Creative Destruction? Examining Special District Dissolution by Service Area

What drives special district dissolution in the areas of fire protection, housing and community development, natural resources, and water supply?

Motivation

Special districts dissolve often
- Approximately 6% of special districts, in any functional area, were dissolved in any 5-year block between 1977 and 2012
Special districts are highly specialized
- Some functional areas are dynamic, and others are relatively static
- Previous work suggests analyzing all types of special district function together is inappropriate (Foster 1997)
Little to no research on special district dissolution
- Exceptions: Bauroth (2010), Moldogaziev, Scott, and Greer (2019), Goodman and Leland (2024)

Two approaches to examining dissolutions
- Individual level analyses
- Systems level analyses
Potentially important factors
- An area’s prior experience with local government reorganization (obsolescence)
- Local demand for services
- State limitations on general purpose local governments
- Boundary change entrepreneurs

Time period: 1977-2017
Unit of analysis: all and metropolitan counties
Four largest functional areas
- Fire Protection; Housing and Community Development; Natural Resources; Water Services
Data sources:
- Census of Governments
- Census Bureau
- Bureau of Economic Analysis
- CDC

Year	Total Districts	Total	Fire Protection	Housing and Community Development	Natural Resources	Water Supply
1977	11,911	48.78%	17.31%	9.16%	11.69%	10.62%
1982	13,075	48.73%	17.34%	10.40%	10.42%	10.57%
1987	13,613	49.12%	17.85%	10.60%	10.32%	10.35%
1992	14,615	46.71%	17.00%	9.74%	9.72%	10.24%
1997	15,561	44.35%	16.70%	8.84%	9.24%	9.58%
2002	15,640	44.12%	16.94%	8.61%	9.20%	9.37%
2007	16,449	42.03%	15.89%	8.16%	9.02%	8.96%
2012	17,209	40.18%	15.11%	7.69%	8.87%	8.51%
2017	17,524	39.57%	15.10%	7.46%	8.61%	8.40%

\[ XR_{ijt} = \alpha + \beta ER_{ijt-1} + \gamma X_{it} + \delta I_{it} + \rho E_{it} + \phi_i + \tau_t + \varepsilon_{ijt} \]

Exit Rate

\[ XR_{it-1}=\frac{NX_{it-1}}{NT_{it-1}} \]

Entry Rate

\[ ER_{it}=\frac{NE_{it}}{NT_{it-1}} \]

\(NX_{it-1}\) is the number of special districts that dissolved in the previous period
\(NE_{it}\) is the number of new special districts in the current period
\(NT_{it-1}\) is the total number of special districts in the previous period “at risk”