Governmental Structure and Performance: the Effects of the Lakewood Plan On Property Values

The paper analyzes the impact on municipal property values of the Lakewood intergovernmental contract police services plan. It is argued that any economic Abstract benefits of contracting over self-provision of services will generate tax and service quality differentials which will tend to be capitalized into residential property values; thus, property value effects can serve, in the absence of accu rate police output indicators, as indirect measures of relative local govern ment performance. The study finds that, after accounting for other spending and tax differences, property values are significantly lower in contract cities. When combined with more direct evidence on police output, this result suggests that the contracting plan does not provide superior services. To improve govermental effectiveness via contracting, it is argued that output-oriented, performance contracts are needed.