With the dust on the failed Wellington mega-merger process having only just settled, it is a disappointing turn of events to see a new merger proposal back on the agenda, albeit in a smaller form.

That is because the previous merger - which would have amalgamated the Greater Wellington Regional Council with district councils in Wellington, Porirua, Kapiti Coast, Hutt, Lower Hutt, South Wairarapa, Carterton and Masterton into a unitary authority - offered so few benefits and such high costs that it never got out the gate.

The latest plan to merge Wellington with Porirua suffers from many of the same weaknesses.

While the official numbers are still being assembled, preliminary estimates show that a merger is likely to increase Wellington rates 3.2 per cent, while Porirua's would drop by 16 per cent. Bear in mind that Wellington's rates were $1045 per capita in 2014, while Porirua's were $898 over the same period.

Proponents are likely to put forward an argument that the merger will allow both cities to consolidate their services, making the united authority cheaper and more efficient. But this fails to stack up under close scrutiny.

It certainly makes sense to consolidate service provision when dealing with large infrastructure networks that cross jurisdictional boundaries, and where scale is needed to achieve efficiencies. Drinking, waste, and stormwater networks are plausible candidates. Even on matters like economic development, collaboration between local authorities makes more sense than going it alone.

But collaboration does not necessarily mean mergers. Councils already have the ability to collaborate on service provision by forming CCOs (council controlled organisations). These are specialist bodies tasked with providing a particular service, but whose underlying assets are still owned by their constituent councils. The scope for these type of arrangements will probably be expanded later this year should the Better Local Services reform package becomes law later this year.

Besides, most of the district councils in the Greater Wellington region already use a shared services model to some degree. Wellington Water, for example, is a CCO owned by Wellington, Porirua, Hutt councils and the regional council. Likewise, the Wellington Regional Economic Development Agency represents all of the major councils in the regions. Transport and roading are another areas that could benefit from regional CCOs.

As such, any operational efficiency gains from a merger are likely to be marginal at best, and where there is scope for collaboration this can be cost effectively achieved through CCOs. But while the gains from a merger are marginal, the costs certainly are not.

International research shows that mergers often increase the costs of running a city. This occurs largely due to cost harmonisation, where smaller authorities benchmark their costs on the larger authority. It would, after all, be unfair to pay an administrator in Porirua less than their equivalent in Wellington under a merged arrangement. Furthermore, research out of Australia shows that mergers can create diseconomies of scale, where councils become too big to administer their services efficiently.

Amalgamation is also not a sure fire guarantee of governance efficiency either. On paper reducing the number of decision-making bodies makes sense. But the salary savings are relatively small in the grand scheme of things. More concerning is the fact that a merger removes multiple points for discussion on how ratepayer money should be spent.

When all the municipalities on the Island of Montreal in Canada were merged with the central city in 2003 it eliminated 28 sets of municipal officials and staff. But it also removed 28 discreet negotiations with unions and service providers. This stripped a competitive process out of the municipal system and allowed unions and contractors to concentrate their lobbying efforts on one set of officials. As a result of this (and harmonisation) the costs of running a merged Montreal rose by almost C$500 million a year.

For now the Wellington-Porirua merger appears to be on hold pending further developments with the Better Local Services legislation, but they are likely to press ahead when the law passes. However, it remains a mystery as to why a proposal that offers so few benefits and substantially higher costs is even being considered. This is particularly so when you consider that Wellington's rates are expected to increase by 3.6 per cent in the next year. That is before merger costs are factored in.

The one bright side of this process is that Wellington City Council has agreed to put any merger proposal to a referendum. Given the recent track record of council amalgamations in New Zealand, it is probably safe to say that residents are likely to vote to ease the burden on their pockets, not increase it.