}  +  \underbrace{\varepsilon_{it}}_{\text{composite error term}} \end{align*}$$`
]

- If special districts are .content-box-red[strategic substitutes] for general purpose governments, `$\beta < 0$`.

- If special districts are .content-box-blue[strategic complements] for general purpose governments, `$\beta > 0$`.

---

## Independent Variables

.large[

- Personal income per capita
- Population
- Population density
- Population growth (5-year CAGR)
- % 19 and younger
- % 65 and older
- Ethnic fractionalization

]

---

## Methodology

.pull-left[

### .bold[Multiple disaggregations]
- By type of local government
  - Total general purpose, cities, counties
- By functional area of service delivery
  - Fire protection
  - Housing & community development
  - Libraries
  - Natural resources
  - Parks & recreation
  - Sewerage 
  - Solid waste management
]

.pull-right[

### .bold[Empirics]
- Estimated via OLS
- Standard errors clustered on the county
]

---

## Summary Statistics

---

## Summary Statistics
<table>
 <thead>
  <tr>
   <th style="text-align:left;"> Variable </th>
   <th style="text-align:center;"> Mean </th>
   <th style="text-align:center;"> St. Dev. </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;"> Personal income, per capita </td>
   <td style="text-align:center;"> 37.504 </td>
   <td style="text-align:center;"> 11.626 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Population </td>
   <td style="text-align:center;"> 229.355 </td>
   <td style="text-align:center;"> 395.082 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Population density </td>
   <td style="text-align:center;"> 0.644 </td>
   <td style="text-align:center;"> 2.758 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Population growth </td>
   <td style="text-align:center;"> 1.350 </td>
   <td style="text-align:center;"> 1.714 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> % 19 and younger </td>
   <td style="text-align:center;"> 0.292 </td>
   <td style="text-align:center;"> 0.040 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> % 65 and older </td>
   <td style="text-align:center;"> 0.125 </td>
   <td style="text-align:center;"> 0.037 </td>
  </tr>
  <tr>
   <td style="text-align:left;"> Ethnic fractionalization </td>
   <td style="text-align:center;"> 0.204 </td>
   <td style="text-align:center;"> 0.156 </td>
  </tr>
</tbody>
</table>

---

## Results - All General Purpose Governents

<table class="table" style="font-size: 18px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;"> Variable </th>
   <th style="text-align:center;"> All expenditures </th>
   <th style="text-align:center;"> Fire protection </th>
   <th style="text-align:center;"> Housing &amp;
community development </th>
   <th style="text-align:center;"> Libraries </th>
   <th style="text-align:center;"> Natural resources </th>
   <th style="text-align:center;"> Parks &amp;
recreation </th>
   <th style="text-align:center;"> Sewerage </th>
   <th style="text-align:center;"> Solid
waste
management </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:left;min-width: 1.5in; "> Per capita special district spending in same functional area </td>
   <td style="text-align:center;"> -0.0000 </td>
   <td style="text-align:center;"> -0.0115* </td>
   <td style="text-align:center;"> -0.0053** </td>
   <td style="text-align:center;"> -0.0159+ </td>
   <td style="text-align:center;"> 0.0014 </td>
   <td style="text-align:center;"> -0.0008 </td>
   <td style="text-align:center;"> -0.0021 </td>
   <td style="text-align:center;"> 0.0041 </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; ">  </td>
   <td style="text-align:center;"> (0.0000) </td>
   <td style="text-align:center;"> (0.0046) </td>
   <td style="text-align:center;"> (0.0019) </td>
   <td style="text-align:center;"> (0.0083) </td>
   <td style="text-align:center;"> (0.0010) </td>
   <td style="text-align:center;"> (0.0010) </td>
   <td style="text-align:center;"> (0.0016) </td>
   <td style="text-align:center;"> (0.0027) </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; "> Controls </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; "> County FE </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; "> Year FE </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; "> MSA-Year FE </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; "> N </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
  </tr>
</tbody>
</table>

---

## Results - Subgroups

<table class="table" style="font-size: 16px; margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:left;"> Variable </th>
   <th style="text-align:center;"> All expenditures </th>
   <th style="text-align:center;"> Fire protection </th>
   <th style="text-align:center;"> Housing &amp;
community development </th>
   <th style="text-align:center;"> Libraries </th>
   <th style="text-align:center;"> Natural resources </th>
   <th style="text-align:center;"> Parks &amp;
recreation </th>
   <th style="text-align:center;"> Sewerage </th>
   <th style="text-align:center;"> Solid
waste
management </th>
  </tr>
 </thead>
<tbody>
  <tr grouplength="2"><td colspan="9" style="border-bottom: 1px solid;"><strong>Municipalities</strong></td></tr>
<tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> Per capita special district spending in same functional area </td>
   <td style="text-align:center;"> -0.0000 </td>
   <td style="text-align:center;"> -0.0087+ </td>
   <td style="text-align:center;"> -0.0038+ </td>
   <td style="text-align:center;"> -0.0083 </td>
   <td style="text-align:center;"> 0.0006 </td>
   <td style="text-align:center;"> -0.0018 </td>
   <td style="text-align:center;"> -0.0005 </td>
   <td style="text-align:center;"> 0.0068* </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1">  </td>
   <td style="text-align:center;"> (0.0000) </td>
   <td style="text-align:center;"> (0.0048) </td>
   <td style="text-align:center;"> (0.0021) </td>
   <td style="text-align:center;"> (0.0053) </td>
   <td style="text-align:center;"> (0.0015) </td>
   <td style="text-align:center;"> (0.0014) </td>
   <td style="text-align:center;"> (0.0014) </td>
   <td style="text-align:center;"> (0.0032) </td>
  </tr>
  <tr grouplength="2"><td colspan="9" style="border-bottom: 1px solid;"><strong>Counties</strong></td></tr>
<tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> Per capita special district spending in same functional area </td>
   <td style="text-align:center;"> -0.0001 </td>
   <td style="text-align:center;"> -0.0190** </td>
   <td style="text-align:center;"> -0.0034 </td>
   <td style="text-align:center;"> -0.0166* </td>
   <td style="text-align:center;"> 0.0011 </td>
   <td style="text-align:center;"> 0.0002 </td>
   <td style="text-align:center;"> -0.0053** </td>
   <td style="text-align:center;"> -0.0119* </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1">  </td>
   <td style="text-align:center;"> (0.0002) </td>
   <td style="text-align:center;"> (0.0059) </td>
   <td style="text-align:center;"> (0.0026) </td>
   <td style="text-align:center;"> (0.0084) </td>
   <td style="text-align:center;"> (0.0010) </td>
   <td style="text-align:center;"> (0.0073) </td>
   <td style="text-align:center;"> (0.0019) </td>
   <td style="text-align:center;"> (0.0054) </td>
  </tr>
  <tr grouplength="5"><td colspan="9" style="border-bottom: 1px solid;"><strong>Controls</strong></td></tr>
<tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> Controls </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> County FE </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> Year FE </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> MSA-Year FE </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
   <td style="text-align:center;"> Yes </td>
  </tr>
  <tr>
   <td style="text-align:left;min-width: 1.5in; padding-left: 2em;" indentlevel="1"> N </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
   <td style="text-align:center;"> 5925 </td>
  </tr>
</tbody>
</table>

---

## Discussion & Conclusions

.large[
- Reasonable evidence that special district spending in some functional areas is a .content-box-red[strategic substitute] for general purpose local government spending
  - A $1 per capita increase in special district spending is associated with a _0.5 to 1.5% decline_ in county spending on the same function
- Suggests that special districts in these areas (fire, libraries, sewerage, solid waste) are, on average, of a regional nature
  - County areas are trading local services for more regional services

]

---
class: title-slide-final, middle
background-image: url(assets/NIU_horz_white.png)
background-size: 260px
background-position: 5% 5%

## Thanks!

|                                                                           |                       |
| :------------------------------------------------------------------------ | :-------------------- |
| <a href="mailto:cgoodman@niu.edu"><svg viewBox="0 0 512 512" style="height:1em;position:relative;display:inline-block;top:.1em;fill:white;" xmlns="http://www.w3.org/2000/svg">  <path d="M440 6.5L24 246.4c-34.4 19.9-31.1 70.8 5.7 85.9L144 379.6V464c0 46.4 59.2 65.5 86.6 28.6l43.8-59.1 111.9 46.2c5.9 2.4 12.1 3.6 18.3 3.6 8.2 0 16.3-2.1 23.6-6.2 12.8-7.2 21.6-20 23.9-34.5l59.4-387.2c6.1-40.1-36.9-68.8-71.5-48.9zM192 464v-64.6l36.6 15.1L192 464zm212.6-28.7l-153.8-63.5L391 169.5c10.7-15.5-9.5-33.5-23.7-21.2L155.8 332.6 48 288 464 48l-59.4 387.3z"></path></svg>     | cgoodman@niu.edu      |
| <a href="https://www.cgoodman.com"><svg viewBox="0 0 512 512" style="height:1em;position:relative;display:inline-block;top:.1em;fill:white;" xmlns="http://www.w3.org/2000/svg">  <path d="M326.612 185.391c59.747 59.809 58.927 155.698.36 214.59-.11.12-.24.25-.36.37l-67.2 67.2c-59.27 59.27-155.699 59.262-214.96 0-59.27-59.26-59.27-155.7 0-214.96l37.106-37.106c9.84-9.84 26.786-3.3 27.294 10.606.648 17.722 3.826 35.527 9.69 52.721 1.986 5.822.567 12.262-3.783 16.612l-13.087 13.087c-28.026 28.026-28.905 73.66-1.155 101.96 28.024 28.579 74.086 28.749 102.325.51l67.2-67.19c28.191-28.191 28.073-73.757 0-101.83-3.701-3.694-7.429-6.564-10.341-8.569a16.037 16.037 0 0 1-6.947-12.606c-.396-10.567 3.348-21.456 11.698-29.806l21.054-21.055c5.521-5.521 14.182-6.199 20.584-1.731a152.482 152.482 0 0 1 20.522 17.197zM467.547 44.449c-59.261-59.262-155.69-59.27-214.96 0l-67.2 67.2c-.12.12-.25.25-.36.37-58.566 58.892-59.387 154.781.36 214.59a152.454 152.454 0 0 0 20.521 17.196c6.402 4.468 15.064 3.789 20.584-1.731l21.054-21.055c8.35-8.35 12.094-19.239 11.698-29.806a16.037 16.037 0 0 0-6.947-12.606c-2.912-2.005-6.64-4.875-10.341-8.569-28.073-28.073-28.191-73.639 0-101.83l67.2-67.19c28.239-28.239 74.3-28.069 102.325.51 27.75 28.3 26.872 73.934-1.155 101.96l-13.087 13.087c-4.35 4.35-5.769 10.79-3.783 16.612 5.864 17.194 9.042 34.999 9.69 52.721.509 13.906 17.454 20.446 27.294 10.606l37.106-37.106c59.271-59.259 59.271-155.699.001-214.959z"></path></svg>           | cgoodman.com          |
| <a href="https://twitter.com/cbgoodman"><svg viewBox="0 0 512 512" style="height:1em;position:relative;display:inline-block;top:.1em;fill:white;" xmlns="http://www.w3.org/2000/svg">  <path d="M459.37 151.716c.325 4.548.325 9.097.325 13.645 0 138.72-105.583 298.558-298.558 298.558-59.452 0-114.68-17.219-161.137-47.106 8.447.974 16.568 1.299 25.34 1.299 49.055 0 94.213-16.568 130.274-44.832-46.132-.975-84.792-31.188-98.112-72.772 6.498.974 12.995 1.624 19.818 1.624 9.421 0 18.843-1.3 27.614-3.573-48.081-9.747-84.143-51.98-84.143-102.985v-1.299c13.969 7.797 30.214 12.67 47.431 13.319-28.264-18.843-46.781-51.005-46.781-87.391 0-19.492 5.197-37.36 14.294-52.954 51.655 63.675 129.3 105.258 216.365 109.807-1.624-7.797-2.599-15.918-2.599-24.04 0-57.828 46.782-104.934 104.934-104.934 30.213 0 57.502 12.67 76.67 33.137 23.715-4.548 46.456-13.32 66.599-25.34-7.798 24.366-24.366 44.833-46.132 57.827 21.117-2.273 41.584-8.122 60.426-16.243-14.292 20.791-32.161 39.308-52.628 54.253z"></path></svg>   | @cbgoodman            |
| <a href="https://github.com/cbgoodman"><svg viewBox="0 0 496 512" style="height:1em;position:relative;display:inline-block;top:.1em;fill:white;" xmlns="http://www.w3.org/2000/svg">  <path d="M165.9 397.4c0 2-2.3 3.6-5.2 3.6-3.3.3-5.6-1.3-5.6-3.6 0-2 2.3-3.6 5.2-3.6 3-.3 5.6 1.3 5.6 3.6zm-31.1-4.5c-.7 2 1.3 4.3 4.3 4.9 2.6 1 5.6 0 6.2-2s-1.3-4.3-4.3-5.2c-2.6-.7-5.5.3-6.2 2.3zm44.2-1.7c-2.9.7-4.9 2.6-4.6 4.9.3 2 2.9 3.3 5.9 2.6 2.9-.7 4.9-2.6 4.6-4.6-.3-1.9-3-3.2-5.9-2.9zM244.8 8C106.1 8 0 113.3 0 252c0 110.9 69.8 205.8 169.5 239.2 12.8 2.3 17.3-5.6 17.3-12.1 0-6.2-.3-40.4-.3-61.4 0 0-70 15-84.7-29.8 0 0-11.4-29.1-27.8-36.6 0 0-22.9-15.7 1.6-15.4 0 0 24.9 2 38.6 25.8 21.9 38.6 58.6 27.5 72.9 20.9 2.3-16 8.8-27.1 16-33.7-55.9-6.2-112.3-14.3-112.3-110.5 0-27.5 7.6-41.3 23.6-58.9-2.6-6.5-11.1-33.3 2.6-67.9 20.9-6.5 69 27 69 27 20-5.6 41.5-8.5 62.8-8.5s42.8 2.9 62.8 8.5c0 0 48.1-33.6 69-27 13.7 34.7 5.2 61.4 2.6 67.9 16 17.7 25.8 31.5 25.8 58.9 0 96.5-58.9 104.2-114.8 110.5 9.2 7.9 17 22.9 17 46.4 0 33.7-.3 75.4-.3 83.6 0 6.5 4.6 14.4 17.3 12.1C428.2 457.8 496 362.9 496 252 496 113.3 383.5 8 244.8 8zM97.2 352.9c-1.3 1-1 3.3.7 5.2 1.6 1.6 3.9 2.3 5.2 1 1.3-1 1-3.3-.7-5.2-1.6-1.6-3.9-2.3-5.2-1zm-10.8-8.1c-.7 1.3.3 2.9 2.3 3.9 1.6 1 3.6.7 4.3-.7.7-1.3-.3-2.9-2.3-3.9-2-.6-3.6-.3-4.3.7zm32.4 35.6c-1.6 1.3-1 4.3 1.3 6.2 2.3 2.3 5.2 2.6 6.5 1 1.3-1.3.7-4.3-1.3-6.2-2.2-2.3-5.2-2.6-6.5-1zm-11.4-14.7c-1.6 1-1.6 3.6 0 5.9 1.6 2.3 4.3 3.3 5.6 2.3 1.6-1.3 1.6-3.9 0-6.2-1.4-2.3-4-3.3-5.6-2z"></path></svg>     | cbgoodman             |