Managerial Effect: Comparing Forms of Local Government
by
Terry Waterfield
Spring 2010
A paper submitted to the faculty of
University of North Carolina at Chapel
Hill in partial fulfillment of the
requirements for the degree of Master of
Public Administration.
This paper represents the work of a UNC MPA student. It is not a formal report of the School of
Government, nor the School of Government faculty.
Executive Summary
The council-manager form of government differs from the mayor-council form of government
because of the presence of a professional, non-elected manager with specific statutory authority.
Many believe this results in tangible benefits to municipalities that adopt the council-manager
form of government. This paper examines these two municipal forms of government in order to
highlight any potential advantages the council-manager form of government provides a
municipality. The study finds that municipalities‟ with the council-manager form of government
are more likely to receive financial reporting awards.
Introduction
The International City and County Management Association (ICMA) has published a brochure
that answers “Frequently Asked Questions” about the council-manager form of government. i
One question is “Does it cost more for a community to adopt the council-manager form and hire a
professional manager?” The response explains that “many local governments have found their
costs are actually reduced under competent management.” The brochure also explains that
“professional managers focus relentlessly on efficient and equitable service delivery, policy
implementation, and evaluation.” ii The ICMA includes a document on the “Council-Manager
Form Resource” section of their website titled “How Managers Save Local Government
Money”iii that provides cases of city managers and administrators promoting efficiencies within
their municipalities. The ICMA, and others, have expressed that the council-manager form of
government brings professionalism to municipalities that adopt it. iv
These claims address a commonly held belief that managers provide tangible fiscal benefits and
bring professionalism to the municipalities they serve. This paper aims to test that claim.
Research Question
The purpose of the research presented in this paper is to find any differences that exist between
municipalities with the mayor-council and the council-manager form of government. Specifically,
does the presence of the council-manager form of government lower total costs v and increase
professionalism in a municipality?
Literature Review
Research has been relatively mixed on the subject of total cost differences between mayorcouncil and council-manager forms of government. This research has generally examined
spending levels, not budgeting levels. Some research has reported a significantly lower amount of
spending in the manager-council form of government vi while other studies refute this claim. vii
Research has found a significantly lower amount of spending, in municipalities with the councilmanager form of government, on police but not fire departments.viii
Related research addressing the relative efficiencies of each form of government from a service
provision perspective, ix as well as research measuring the efficiencies of a municipality during the
transition from the mayor-council to the council-manager form of government, x has generally
found no significant differences in the efficiencies of the two forms of government.
Much of the literature surrounding the council-manager form of government addresses the role of
the manager and the benefits a manager provides, on a case study basis. Prior research also has
attempted measuring professionalism in municipalities with mayor-council and council-manager
forms of government.xi A major difficulty in comparing professionalism between municipalities is
obtaining valid professionalism measurements. Yet, research that has attempted to answer the
question has generally found higher levels of professionalism in manager-council forms of
government.
Methodology
This study tests two stratified random samples, differing in form of government, with each
sample including 24 municipalities. To lower the probability of bias, the population was stratified
by location. The samples were selected from only southeastern states and a municipality from one
1
state was only included if a municipality from the same state was included in the corresponding
sample (for instance, if three municipalities from Tennessee were included in the managercouncil sample, three municipalities from Tennessee also would need to be included in the
mayor-council sample). As a result, states with few municipalities with either the councilmanager or mayor-council form of government were not included.
The study aimed to include similar, medium-sized cities and, therefore, limited the population to
a range of 25,000 to 250,000. The samples were selected from Alabama, Arkansas, Florida,
Georgia, Maryland, South Carolina, Texas and Tennessee. xii
Table 1 shows the variables selected to measure cost, efficiency, long-term planning,
professionalism and fiscal stability. The professionalism measures included in this study address
a commitment, specifically, to professional financial reporting. All budget data were taken from
fiscal year 2009-2010 budgets.xiii
Table 1
VARIABLE
General Fund Budget per Capita
Police Budget per Capita
Fire Budget per Capita
Administrative Budget as % of General Fund
Budgetxiv
Planning Budget as % of General Fund
Budget
Governmental Finance Officers Association
(GFOA) Distinguished Budget Presentation
Award
Governmental Finance Officers Association
(GFOA) Certificate of Achievement for
Excellence in Financial Reporting Program
(CAFR Award)
Municipal Bond Rating
DIMENSION
Cost
Cost
Cost
Efficiency
Long-Term
Planning
Professionalism
Professionalism
Fiscal Stability
The prevalence of the GFOA budget and CAFR award was measured by coding municipalities
that received the award “1” and municipalities that did not “0.” The sample results are an average
of the coded results. Bond rating was measured on a scale of seven to one, in descending order,
with AAA being a seven and A1 (the lowest rating reporting for any municipality included in this
study) being a one.
Limitations
Comparing sets of municipalities inherently provided drawbacks. Municipalities in different
regions are often charged with providing different services. Limiting the sample to southeastern
states and pairing the municipalities controls this, to some extent, but municipal differences often
exist within regions and states.
2
Another problem with comparing municipalities involves population. Inherently, larger
municipalities function differently than smaller municipalities. To limit this bias the samples were
stratified by populationxv but the range of 25,000 to 250,000 still provides the opportunity for
differences in the role of the municipality.
The methodology also is limited by the ability to measure efficiency without measuring exact
governmental functions. Without knowing the exact functions of each municipality, we cannot be
completely sure that costs are actually lower for a municipality that appears to have lower costs
than a comparable. By limiting the samples by region, some of this bias may be removed but,
without an in-depth study of the specific budgetary line-items of each municipality, there is still
uncertainty.
Results
The methodology produced samples with similar population averages. This combined with the
paired-municipalities within each sample are a good indication that region and population are not
responsible for skewing the results drastically.
Table 2
COUNCILMANAGER
(N=24)
MAYORCOUNCIL
(N=24)
Population Average
75,986
79,367
General Fund Budget Average
$76,619,569
$76,901,183
General Fund Budget Average per Capita
$1,086
$1,032
Police Budget per Capita
$239
$271
Fire Budget per Capita
$233
$179
Administration Budget as % of Total Budget
5.11%
4.82%
Planning Budget as % of Total Budget
1.12%
0.96%
Average Budget Award
0.71
0.42*
Average CAFR Award
0.96
0.67**
Average Bond Rating
4.13
4.38
*- Significant at the .05 level, **- Significant at the .01 level
The study found that the council-manager municipalities had a higher general fund budget per
capita, fire budget per capita, administration budget as a percent of total budget and planning
budget as a percent of the total budget. In contrast, the mayor-council form of government had a
higher police budget per capita.xvi However, these results were not statistically significant. As
Table 2 shows, a difference of means test found significant difference between the two forms of
government in the prevalence of a GFOA Budget award (at the .05 level) and CAFR award (at the
.01 level). Average bond rating, however, differed only slightly between the two groups, with the
mayor-council form of government having a slightly higher bond rating average.
While all municipalities in the sample are governed by the indicated form of government, some of
the mayor-council municipalities have city administrators. The ICMA includes city
administrators in their organization, as members, although there are significant differences
3
between the position of a city administrator and a city manager. xvii Therefore, this study also
compares a subset of mayor-council municipalities, with professional administrators, with
manager-council municipalities (chosen at random, yet still stratified in order to fulfill the
requirement of having the same number of municipalities per state). The result was a comparison
of five municipalities.xviii
TABLE 3
MAYORCOUNCIL
MAYOR-COUNCIL WITH
(N=5) xix
ADMINSTRATOR (N=5)
Population Average
72,304
71,239
General Fund Average
63,380,380
83,640,977
General Fund Average per Capita
$960
$1,279
Police Budget per Capita
$276
$304
Fire Budget per Capita
$138.24
$169
Administration Budget as % of Total Budget
4.40%
7.12%
Planning Budget as % of Total Budget
0.96%
1.52%
Average Budget Award
0.20
0.80
Average CAFFR Award
0.40
1.0
Average Bond Rating
4.40
5.40
The results illustrate greater differences between the mayor-council form of government without
an administrator and the mayor-council form of government with an administrator than between
the mayor-council form of government and the council-manager form of government. There is an
increased level of budgeted spending (in general fund average per capita, police budget per
capita, administration budget as a percent of total general fund budget and planning budget as a
percent of total general fund budget) in mayor-council municipalities with a professional
administrator. This could come from actual differences but could also be a result of the relatively
low number of municipalities in the sample.
There are also larger disparities between receiving a GFOA Budget or CAFR award. Bond rating
differed by about 1 point (or one rating position), with mayor-council with administrator
municipalities receiving a higher rating.
Analysis
This research suggests that mayor-council municipalities tend to spend more, per capita, on their
respective police departments than council-manager municipalities. Conversely, council-manager
municipalities tend to spend more, per capita, on their respective fire departments than mayorcouncil municipalities. This indicates that the presence of the manager-council form of
government provides some balance between the police and fire budgets. This finding aligns with
the view that political pressures can inflate the budgets of departments that are popular within a
municipality. The results of this study indicate that municipalities with the council-manager form
of government do not have lower costs than municipalities‟ with the mayor-council form of
government.
4
While administrative spending appears to be higher under the manager-council form of
government when compared to the mayor-council form of government, the planning budget as a
percent of the general fund budget also appears to be higher. This indicates a greater commitment
to long-term municipal planning. The likelihood of a council-manager municipality receiving a
GFOA Budget or CAFFR award is higher than that of mayor-council municipalities, to
statistically significant levels. This indicates a higher commitment to detailed and professional
financial reporting in municipalities with the council-manager form of government. The higher
level of planning expenditures as a percent of the general fund and the increased likelihood of the
GFOA Budget and CAFFR award indicate that, the presence of the council-manager form of
government provides professionalism and planning benefits when compared to the mayor-council
form of government. These benefits are indicative of the ICMA‟s stated goals.
Mayor-council municipalities had a slightly higher average bond rating than manager-council
municipalities. The result indicates that bond rating, a core measurement of municipal financial
health, is influenced by more than simply municipal form of government. This aligns with
information provided by an analyst for Moody‟s Investment Services, xx who explains that the
methodology for calculating a municipality‟s bond rating has four primary areas of focus:
“economic profile, financial position, debt burden, and management.” Certainly competent
management will affect the management component but it may not be able to fully affect
economic profile, financial position or debt burden, especially in the short term. The results of
this study indicate that municipal bond rating is not significantly affected by the presence of a
professional manager.
The differences between municipalities with the mayor-council form of government without an
administrator and the mayor-council form of government with an administrator illustrate that
strong-mayors may tend to budget less when they serve as the day-to-day manager of a
municipality. The relatively low number of municipalities in this comparison makes it not
possible to form any generalizable conclusions but, of the municipalities sampled, there are stark
differences when an administrator is added to a municipality.
Conclusions
Municipalities with the council-manager form of government differ from municipalities with the
mayor-council form of government in three main ways: police and fire department expenditures
are more balanced, administrative expenditures as a percent of the general fund are higher, and
there is a higher degree of professionalism (as measured by the indicators in this study).
Future research could benefit by using a larger sample size than what was included in this study.
This would allow real differences, even if those differences are slight, to approach statistical
significance. This would also be beneficial in comparing mayor-council municipalities without an
administrator and mayor-council municipalities with an administrator. In this study there
appeared to be sizable differences in mayor-council municipalities when an administrator is
present but the low number of municipalities within the study limits any conclusions. A future
study could also gain from including other professionalism measures and ratings from more than
one bond-rating agency when comparing municipal bond ratings.
5
Endnotes
ICMA‟s “Council-Manager Form of Government: Frequently Asked Questions” can be found on ICMA‟s
online bookstore at http://bookstore.icma.org
ii
“Council-Manager Form of Government: Frequently Asked Questions.”
iii
www.icma.org. “Resource Center.”
iv This can be found in aforementioned brochure on the council-manager form of government as well as in
the following places:
Svara, James and Nelson, Kimberly. “Taking Stock of the Council-Manager Form at 100.” Public
Management. 2008 August.
“Professional Local Government Management: The Benefits to Your Municipality.” www.icma.org.
“Resource Center”.
“Council Manager or „Strong Mayor‟ The Choice is Clear. Learn the Facts About Council-Manager
Government.” California City Management Foundation and ICMA, the International City/County
Management Association. www.icma.org. “Resource Center.”
v
Total expenditures are an imperfect proxy for costs. This is a limitation any research on this subject will
face unless the research addresses specific, comparable municipal performance measurements. This paper
simply aims to compare total expenditures per capita, which is an important component, yet not the sole
indicator, of fiscal prudence and responsibility.
vi Booms, Bernard, “City Government Form and Public Expenditures.” National Tax Journal, 1966, 18799.
vii Deno, Kevin and Mehay, Stephen. “The Municipal Management Structure and Fiscal Performance: Do
City Managers Make a Difference?” Southern Economic Journal, Vol. 53, No. 3 (Jan., 1987), pp.
627-642. http://www.jstor.org/stable/1058759
viii Jung, Changhoon. “Forms of Government and Spending on Common Municipal Functions: A
Longitudinal Approach.” International Review of Administrative Sciences. Vol. 72, No. 3, 363376 (2006).
ix
Hayes, Kathy and Semoon, Chang. “The Relative Efficiency of City Manager and Mayor-Council Forms
of Government.” Southern Economic Journal, Vol. 57, No. 1 (Jul., 1990), pp. 167-177.
http://www.jstor.org/stable/1060487
x
Morgan, David R. and John P. Pelissero. “Urban Policy: Does Political Structure Matter?” Public Choice.
Spring 1974, pp. 27-43. http://www.jstor.org/stable/195431
xi
Keene, James, et. al. “How Professionals Can Add Value to Their Communities And Organizations.”
Public Management. March 2007.
xii
North Carolina and Virginia were excluded because they did not have municipalities, with a population
of over 25,000, with the mayor-council form of government. Louisiana was excluded because of how its
municipal functions differ from other southeastern states. A complete list of the municipalities used in this
study is included as Appendix A.
xiii Budget data was taken from municipal websites and email correspondence with municipal officials.
xiv
This number was calculated by adding the legislative, executive, human resources and financial
departments together and dividing by the total general fund budget. A full breakdown of these departmental
results can be found in Appendix B.
xv
Population data was complied through the US Census Bureau‟s website, www.census.gov.
xvi This finding aligns with the previously cited study by Changhoon Jung (“Forms of Government and
Spending on Common Municipal Functions: A Longitudinal Approach”, cited in footnote 8)
xvii Svara, James and Nelson, Kimberly. “Taking Stock of the Council-Manager Form at 100.” Public
Management. 2008 August.
xviii A complete list of the municipalities included in the mayor-council and mayor-council with
administrator comparison is included as Appendix C.
xix A difference of means test was not feasible for this comparison because of the low number of
municipalities in the sample.
i
6
xx
This analysis was taken from an email correspondence with Ms. Alicia Stephens, an analyst for Moodys,
concerning this research study.
7
Appendix A: Municipalities Included in this Study
STATE
Alabama
Alabama
Arkansas
Arkansas
Florida
Florida
Georgia
Georgia
Georgia
Maryland
South Carolina
South Carolina
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Texas
Texas
Texas
Alabama
Alabama
Arkansas
Arkansas
Florida
Florida
Georgia
Georgia
South Carolina
South Carolina
Tennessee
Tennessee
Tennessee
Texas
FORM OF GOVERNMENT
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Manager
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
Mayor
8
CITY
Dothan City
Auburn City
Little Rock
Hot Springs
Clearwater City
Lakeland City
Marietta City
Rome City
Savannah City
Bowie City
Columbia City
Hilton Head Island
Brentwood City
Cleveland City
Columbia City
Johnson City
Kingsport City
Murfressboro City
Oak Ridge City
Smyrna City
Amarillo City
Cleburne City
Corpus Christi City
Montgomery City
Vestavia Hills City
Jonesboro City
Pine Bluff City
Bradenton City
Hialeah City
Macon City
Warner Robbins City
Charleston City
North Charleston City
Bartlett City
Clarksville City
Jackson City
Texas City
Maryland
Georgia
Maryland
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Texas
Texas
Mayor
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
Mayor w/Administrator
9
Fredrick City
Roswell City
Annapolis City
Chattanooga City
Collierville Town
Franklin City
Germantown City
Knoxville City
Conroe City
League City
Appendix B: Administrative Budget Breakdown
Total Legislative Budget
Total Legislative Budget as % of Total General Fund
Budget
Total Executive Office Budget
Total Executive Officer Budget as % of Total General
Fund
Total Finance Budget
Total Finance Budget as % of Total General Fund
Budget
Total Human Resource Budget
Total Human Resource Budget as % of Total General
Fund
Total Administrative Budget Average per Capita
Total Administrative Budget as % of Total General
Fund Budget
10
MANAGER MAYOR
$291,303
$362,356
0.00543
$745,068
0.00543
$575,286
0.01267
0.00961
$1,405,997 $1,371,448
0.02389
$773,112
0.01955
$925,333
0.01214
0.01272
$3,215,480 $3,234,423
0.05413
0.04732
Appendix C: List of Municipalities Included in Mayor-Council with
Administrator and Mayor-Council Comparison
STATE
FORM OF GOVERNMENT
CITY
Georgia
Mayor w/Administrator
Roswell City
Maryland
Mayor w/Administrator
Annapolis City
Tennessee
Mayor w/Administrator
Chattanooga City
Tennessee
Mayor w/Administrator
Collierville Town
Texas
Mayor w/Administrator
League City
Georgia
Mayor
Macon City
Maryland
Mayor
Fredrick City
Tennessee
Mayor
Clarksville City
Tennessee
Mayor
Jackson City
Texas
Mayor
Texas City
11