Volume 76, Number 1

April 2001

Regionalization and Interlocal Bargains

Clayton P. Gillette

Professor of Law, New York University. B.A., 1972, Amherst College; J.D., 1975, University of Michigan.

Numerous commentators on local government law have advocated some form of regionalization to address metropolitan problems. These recommendations emanate from a conception of local governments, particularly suburbs, as isolated, self-interested entities that ignore or exploit the plight of their neighbors, particularly central cities. In this Article, Professor Clayton Gillette puts forward a justification for decentralized entities and posits a more sanguine relationship among localities within a region. Analogizing from literature concerning firms that form long-term contractual relationships, he contends that neighboring localities may be sufficiently interdependent that they have significant incentives to cooperate through interlocal contracts that realize economies of scale or that share regional distributional burdens. He suggests that any underutilization of interlocal contract depends less on suburban disinterest or exploitation than on contracting costs and legal obstacles that do not affect interfirm relationships as readily. Thus, problems attributed by advocates of regionalization to excessive localism may be redressed best through institutional arrangements that reduce contracting costs. Nevertheless, Professor Gillette argues that some costs inherent in regional burden-sharing contracts, such as those involving observability and verifiability of contract breaches, may be irreducible. He concludes, therefore, that some contracting costs that are endemic in interlocal relations are best circumvented through informal cooperative bargains that avoid problems of monitoring and enforcement.