ONE CITY FROM THREE;

A CASE STUDY IN MUNICIPAL CONSOLIDATION

By Holley Hewitt Ulbrich, Ph.D.
Professor of Economics
Strom Thurmond Institute
Clemson University
Clemson, SC
1998

In the 1990s, consolidation, annexation, and interlocal cooperation as strategies to make more efficient use of local fiscal resources have been on the agenda in many parts of the state. The city-county consolidation legislation passed in 1991 was one response to that interest. Increasing interlocal revenues appear on the annual municipal financial statements, suggesting that many cities are contracting for services with other cities or with counties. The successful consolidation of Batesburg and Leesville prompted several other groups of small adjacent communities to look at this option.

Early in 1995, the Strom Thurmond Institute was asked to assist members of the TriPacolet Partnership in Pacolet, Central Pacolet and Pacolet Mills evaluate a proposal to consolidate the three small communities into a single community. This case study is the result of that request. Although each community is unique in its history and in some of the specific challenges and opportunities it faces, many of the issues related to the Pacolet communities are common to all consolidations. This case is being made available to assist other communities in thinking through the various aspects of a consolidation proposal.

This report was prepared by Holley H. Ulbrich, Coordinator, Community and Economic Development Program, Strom Thurmond Institute, with the assistance of Ellen W. Saltzman, Research Associate. Special thanks to Joe Newton from the Appalachian Council of Governments for providing valuable supporting data, maps, and advice; Christine Prado of Clemson University's Printing Services and Dave Tarbox of the Institute staff for assistance with maps; Elaine Harris, Linda Thornton, Betty Littlejohn and Sarah Isaac of the TriPacolet Partnership for their time and efforts in making sure that we had an opportunity to get to know the three communities better: and countless individual citizens, municipal staff, elected officials, and business people in the TriPacolet communities who were willing to share history, information, and insights with us.

Evaluation of the TriPacolet Consolidation Proposal

Proposals to join the three closely linked communities of Pacolet, Pacolet Mills and Central Pacolet (referred to for convenience as the TriPacolet communities in this report) have been made periodically for the last forty years. While the geographic closeness of the three communities certainly makes consolidation feasible, the proposal needs to be examined in terms of the benefits it may generate for current and future residents and the costs it may impose.

Why consolidate?

The pressures on the TriPacolet communities are similar to those affecting other small towns in the state. Changes in the economy, in demographics, and in the demands on local governments have been stressful for small communities in South Carolina. Small rural communities have lost their employment base in many parts of the state as job opportunities, retailers, and services have become more concentrated in urban areas. Some communities, like Pacolet Mills and Central Pacolet, have lost population. Others have seen their communities lose not only much of their employment base but also a substantial part of their tax base. The population in many smaller towns has gradually become older and poorer relative to more prosperous areas-a population that has limited ability to pay taxes but often has a greater need for certain services, such as police protection and transportation. Where the local economy is in decline from loss of jobs and population, neighborhoods become less attractive, stores close, and the community becomes a less desirable place to live.

Any proposal to change a city's boundaries usually has two driving forces: community and economic development, and local taxes and services. These two concerns are far from separate. Economic development increases the tax base and public service demands. It creates jobs and attracts new residents which also increase tax and service revenues and spending pressures. Economic development, in turn, depends at least partly on the kinds of local public services available. Not only industry but also commercial and residential developments look for adequate police and fire protection, solid waste disposal, water and sewer services, and transportation, including drainage and road maintenance. Residents and local businesses may also be interested in such amenities as sidewalks, street lights, parks, and recreation.

Both the private sector and the public sector are important dimensions of local quality of life. A community needs a healthy private sector to create jobs and tax revenues and provide convenient access to goods and services locally. It also needs a healthy public sector to provide infrastruture and shared services. Both of these dimensions of the quality of life in the TriPacolet communities could potentially be enhanced by consolidating these three communities.

However, consolidation should not be oversold as the answer to all of the TriPacolet area's concerns. There are obstacles to both private sector development and improved local services that would continue to exist even after consolidation, such as a limited tax base, water quality, and access to sewer service.

The TriPacolet Partnership is not alone in responding to the changes of the last decade by looking at consolidation. Many other cities in South Carolina are looking for ways to enhance their tax bases and create more efficient service areas. Communities such as Greer expanded by annexing some of the surrounding areas. Legislation passed in 1991 made it easier to consolidate counties with their municipalities or to consolidate particular services between local governments. In the same year, Batesburg and Leesville successfully pursued consolidation of two incorporated communities. Duncan, Lyman and Wellford are presently exploring the same option. In an atmosphere of budget pressures and a climate of change, are likely more communities to consider consolidation as a way to provide quality public services at an affordable cost.

Fiscal pressures: a major source of pressure on all local communities has been the rising cost of many local public services. Wages and salaries, including fringe benefits, make up a large share of the budget for small communities the size of the TriPacolet communities goes to wages and salaries, including fringe benefits. Rising health insurance costs for employees have put pressure on city budgets. So have the increased cost of solid waste collection and disposal, and increased demand for police protection, two fast-growing areas of small town expenses. These pressures are particularly intense for small towns, which were already finding it difficult to provide professional administrative staff, curbside waste collection, recycling, 24 hour police protection or other basic services at an acceptable cost per resident.

Cities, particular smaller cities like the TriPacolet communities, rely mainly on property taxes and state-shared revenues to fund their services. State shared revenues have not kept pace with inflation in recent years, and property tax revenues have picked up a larger share of the burden in counties and smaller towns. Larger cities have been able to tap other sources, such as business licenses and fees, to relieve some of the pressure on property taxes. But all local governments have looked for ways to reduce service costs in order to avoid raising property taxes or increasing fees and charges.

A major argument for consolidation as a response to fiscal pressures is that a larger community can provide the same services at a lower cost per resident, or better services out of the same revenue per person. We will explore this issue in greater detail in a later section.

Development and quality of life: local public services and taxes are not the only driving force behind the move to consolidate. A larger community, speaking with a single voice and pooling resources, can provide a more effective channel for input on area concerns in county affairs. It can be more effective in attracting industry and commercial facilities that provide jobs, strengthen the community, and offer convenient local services, especially for older residents. Numbers matter when retailers and service firms make location decisions, and the numbers that are most readily available are the small Census population figures for the individual communities.

Gainers, losers, and community identity: even if consolidation would benefit the three TriPacolet communities as a whole, it is rare for any such change to occur without imposing costs on some groups of citizens. Some people may pay more taxes, and those higher taxes may be greater than the value they place on better public services. There may be loss of community identity in the smaller communities. Others may not wish to see growth, preferring to preserve a small town atmosphere and a lifestyle that might be threatened by strip malls, housing developments, and traffic. If there is indeed majority support for consolidation, the challenge facing the TriPacolet Partnership is to develop a consolidation plan that meets the needs of the majority while making a sincere effort to address these concerns of the minority.

After a brief description of the geography and demographics of the TriPacolet area, we will explore separately the three interrelated consolidation issues: fiscal impact, development implications, and effects on community identity.

GEOGRAPHY

City boundaries arbitrarily divide regions according to local taxing and service-providing jurisdictions. However, city limits are only one way to define an area. City boundaries may change with annexation, consolidation, incorporation or disincorporation of municipalities. School districts are another, more lasting area of defining the extent of a community, because schools represent not only a tax and service area but also, in more rural areas, the region served by a shared community center where children know each other and parents encounter other parents. Census divisions are yet another, as is the postal service area, that does not represent any local government but represents a reasonable range of service delivery. The commercial service area of a small city may extend 5 to 10 miles from the city center. Each of these measures is meaningful for certain purposes.

Map #1 shows the corporate boundaries of the three communities as well as the unincorporated area formerly incorporated as Pacolet Park that is enclosed by the corporate limits of Pacolet Mills. The estimated 1992 population of the three incorporated communities is 2,866 (1990 population was 2,636).

Map #2 shows the school district, Spartanburg #3, which is split into four attendance areas. The Pacolet attendance area (and part of the Clifdale attendance area) are served by Pacolet Elementary School for Grades K-5 (376 students), the Middle School of Pacolet for grades 6-8 (292 students), and Broome High School for grades 9-12 (902 students), which serves the entire district.

There is a fairly close correspondence between the Pacolet school attendance area and the Pacolet Census division. The 1990 Census provides separate data for Pacolet, Pacolet Mills, Central Pacolet, and "Pacolet division," an area of Spartanburg County that includes the surrounding unincorporated area. According to the revised Census, this area counted a 1990 population of 5,191, of which roughly half lived in the corporate limits of the three municipalities.

Map #3 was created at the Strom Thurmond Institute from Census data and related information. This map defines the "market" area served, or potentially served, by the TriPacolet communities. The potential commercial service area population of the TriPacolet communities is defined as the population within 5 miles and 7 miles of the intersection of highways 150 and 176. The seven mile limit was chosen to avoid extending the region into the city of Spartanburg. Residents this close to the TriPacolet shopping district might reasonably be expected to come to Pacolet for such regular purchases as gasoline, groceries, flowers, hair styling, medicine, and perhaps health and dental care. Within five miles of that intersection, there were 3,166 households and 8,436 people (1990 Census, corrected). Within seven miles, which takes in Jonesville and the outermost fringes of Cowpens and the city of Spartanburg, there are 6,949 households and 18,723 people. A market this size is large enought to support a reasonably diversified local business district.

DEMOGRAPHICS

The population of the three communities and the surrounding areas show both common characteristics and striking differences, as indicated in Table 1. In all three towns the percentage of homeowners is well above state and national norms, ranging from 73% to 82% of households. Pacolet and the unincorporated area surrounding the three communities are both close to the state and county averages in the share of persons under age 18, and somewhat higher than average in the percent over 65. But both Pacolet Mills and Central Pacolet have very few youth and twice as high a proportion of elderly residents as the county and state average. Both of these smaller towns also lost population between the 1980 and 1990 Censuses, while Pacolet increased its population.

While all of the income measures are low by county and state standards, none of them give a clear picture of relative income in the TriPacolet communities. The median household income is the best measure, but the high percentage of elderly households in Pacolet Mills and Central Pacolet means that that median income is being shared among fewer persons within the household. An income of $17,500 (Central Pacolet) supports a higher standard of living in a one or two person household than it would in a four or five person household. Per capita incomes come closer to reflecting the similarity between the three TriPacolet communities, putting the three communities at 79% to 86% of the state average.

Table 1
Demographic Characteristics of the TriPacolet Area

	Pacolet	Central Pacolet	Pacolet Mills	Pacolet (uninc.)	Spartanburg County	SC
1990 population	1,736	213	687	2,555
Percent minority	26.7%	5.6%	31.2%	16.4%	21.7%	30.9%
Percent homeowners	73.2%	78.9%	81.6%	81.3%	69.8%	69.8%
Percent <18 yrs.	25.3%	10.8%	18.9%	25.0%	24.6%	26.4%
Percent >65 yrs.	17.9%	28.6%	24.6%	13.3%	12.6%	11.4%
1989 income
Median household	$20,278	$17,500	$17,308		26,941	26,526
Per capita	10,290	9,691	9,406		12,218	11,897
Percent <$15,000	34.3%	41.5%	49.2%		6.8%	8.3%

These differences are important for the kinds of services a combined municipality would be asked to provide and the ways that taxes and charges would impact residents. The elderly homeowners that make up a significant share of the population in Pacolet Mills and Central Pacolet would not be overly burdened by increased property taxes because of the $20,000 homestead exemption for all taxes for citizens over age 65. These same citizens are those most in need of improved public safety, especially police protection.

CITY FINANCES AND CITY SERVICES

If the three cities of Pacolet, Pacolet Mills and Central Pacolet were combined, they would form a city with a population of 2,866 (1993 population). What kind of combined revenues might it expect, and what kinds of services could it provide?

In order to visualize how the fiscal picture might look for a combined city, Table 2 compares the combined revenue and spending for these three municipalities as reported in 1992-93 to a hypothetical "Smallville." This imaginary city is made up of the average revenue and spending for the 80 small cities in South Carolina with 1992 populations between 1,000 to 5,000 that reported their revenues and expenditures. If the TriPacolet communities were a single city, they would be very close to the middle of this size range. In both cases, utility revenues and expenditures are excluded, because these enterprise funds are usually handled separately from the regular city budget.

Revenues. Table 2 shows the total and per capita revenues of various kinds for the combined Pacolet communities and for Smallville, a composite of other towns in the same size range as the combined TriPacolet communities.

Except for state shared taxes, which are distributed primarily on a per person basis, all of the revenue sources generate fewer dollars per capita in the TriPacolet communities than in Smallville. To some extent, these low figures reflect lower than average income, but they also partly reflect local decisions about how to raise revenue.

Table 2
Revenue Profile: TriPacolet and Smallville
Fiscal Year 1992-93

	TriPacolet		Smallville
	Total	Per Capita	Total	Per Capita
Revenues	$363,364	126.78	892,497	342.30
Property tax	157,251	54.87	344,817	132.25
Licenses/permits	81,116	28.30	151,154	57.96
Service revenues	24,446	8.54	127,738	48.99
Miscellaneous*	26,632	9.30	65,599	26.70
Federal aid	0	0.00	79,052	30.32
State shared taxes	69,052	24.09	66,191	25.39
State grants	0	0.00	34,734	13.32
Other intergovernmental	4,837	1.69	19,241	7.38

*Includes $26,430 ($10.14 per capita) of local option sales tax revenues.

Property taxes: this low figure is the result of two factors: low per capita assessed value, and no millage in Central Pacolet. It is not unusual for very small towns like Central Pacolet to provide very few services and levy no millage. Of 129 incorporated towns with populations under 1,000, 39 levied no millage in 1992-93. It should be noted that, if the three cities were to consolidate and impose a common millage on Central Pacolet, about one-sixth of the property tax revenue in Central Pacolet would come from state reimbursements for the homestead exemption for elderly homeowners rather than directly from local taxpayers.

According to the county administrator's office, the combined assessed value for the TriPacolet communities in fiscal 1991 was $2,424,703. Adjusting the base to allow for some modest increase in value (using the rate of inflation for housing costs) would have resulted in a base of about $2.6 million in 1992-93. If that base was taxed at the same mill rate as the median for the Smallville cities in 1992-93 (84 mills), it would have generated $217,052 in property tax revenues, or $75.73 per capita, considerably more than the actual figure of $54.87.

Thus, about 27% of the difference between property tax collections in the TriPacolet communities and in Smallville appears to be due to a lower average mill rate. (It should be noted that Pacolet has an additional 20 mills for fire service which is charged to all residents of their fire service area, both inside and outside the city. The mill rate for Pacolet Mills includes fire service millage for city residents.) The remaining 73% of the difference in per capita tax property revenue between the TriPacolet communities and Smallville is the result of a smaller per capita property tax base. Spartanburg County was scheduled for reassessment in 1995, and the new valuation for the TriPacolet communities may give a better idea of the tax base and property tax revenue potential.

What would it mean in terms of taxes to local residents and businesses if Pacolet used that average mill rate? A $50,000 house would pay $200 in city taxes; a $100,000 commercial building or apartment complex would pay $600; and a $10,000 car would pay $84 in city property taxes. However, a homeowner over age 65 with a $50,000 would only pay $120 in city property taxes, because the remainder of the taxes would be reimbursed by the state through the homestead exemption. Any homeowners over age 65 with real estate property worth $20,000 or less would not pay any municipal property taxes on their homes, because the tax would all be covered by the homestead exemption.

If the TriPacolet cities used that average mill rate, a $50,000 owner-occupied house would pay $168 in city taxes; a $100,000 commercial building or apartment complex would pay about $500; and a $10,000 car would pay about $86. However, a homeowner over age 65 with a $50,000 house would only pay about $100 in city property taxes, because the remainder of the taxes would be reimbursed by the state through the homestead exemption. Any homeowners over age 65 with real estate property worth $20,000 or less would not pay any municipal property taxes on their homes, because the tax would all be covered by the homestead exemption.

All homeowners in South Carolina will also be getting considerable relief on their school property taxes next year, because of the property tax relief legislation passed by the General Assembly. The first $100,000 in market value of homeowners' residential property will be exempt from school taxes, considerably reducing overall tax bills. In Spartanburg #3, a homeowner with a $50,000 house will see a $357 reduction in the 1995 tax bill, and one with a house worth $100,000 or more would see a reduction of $714. While the property tax relief does not affect city or county taxes, in Spartanburg #3 the largest part of the property tax bill is for schools.

Licenses and permits: the area does have a limited base for business licenses and building permits, usually the two largest entries in this category. Pacolet Mills has increased its revenue from this sources considerably since 1991, jumping from $7.23 per capita to $26.93. Pacolet has taken advantage of the service offered by the Municipal Association of South Carolina to collect business license fees for insurance agents, and reports that its revenue from this source has tripled in the last two years. Central Pacolet is also using this service.

While Central Pacolet has little potential for additional construction because of lack of vacant land, both Pacolet and Pacolet Mills have the capability of growing both by infill and by annexation, generating both additional permit revenue and service fees.

Service fees: low service fees reflect either limited services or unwillingness to use fees. In most cases, fees cover part but not all of the cost of a particular service (garbage pickup, fire protection, parking, recreational programs, etc.) Service fees could generate more revenues where services are presently being provided without fees, but might also result in higher expenditures if they are associated with new or improved services.

Patterns of revenue in very small towns: the comparison of the TriPacolet communities with Smallville combines three communities of quite different sizes. Pacolet itself is in the Smallville size class, as would be a combined TriPacolet city, but Central Pacolet and Pacolet Mills as individual cities fall in the smallest size class, "Tinytown," which includes 129 cities in South Carolina with populations of 1,000 or less. Table 3 shows the individual revenue figures for the three separate TriPacolet communities as well as the comparison figures for their size classes-Smallville for Pacolet, Tinytown for Central Pacolet and Pacolet Mills.

Table 3
Revenue Profile: Per Capita Revenue
Pacolet, Central Pacolet, and Pacolet Mills
Fiscal Year 1992-93
(utilities excluded)

	Pacolet	Smallville	Central Pacolet	Pacolet Mills	Tinytown
Revenues	115.39	342.30	83.99	168.30	258.51
Property tax	53.30	132.25	0.00	77.04	63.52
Licenses/permits	28.13	57.96	33.61	26.93	48.34
Service revenues	12.04	48.99	0.00	3.06	54.26
Miscellaneous*	0.99	26.70	29.31	22.36	24.58
Intergovernmental	20.93	85.41	21.07	38.9	67.82

*Includes local option sales tax revenues.

Even comparing Central Pacolet and Pacolet Mills separately to small towns of similar size, their overall per capita revenues are still low by statewide standards. Only in property tax is Pacolet Mills above the average for very small towns. Particulary striking is the difference in intergovernmental revenues, most of it in state and federal grants.

Since the fiscal year for which these data were reported, Pacolet has received federal assistance in two areas: a Community Development Block Grant to rehabilitate 23 houses, and a law enforcement grant to hire another police officer. Pacolet Mills has received assistance in both sewer and water.

Potential revenue for a TriPacolet consolidation: if the TriPacolet communities were to consolidate, impose a common mill rate at the median for communities of their size, increase service revenues to the $33.61 per capita collected by Central Pacolet, and use their combined administrative resources to seek state and federal grants at the same level as other towns their size, their 1992-93 combined revenues would have been about 55% higher-approximately $563,418, or almost $200 per capita. While this figure is still lower than the Smalltown average, it would allow expansion of important public services, particularly improved solid waste collection and public safety.

Expenditures/services: a similar comparison between the TriPacolet communities and Smallville in the same size range can be made on the expenditure side. Table 4 shows the major expenditure categories for the combined TriPacolet communities and for Smallville for 1992-93, using data from the Annual Municipal Financial Reports filed by each city each year.

All three municipalities get by on a modest operating budget in all these major municipal service categories. Particularly striking is the low per capita spending on public safety, which is only 25% of the average for other cities of similar size. As Table 4 indicates, public safety tends to be the number one spending priority in Smallville, a composite of small communities the size of the TriPacolet communities.

Table 4
Expenditure Profile: TriPacolet and Smallville
Fiscal Year 1992-93

	TriPacolet		Smallville
	Total	Per Capita		Total	Per Capita
Total Expenditures	$315,148	126.78		815,045	312.60
Administration	94,719	33.05		183,482	70.37
Public safety	96,559	33.69		352,863	135.33
Environment & housing*	83,298	29.28		123,880	47.51
Recreation & culture	339	0.12		51,797	19.87
All other	39,603	13.82		103,024	39.51

*Includes solid waste disposal.

Pacolet presently is able to provide 24 hour police protection, having just added a fourth officer with federal funds. while Pacolet Mills has very limited police coverage (one part time-officer), and Central Pacolet relies exclusively on the sheriff's office. Service calls are mainly for traffic control, traffic offenses, drugs, and domestic violence. Pacolet also has an excellent fire department (with a fire insurance rating of 4). The fire department now has paid staff during peak hours as well as volunteers, and serves an area within a five mile radius. Those outside the city limits pay fire service millage to the Pacolet Fire District to cover the cost of the service.

For the fiscal year ending June, 1994, the number of dispatch requests for Pacolet and Pacolet Mills reported by the county was 4,082:2,883 for local police, 896 for the rescue squad, and 303 for fire. There is a county EMS substation in Pacolet as well as a volunteer rescue squad. Several citizens expressed concerns about issues of safety both in personal interviews and in the needs survey conducted by the TriPacolet Partnership last fall. There was particular emphasis on protection for older residents. The possibility of 24-hour police on duty with increased patrolling would be a major plus associated with consolidation. The other components of public safety-fire protection and emergency medical service (rescue squad)-appear to be more satisfactory.

There is also interest in improving solid waste disposal in the two smaller communities. Both Central Pacolet and Pacolet Mills contract for garbage pickup, while Pacolet provides solid waste collection as a city service. Pacolet has a new truck and two employees, serving 600 to 700 homes with weekly pickup. Pacolet Mills collects from 425 homes and Central Pacolet serves 150 homes. Pacolet officials expect that they could service all three municipalities with their existing staff and equipment at very little additional cost, and could also provide supplementary services such as pickup for appliances and tree limbs.

A county-owned recreation building, built with grant money, which houses recreation programs provided by the county to all citizens in the area. The library, located in Pacolet, also serves the entire area.

One could conclude that the governments of all three towns are quite frugal with their taxpayers' money, but also that citizens of the TriPacolet communities enjoy lower levels of public services than many of their peers elsewhere in South Carolina. Discussions with citizens and city officials confirm very limited public safety hours and dissatisfaction with solid waste pickup in two of the three communities as top local services priorities.

Service potential and service needs in the TriPacolet communities: pooling resources has potential for cost savings or service improvements, especially in police protection, solid waste pickup, and administration. A single city hall would free up two buildings for other uses, such as recreation, and a single town clerk could serve the needs of all three municipalities. Much of the town clerk's time is spent in such tasks as recording and transcribing minutes of city council meetings and filling out reporting forms, which would not take significantly more time to do for a combined municipality than it presently requires to do for each of the three. A part of the town clerk's function is simply to be present to answer questions and respond to requests, which again can be performed by a single individual in a town of a combined size of less than 3,000. A combined town would also be able to make better use of its police force and solid waste workers and equipment. Consolidation would probably have less effect on fire protection, since stations are needed on both sides of the railroad tracks and there is already a strong record of cooperation in answering fire calls.

Table 5
Expenditure Profile: Per Capita Expenditures
Pacolet, Central Pacolet, and Pacolet Mills
(Utilities excluded)
Fiscal Year 1992-93

	Pacolet	Smallville	Central Pacolet	Pacolet Mills	Tinytown
Total Expenditures	$109.84	$312.60	$56.39	$128.24	$216.05
Administration	28.83	70.37	37.85	41.47	80.44
Public safety	38.33	135.33	0.00	33.96	81.33
Environment & housing*	35.58	47.51	18.53	17.90	24.09
Recreation & culture	0.18	19.87	0.00	0.00	5.54
All other	6.91	39.51	0.00	34.91	24.65

*Includes solid waste disposal.

A survey by the TriPacolet Community Partnership in the fall of 1994 identified a number of needs, including but not limited to public services. In addition to expressed needs for better solid waste collection and road maintenance and improvements, a number of respondents were anxious to restrict mobile homes and junk yards, and several mentioned a need for land use planning. This item does not appear as an expenditure line because it falls in the general category of administration. Land use planning would be easier to achieve in a consolidated community. Other needs expressed were for bus transportation, a museum, recreation, housing and housing improvement, and beautification.

Improved public services would make the community more attractive to outlying areas, which might be willing to be annexed if the package of services was sufficient to offset the additional taxes that would be levied. Police protection, solid waste collection, and fire protection are often decisive in convincing outlying areas to join a municipality. All of these services could be strengthened by consolidation.

ECONOMIC DEVELOPMENT

Studies of successful economic development strategies provide some guidance as to what steps a community can take in order to expand its economic base and enhance both the prosperity of its residents and the local access to goods and services that are an important dimension of quality of life. In the needs assessment survey of the TriPacolet Community Partnership in the fall of 1994, while many residents wanted industry, others pleaded for dry cleaners, grocery stores, restaurants, or more stores in general.

Several factors appear to play an important role in business location decisions. One is infrastructure, primarily water and sewer. Another is quality of local public services, especially schools but also fire protection, public safety and waste disposal. A third is location, particularly with respect to access to markets and to transportation. A fourth is availability of land and skilled labor. A fifth is local taxes, fees and charges, which play a minor but not insignificant role. A sixth, important for commercial and service establishments, is the size of the local market. A seventh is other unique local attractions. Finally, there is the community itself-how it presents itself and what efforts it makes to attract and retain both industry and commercial facilities.

None of these factors is a guarantee of development success. Economists know, for example, that communities without access to major highways rarely develop, but there are many communities on major roads that have failed to develop. Highway access is a necessary but not sufficient condition for development. We will examine each of these considerations for the Pacolet area in turn and consider how they might be impacted by consolidation.

Infrastructure: water and sewer is probably the biggest handicap facing the TriPacolet communities right now in terms of commercial, residential and industrial development. While there is sewer treatment capacity in the Pacolet Mills area, and its citizens are on the sewer system for the most part, Pacolet and Central Pacolet continue to rely on septic tanks, which limits residential and commercial growth and is an obstacle to industrial development. The problems of extending sewer lines through intractable surfaces and the lack of adequate customer base have limited access to sewer for the other two communities. It will probably take outside assistance tank from the county or the state to extend the sewer so as to permit more residential, commercial and industrial development. Water quality is also a concern among some residents of Pacolet Mills.

While Pacolet Mills did receive emergency assistance for its sewer service, and has grant funding for water, the unmet needs in water and sewer are still substantial. Seeking further grant assistance for sewer development for Pacolet and Central Pacolet and for water quality improvement in Pacolet Mills would be facilitated by consolidation. The request would come from a larger number of citizens working through a single local government with greater administrative capability. However, consolidation does not guarantee success in convincing county or state authorities to provide financial assistance to the TriPacolet communities in developing water and sewer infrastructure.

Local public services: schools: while the TriPacolet communities have a limited tax base, the school district, which includes Cowpens and the fringe areas of the city of Spartanburg, is considerably more prosperous. In 1992-93, Spartanburg #3 had an assessed valuation per pupil of $16,612, ranking 15th of the 91 school districts in South Carolina. The district's per pupil spending of $5,255 ranked 5th in the state. Clearly the school district is a plus for economic development in Southeast Spartanburg County, a plus that is not really impacted one way or the other by the proposed consolidation.

Other local public services: fire protection appears to be adequate for commercial and residential customers. Police protection is a concern for some local merchants, especially in Pacolet Mills with only limited police coverage, Central Pacolet and the unincorporated area which rely on the sheriff's office. Solid waste collection is another service that draws complaints from some citizens, particularly in Pacolet Mills and Central Pacolet. This service is another that is important to local merchants and food establishments. One of the motivating factors for consolidation is the opportunity to improve the quality and quantity of these kinds of local public services. Better police coverage and solid waste disposal, as well as improvements in other services should result from consolidation and enhance the TriPacolet community as a place to open a business.

Location: access to markets and transportation: the TriPacolet area has a reputation for being off the beaten track, hidden away in the rural southeast corner of a Spartanburg County that has been growing rapidly. The county benefits from the crossing of I-26 and I-85, two major Southeastern interstate highways that connect Asheville to Charleston via Columbia and Atlanta (and points south) to Charlotte (and points north). The TriPacolet area, however, is handicapped by not having direct access to either of these major highways. I-85 can only be accessed by going through the city of Spartanburg, and the link to I-26 is by 176 and 295. It is fairly convenient for residents of the TriPacolet area to get to both Greenville Spartanburg airport, about one half hour away, and to Charlotte airport, about an hour away in the other direction.

The TriPacolet area can expect to benefit greatly from the expansion of SC 176 to four lane, which makes it easier to live in the TriPacolets and commute to Spartanburg for work or shopping but also makes it easier for residents in the surrounding area to get to Pacolet for local shopping and services. Rail service through the Pacolet communities is also a plus for certain kinds of industries and small businesses.

Land and skilled labor: land is still relatively abundant and inexpensive in Pacolet, Pacolet Mills and the surrounding unincorporated area. There are also vacant stores and other buildings, particularly in Pacolet Mills. Rental housing is in limited supply but both rental and owner-occupied housing could develop in response to growth in the metropolitan area if sewer problems could be resolved. The area already has several nursing homes because of inexpensive land, available labor, and convenience to the Spartanburg metropolitan area.

As in many rural areas left behind by development, the Pacolet communities tend to lose many of their high school and college graduates, but there are educational opportunities at USC-Spartanburg and at Spartanburg TEC, both convenient to the Pacolet communities. Skilled labor is also available at easy commuting distance in the nearby Spartanburg metropolitan area.

Local taxes, fees and charges: for industry, the most important property tax is usually the school tax, both because it is a large share of total property taxes and because new industries are either exempt from city and county taxes or negotiate a payment in lieu of taxes. In 1992-93, Spartanburg #3 levied a total school tax of 178.6 mills, 15th highest of the 91 school districts and 31% above the district mean of 136.4 mills that year. Firms must weigh the attraction of quality schools such as are enjoyed by Spartanburg #3 against the cost of higher school taxes in other districts. Even within Spartanburg County, there are considerable differences in mill rates, ranging from 196.2 in Spartanburg #7 to 115 mills in Spartanburg #5.

For most prospective industries, city taxes and fees are not an issue because they are much more likely to locate in the county. For local businesses, however, not only the mill rate (relatively low in the TriPacolet communities) but also the business license fee schedule and fees, charges and permits for various services may have some impact on their location decisions. However, the TriPacolet communities are competitive with other small towns in these taxes and fees and are likely to remain so even with consolidation.

Size of the local market: while industry has little interest in the local market, the size of the local market and its buying power is an important factor in location decisions for retailers and small service firms. Smaller South Carolina cities are handicapped in attracting these kinds of businesses by the low reported population in incorporated municipalities, because population figures do not include the residents of the surrounding unincorporated areas.

There are several indicators to suggest that the potential local market may be larger than it appears to be. The Pacolet postmaster notes that he serves about 2,000 customers and is seeing steady growth. His customer base is not bounded by city limits but includes the surrounding unincorporated area, even extending into adjacent counties. Census data for the Pacolet Census division confirms that the population count for the three incorporated municipalities only accounts for about half the area's residents. Map #3, which defines boundaries around the TriPacolet area that are a potential local service area for small businesses, counts 3,166 households and 8,436 people within 5 miles of the 176-150 intersection and 6,949 households with 18,723 people in a seven mile radius. A market this size is large enough to support a reasonably diversified local business district.

Market size has at least two other dimensions. One is buying power. Adjusting the 1989 per capita income for inflation and multiplying by the population, there is a total personal income of $33.7 million in the incorporated communities, $81.7 million within a five mile radius, $220 million within a seven mile radius.

The other dimension of market size is sub-populations-concentrations of people in particular age groups or other specialized markets. In the TriPacolet area, there is a high proportion of senior citizens and a high proportion of homeowners, which might suggest opportunities for particular businesses that cater to those individuals-drug stores, lawn care services, home health care, or even transportation.

Individuals often shop where there is a cluster of stores and services-groceries, drug store, bookstore, gas station, dry cleaning-so that they can meet many needs on one trip. It is this need for a critical mass of establishments that has made it difficult for small communities to attract or retain enough local merchants to have a viable business district that provides convenient access the local merchants and services prospective residents would like to have. It would require some active promotion to develop that kind of local shopping/service complex in the Tri-Pacolet community, an undertaking that would fare better in a cooperative environment. Consolidation might strengthen that cooperative environment and make it easier to build a local business/service community.

Unique local attractions: local attractions are of some modest importance to prospective residents and merchants, but not to industry. Pacolet has a few local historical sites, including the old school in Pacolet Mills and the mill village itself. Nearby Croft State Park offers some modest development potential both in supplying visitors and in making people aware of the TriPacolet communities nearby. That asset will be greatly enhanced when the South Carolina Heritage Trail is completed, now scheduled to pass through Pacolet and Pacolet Mills to take advantage of the state park, local history, and a convenient trail stop for supplies and services. The three communities could capitalize on these assets whether the communities consolidate or not, but a single community might be able to do so more effectively.

The community: identity and image: the TriPacolet Partnership is making commendable efforts to develop an identity and a positive image for the three Pacolet communities as an inviting small town area in which to live and raise a family, to retire, to locate a small business, or to shop for an industrial site. The consolidation effort, whether or not it succeeds, has raised the visibility of the area as a progressive place that should be included on any list of potential development sites for subdivisions, retail outlets, or other developments. Consolidation might reinforce this positive progressive image and reduce blurring of identity that comes from being three distinct, separate communities.

COMMUNITY IDENTITY

One of the concerns expressed by some residents and officials was that consolidation would lead to loss of identity. These concerns are particularly strong in the two smaller communities, where some residents feel like they would be "swallowed up" by the much larger Pacolet, or that consolidation would really be more like annexation of two small communities by a larger one. The largest community's values and preferences would dominate, its name and identity would prevail, and the distinctive nature and history of Pacolet Mills and Central Pacolet would be lost.

These concerns reflect some real possible outcomes. Pacolet is not only much larger than the other two, with 2/3 of the combined population, but it is different in other ways. Pacolet's citizens are less likely to be retired, more likely to be working in metropolitan Spartanburg, more likely to have children, a little more likely to live in an apartment and less likely to live in a mill house or a mobile home, and appear to prefer a higher level of local public services. The needs and preferences of the elderly, retired homeowners that make up a larger share of the population of Pacolet Mills and Central Pacolet could get lost in a consolidated community. Pacolet Mills residents already pay slightly higher property taxes than residents of Pacolet (even after allowing for fire district millage in Pacolet), but some citizens of Central Pacolet prefer to maintain their present situation with no city property taxes. Others would like access to better services, especially police protection and better waste collection, but are concerned about "buying into" a package of other services as well that they might not want.

One symbol of a community's identity is its post office, which confirms its existence as a separate place and often serves as an informal meeting place in small towns. The Pacolet Post Office already serves both Pacolet and Central Pacolet, with 2,015 customers. Pacolet Mills has its own post office with 525 customers. With no commercial establishments in Pacolet Mills, the town hall and the post office are the only public gathering places other than parks and churches. It is not clear what the policy of the Postal System is toward elimination of small post offices, or whether a consolidation would hasten a movement in that direction. There are certainly reasons to keep the Post Office open and reasons to consider closure independent of the consolidation of the three communities. Leaders in the community should address this issue through state and local elected officials, including the District 4 Congressional Office.

The issue of community identity is an important one to South Carolinians. It has been a major obstacle to creating larger school districts and consolidated high schools. In this case, if the three cities consolidate, Pacolet's identity will be swallowed up just as much as Central Pacolet's and Pacolet Mills' identities. There are, however, ways to address at least some of those concerns. Cities have the option of creating single-member districts for city councils. Members can be elected at large, from single-member districts, or some combination of the two. Single member districts could be guaranteed to Central Pacolet and Pacolet Mills as long as the requirement for districts of approximately equal size is honored.

Community identity is also tied up in community buildings and facilities. There are three town halls, one small but in good condition in Central Pacolet, one in need of repairs in Pacolet Mills, and one recently remodeled to serve Pacolet. Both Pacolet and Pacolet Mills have fire stations (the one in Pacolet also serves Central Pacolet). One way to preserve the historical identity of two of the three communities could be in the way that the municipal buildings are used. The two "surplus" town halls could be put to use for recreation, senior citizen programs, a local history museum or library, or other purposes in such a way as to preserve the history of the communities.

Community identity is also tied up in its leadership, including elected and appointed city officials. Consolidation will be much more likely to succeed if every effort is made to find ways to continue to utilize the experience and knowledge of these local leaders in the combined community.

Naming a consolidated community and developing a seal or symbol to represent the combined community offers another challenge and opportunity in preserving community identities within a new name and a new image. Citizens who raised this issue felt fairly strongly about a name that included Pacolet but that was different from the name of any of the three original communities.

SUMMARY

Any consolidation or expansion of a municipality creates both costs and benefits. For small communities, there are potentially very substantial benefits in the form of economies of scale-making better use of existing personnel, facilities and equipment to serve a larger population at very little additional cost. These small communities may also benefit by having a more effective single voice in the allocation of county resources and setting of county priorities. The costs are more subtle: they come from the fact that a larger and more diverse group of people are now "members of the same club," forced to accept the same level of taxes, fees and services even if their preferences are very different.

From a fiscal perspective, there is a fairly strong case for consolidating the three small TriPacolet communities into a single community. With a limited tax base, these communities have very few public services, and many citizens would like to have more police protection, better waste disposal, and other services that small towns of similar size elsewhere in the state are able to provide. From a development perspective, the gains from consolidation are less concrete, but there are few if any risks. Community identity and demographic differences between these communities are major obstacles that would have to be addressed in order for consolidation to meet with voter approval in all three cities.

Even with consolidation, the TriPacolet communities would have an uphill battle to "catch up" with the growth and prosperity being experienced by much of the rest of the area. Aging mill houses and mobile homes still make up a large part of the housing stock, employment opportunities are limited, incomes are low, young people tend to move away as the population becomes increasingly elderly, public services are very limited, and sewer service presents a serious challenge. On the plus side, the area has a nearby state park, the prospect of being a way station on the South Carolina Heritage Trail now being developed, convenient access to the Spartanburg metropolitan area, sewage treatment capacity that can eventually be accessed, inexpensive land, small town charm, and dedicated leadership. A combined community would still be challenged but might have a better opportunity to meet those challenges and build on those assets to build a Greater Pacolet for the 21st century.

APPENDIX

THE CONSOLIDATION DECISION:

OPTIONS FOR THE TRI-PACOLET AREA

Question: Should the citizens of Pacolet, Central Pacolet, and Pacolet Mills join together to form a single community with shared government, public services, facilities, and a common structure of taxes and fees?

Answer: Each citizen has to evaluate the gains and losses in terms of taxes, services, economic development, and community identity and voice and make his or her own decision. Often both expectations and fears are exaggerated compared to the actual effects. Consolidation won't solve all of the area's problems, especially in economic development. But it may improve quality of life in some areas and lay the groundwork for future development.

Question: What size town would it be after consolidation?

Answer: The three towns have a population of 2,866 (1993 estimated population). If no additional areas were annexed, the new town (whatever name it bears) would be about the size of Saluda, Central, Hampton, Edgefield, or Travelers Rest. The TriPacolet area, including the nearby unincorporated area in the Pacolet Census division, has about 5,200 people. The market area within a 5 mile radius is almost 7,000 people; within a 7 mile radius, more than 18,000 people.

Question: How would the population of a combined town compare to other towns in South Carolina?

Answer: These three towns are a little different from the average for the rest of the state and even the rest of the county. They have more older people, a higher share of homeowners, a lower median family income, and a lower percentage of children than other areas. Pacolet itself is close to average in terms of children and retired people, but both Pacolet Mills and Central Pacolet have fewer children and more people over 65 than average.

Question: What would happen to property taxes if the three towns were combined?

Answer: There's no doubt that citizens of Central Pacolet would see higher property taxes, because right now they pay no millage. Property taxes for the three towns combined are low compared to other towns of similar size, partly because of lower millage in Pacolet and no millage in Central Pacolet, and partly because of a low tax base. The average town this size (1,000-5,000 residents) in South Carolina levied a tax of 84 mills and collected $132.25 per capita in property taxes in 1992-93, compared to $54.87 for three TriPacolet towns combined. Pacolet Mills has higher millage than average for towns its size, but this figure includes fire millage. In Pacolet and Central Pacolet the millage for fire protection is collected by fire districts. However, the low tax base is also an issue. These three communities have a lower tax base with a large share of older homes and mobile homes and very limited commercial properties. If the combined Pacolets used the average mill rate for towns of their combined size, they could raise about $76 per capita, which is still below average for towns of that size.

Question: How much property tax would 84 mills be for the average homeowner?

Answer: If the TriPacolet towns used that average mill rate, a $50,000 owner-occupied house would pay $168 in city taxes; a $100,000 commercial building or apartment complex would pay about $500; and a $10,000 car would pay about $86. However, a homeowner over age 65 with a $50,000 house would only pay about $100 in city property taxes, because the remainder of the taxes would be reimbursed by the state through the homestead exemption.

Question: Wouldn't higher property taxes be a burden on low income senior citizens?

Answer: Because of property tax relief approved by the General Assembly this year, homeowners are going to get a substantial cut in their school property taxes, which are about half the total tax bill. Even if the combined town raised the mill rate to the average for small towns, everyone's tax bill would be lower. Senior citizens who are homeowners (and the percentage of homeowners in Central Pacolet and Pacolet Mills is very high) pay no taxes on the first $20,000 of their homes because of the homestead exemption. The state makes up the loss of tax revenue to the city, so the combined town would collect more in new tax revenue than citizens would pay. Rental and commercial property, however, do not benefit from these tax breaks.

Question: What about other revenue sources? How will they be affected by consolidation?

Answer: Per capita revenues from other sources in the three towns were low in fiscal year 1992-93 in just about every category except state-shared taxes, which are distributed mainly on a population basis. Most towns collect more from licenses and permits, although both Pacolet and Central Pacolet have increased their business license revenue in the last two years by having the Municipal Association collect from insurance firms on their behalf. Service revenues (such as garbage fees) were also lower than average, and most other small towns get a lot more in state and federal grants. A combined municipality would probably be in a better position to pursue grant opportunities.

Question: Could we count on better public services with consolidation, like garbage collection, police protection, and land use planning?

Answer: Taken together, these three towns spend much less than other towns the same size on all services, but especially public safety, where spending is less than 30% of the average for towns of this size. It is virtually certain that a combined municipality could increase the level of police protection to that of Pacolet at very little additional cost, extending that protection into Central Pacolet and Pacolet Mills, because the population is small and the area is very compact. Pacolet's solid waste staff and equipment is more than adequate to service all three communities, which would represent a cost saving. Consolidation would also free up two of the three city hall buildings, a savings in maintenance costs and/or an opportunity to provide other services in those buildings.

Question: Would outlying areas be more likely to become part of the town if consolidation took place?

Answer: Improved public services should make the community more attractive to outlying areas. Residents might be willing to be annexed if the package of services was good enough to offset the extra taxes. Police protection and solid waste collection are often important factors in annexation. Both these services could be strengthened by consolidation.

Question: Homeowners, businesses, and potential industries all need access to sewer. Will consolidation help?

Answer: Sewer is one of those problems that consolidation won't solve, but consolidation might make it a little easier to eventually move toward a solution. The sewer problem is tough, because the land is hard to dig through and because the customer base is limited. Consolidation won't change the subsoil, or immediately expand the customer base. It might give a stronger voice and more municipal staff to seek out resources to help break the sewer impasse.

Question: Our biggest need is economic development. How will consolidation help or hurt?

Answer: This area has some real assets it can draw on. It's close to Spartanburg, has a good school district, is close to a state park and on the Heritage Trail that is being developed, has access to technical education and USC-S. Land is still inexpensive and, with the new four lane highway, access is good. But the lack of sewer, the limited size and low income retail market, and competition with Spartanburg close by are drawbacks that will still remain with or without consolidation. The assets, likewise, are there whether or not the three towns consolidate.

Consolidation is likely to provide better public services which may attract some industry or commercial development. Since Central Pacolet has little developable land, new business or industry is more likely to locate in Pacolet, Pacolet Mills, or the unincorporated area. In those areas, taxes are likely to be about the same after consolidation.

For attracting retailers and service firms, consolidation (along with the Heritage Trail) may increase awareness of the market potential of the area. Consolidation should give the communities more visibility and a single, more effective voice with which to court potential firms.

Question: The people in Pacolet Mills and Central Pacolet are different from those in Pacolet. They're older, less likely to have children at home, more likely to live in a mill house or a mobile home. They feel differently about paying taxes and have different service needs. Won't they be more dissatisfied with taxes and services after consolidation?

Answer: This is one of the major issues in any consolidation that has to be addressed very thoughtfully. It would be important to preserve a voice for the two smaller towns in consolidation, perhaps by single member districts for city council. Certainly there should be a transition board that addresses these issues as they come up. But citizens of Pacolet Mills already pay property taxes that are a little higher than in Pacolet, and both residents of both Pacolet Mills and Central Pacolet appear to be concerned about police protection and garbage collection. It's a tradeoff that only those who live there can evaluate.

Question: I live in Pacolet Mills, which is a lot smaller. My family has lived there for generations. Aren't we going to lose our community identity and be swallowed up by Pacolet because it's so much larger?

Answer: This is a question that only the residents can answer. The fact that so many people live in one town but have relatives, shop, work, or go to church in another should help. But, if citizens decide to consolidate, it's important to find ways to preserve the history of the three separate communities, to provide community centers, to use some of the present elected leadership and staff from all three towns to help ease the transition, and to be sensitive to differences in needs and ability to pay in different parts of the community.

About the author

Holley Hewitt Ulbrich is Alumni Professor of Economics at Clemson University and a senior fellow at the Strom Thurmond Institute, with a particular interest in issues relating to state and local public finance. She holds the BA, MA and Ph.D. degrees in Economics from the University of Connecticut and has done consulting work with many federal, state and local government agencies as well as the World Bank.

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