In this study the role of special districts in providing local public services is assessed. Using economic theory, it is determined, theoretically, that special districts do provide an institution by which consumption, production, and distributional efficiency in the provision of local public goods and services can be attained.

This view is contrasted to the view of special districts held by the "reform tradition," a set of ideas about how local government can be most efficiently organized. Assuming that a centralized local governmental administration is the most efficient, the reformists deduce that the proliferation of special districts will result in more costly provision of local public services as well as "unresponsive local government." These propositions have led at least five states to create state regulatory agencies that have effectively controlled the growth of special districts.

In light of these two contrasting views on the role of special districts in the provision of local public services, the "economic interpretation" and the refer tradition, the question of the effects of special districts on the cost of providing local public services becomes an empirical one. The effects of restricting the growth of special districts in three states, California, Oregon, and Washington, on the cost of providing municipal services are examined. It is determined that restricting the growth of special districts increases the costs of providing such services, contrary to the reformist predictions.

Further evidence is presented that shows that consumer-taxpayers are more satisfied with the public services provided by smaller local governmental jurisdictions such as special districts than with many larger, general purpose units of government.

The evidence brought forth in this study also supports the conjecture that special district growth restrictions are a means of enhancing the monopoly power of existing local governmental jurisdictions. For policy purposes, it is concluded that a legal framework that permits the creation and dissolution of special districts by the groups of individuals served by them is most conducive to attaining consumption, production, and distributional efficiency in the provision of local public services.