Terminating Interlocal Contracts for Police Service Delivery in California: Contract Failure versus Vertical Integration?

With the recent growth in interlocal agreements for municipal service delivery, insufficient attention has been given to city governments that choose to terminate interlocal contracts. Interlocal contract termination deserves attention as a special class of service delivery change because the termination of interlocal contracts may signal problems related to intergovernmental relations and metropolitan cooperation. Vertical integration theory from transaction cost economics can help us understand interlocal contract termination. This research examines all cases of interlocal contract termination for police service delivery by California cities between 2001 and 2010. Two case study cities are selected for additional analysis. Analysis of the causal processes of interlocal contract termination refines our understanding of how cities weigh the costs of internal production versus production through interlocal contract, and highlights limits to the durability of shared services.