Unlike the relationship of federalism that exists between the U.S. government and the states (in which power is shared), municipal governments have no power except what is granted to them by their states. This legal doctrine was established by Judge John Forrest Dillon in 1872 and upheld by the U.S. Supreme Court in Hunter v. Pittsburgh, 207 U.S. 161 (1907), which upheld the power of Pennsylvania to consolidate the city of Allegheny into the city of Pittsburgh, despite the wishes of the majority of Allegheny residents. In effect, state governments can place whatever restrictions they choose on their municipalities (including merging municipalities, controlling them directly, or abolishing them outright), as long as such rules don't violate the state's constitution.

http://en.wikipedia.org/wiki/Local_government_in_the_United_States#Dillon.27s_Rule