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Sunday, June 10, 2012

A Judicial Victory for City Home Rule -- but Maybe Not Taxi Customers? Some Reflections on Local Autonomy and Protectionism.

As I have noted before, sometimes my libertarian and decentralizing loyalties tear me in opposite directions. I love both private freedom, and I love local democracy. The two, however, do not always mix very well, and then one has to choose.

Local government law posed just such a choice this week when Justice Engeron granted a TRO restraining the enforcement of New York's HAIL Act, a statute authorizing Mayor Bloomberg to issue 18,000 taxi medallions for street hail service only in the outer boroughs. Justice Engeron's opinion reasoned that the HAIL Act violated New York City's "home rule" powers guaranteed by Article IX of the New York Constitution, because the Act stripped the City Council of its charter powers to regulate the supply of taxi medallions. This would be a breathtaking assertion of local immunity from state law in any state. In New York, however, it is especially big news (at least if you are a local government junkie like myself), because the New York courts, influenced perhaps by images of Tammany-style local corruption, almost never provide NYC with any protection from Albany. In the context of New York local government law, then, Justice Engeron's decision is a sort of Lopez/Morrison doctrine for cities -- but on steroids.

As a fan -- nay, an addict -- of local participatory democracy, I should be dancing in the street. The problem is that I live in Brooklyn, and my efforts to catch a cab often leave me dancing in the street in frustration, not joy. (I have it relatively easy, as I live a block away from "Cab Corridor" -- Clinton Street & Atlantic, where the taxis head back to the Brooklyn Bridge). As my colleague, Katrina Wyman, explains in her fascinating and important piece on private property in taxi medallions (forthcoming in the Yale Journal of Regulation), my trouble with catching a cab is surely a product of New York City's particularly perverse system of rationing taxi medallions to protect from competition the medallion owners' investment -- amounting to hundreds of thousands of dollars per medallion. And this perversity is likely the result of the City Council's political incentives: As David Schleicher has noted, there are structural reasons for why local legislative bodies lack the sort of partisan competition that might lead entrepreneurial members to champion diffuse consumer interests. Instead, each council member responds to narrow self-interested groups who actually vote in the low-turnout party primaries. The result is councilmanic indifference to general policy, obsession with district-specific "pothole pork,"and craven pandering to any organized interest who can fund campaigns.

So where should my loyalties lie? In the rare vindication of the City's rights to be governed by its own charter institution -- i.e., city council? Or in the mayor's efforts to make an end run around a protectionist local legislature to protect diffuse consumer interests? After the jump, I'll try to make both the legal and policy case for robust home rule despite these concerns -- a case that rests on the idea that, as bad as city councils are, the New York State legislature might be worse.

Consider (if local government is your sort of thing), some Hamlet-style agonizing over the merits and demerits of "home rule" arguments against the HAIL Act. The legal question turns on the meaning of Article IX of the State Constitution, which provides that the state legislature may "act in relation to the property, affairs or government of any local government only by general law" unless the city council approves such state action with a "home rule" message. The HAIL Act's delegation of authority to the mayor of NYC to issue 18,000 new medallions is clearly a "special law" (it applies only to NYC), so the legal question turns on whether the Act unconstitutionally interferes with NYC's "property, affairs, or government."

1. The legal case against strong home rule on taxis: Here's what can be said against Justice Engeron's opinion as a doctrinal matter. The "home rule" doctrine in New York construing this cryptic phrase so closely mimics the centralizing "substantial effects" doctrine under the U.S. Constitution's commerce clause that one might be tempted to explain both by a fundamental principle of judicial sociology: In contests between a central and subcentral government, judges, whether state or federal, will always defer to the central authorities that appoint them, regardless of constitutional text. Brushing aside the text, the NY Court of Appeals has long followed a concurring opinion by then-Judge Cardozo in Adler v. Deegan, 251 N.Y. 467 (1929) to settle on a doctrine essentially similar to Wickard v. Filburn's "substantial effects" test: Does the state law address some "substantial state concern" such as the protection of non-residents from local action? Although Cardozo styled this as a sort of balancing test in which local interests of city residents might theoretically outweigh state interests, that part of his opinion has long been a quaint relic: The Court of Appeals almost routinely finds some "substantial" state interests in upholding state control of everything from subways and public housing to local collective bargaining, usually on the ground that non-residents are affected in some way by the activity being regulated by the state.

Given that millions of tourists and travelers use NYC's taxis every year, one might think that Judge Engeron's decision is doomed on appeal: There obviously is a "substantial state interest" under this definition in protecting non-residents from the NYC City Council's kow-towing to taxi fleet owners, right?

2. The legal merits in favor of stronger home rule for local separation of powers: But there is a novel legal argument in favor of striking down the HAIL Act: Unlike, say, a state law creating a state subway authority to run NYC's subways, the HAIL Act simply turns over the taxi-licensing power to the mayor. It is as if Congress were to enact a federal statute authorizing a governor to rule a state free from the state legislature's control. As I have argued at (interminable) length decades ago, this sort of federal law "dissecting the state" to empower state officers to ignore state law is arguably unconstitutional quasi-commandeering of state regulatory machinery and, in any case, very bad policy. As a matter of statutory construction, if not constitutional doctrine, SCOTUS has agreed in Columbus v. Ours Garage & Wrecker Service, Inc., 536 U.S. 424 (2002).

As a matter of legal doctrine, one can make an analogous argument that the NY Court of Appeals should follow suit and strike down special laws that shift powers between the local institutions created by a home-rule city's charter. There may be some state interest in insuring a minimum number of taxi medallions, on the ground that NYC officials have electoral incentives slight the interests of non-resident tourists and travelers. But where is the legitimate state interest in selecting the mayor over the city council to control those medallions? Both sorts of city official are, after all, locally elected: If the problem is that local voters ignore non-residents' interests, then a state law transferring power from one set of elected officials to another does not seem to advance that state interest in any intelligible way.

In short, the NY Court of Appeals has a narrowly tailored way to uphold Justice Engeron's decision and strike down the HAIL Act without disturbing prior precedents giving the state legislature powers to supervise transportation within NYC at the behest of non-residents. In effect, the Court would be importing a sort of "separation of powers" principle into "home rule" doctrine.

3. Using political science to break the doctrinal tie? The problem with this doctrinal argument, however, is that it ignores the different electoral incentives of mayors and city council members described above the jump. Low-visibility council members are likely inclined to ignore diffuse consumer interests in increasing medallion supply; High-visibility mayors with a city-wide constituency are likely to take those interests into account. The best justification for state intervention into city affairs, in short, is not to protect non-resident tourists from an indifferent city council (because, of course, NYC politicians are almost slavishly attentive to attracting tourists): The best justification is that certain types of city officials -- those elected from inattentive and geographically narrow constituencies -- are inclined to ignore the diffuse, city-wide interests of both residents and non-residents alike in favor of small, well-organized service providers like fleet owners.

Put doctrinally, there may be a "substantial state interest" in insuring that broad-based city interests in de-regulation of transportation are placed in the hands of a local satrap like Bloomberg who has the electoral incentives to take those interests into account.

Should the NY Court of Appeals use this argument for mayoral power to uphold the HAIL Act under Adler v. Deegan? I am not sure: As I say, my loyalties to both localism and libertarianism pull against each other.

But here is a tentative pitch in favor of localism. The city has a local mechanism for increasing the mayor's power -- the charter revision process. Charter commissions are regularly appointed and regularly consider overhauls of city government, and the mayor plays the largest role in the formation of such commissions. Moreover, voters can consider the balance of power between mayor and city council in city-wide referendum where, again, the mayor has the proverbial bull pulpit. It is not obvious, therefore, that the mayor needs yet more power to shift jurisdiction towards the mayor's office, by running to Albany for special legislation.

And there are costs to relying on Albany. Entrenched local interests, after all, can make that same trip upstate -- and can re-direct their money from lobbying city council to lobbying the state legislature. Why will a state legislature be more responsive to diffuse interests that the local legislature? To the contrary, why will not such mayoral dealings with Albany create opportunities for upstate legislators from Buffalo or Rochester, who are properly indifferent to taxi policy in NYC, to hold up city laws as a means for extorting benefits for their own communities? Is there any sense to encouraging such an orgy of budgetary and regulatory log-rolling?

David Schleicher might answer "yes," on the ground that at least the state legislature is organized along partisan lines such that general policies -- deregulation versus protecting vested medallion "property," for instance -- can get some traction, championed by legislative leaders with ideological frameworks. On this theory, upstate Republicans will not simply hold out their palms for pork in exchange for their votes on downstate special laws: They will be motivated by general ideological concerns to support special laws deregulating (say) medallion supply.

Maybe: That is a tricky empirical question. Safe districting and low salience might make state assemblymen and senators only moderately more responsive to diffuse interests than city council members. In any case, is there any reason to believe that Albany's politics will outperform the charter revision process right here in NYC? I am dubious.

So I lean in favor of Justice Engeron's vindication of home rule. If Albany -- or any state legislature -- wants to make transit policy, then let them make policy directly: They can create state authorities or issue medallions or preempt local laws as they see fit. If all the state legislature, however, merely transfers power from one city institution to another, then the state interest justifying such a transfer seems mighty attenuated to me. We have a chartering process for that sort of thing: Why cannot the mayor be required to use it?

Posted by Rick Hills on June 10, 2012 at 10:12 AM | Permalink


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Hi, Rick. When you say you're a fan of "local participatory democracy", politics in NYC is not among the first things that comes to my mind. I grew up in NYc, and saw lots of rules and regulations emanating from bureaucrats in Manhattan, and precious little local democracy out in Queens, beyond our councilman attending rubber chicken dinners at the synagogue occasionally. Not surprising, given that NYC has a population of 8 million, more than many countries. There may be reasons to prefer NYC to NYS in a dispute between them, but I doubt favoring local participatory gets you very far. Indeed, in this case, I have to think that the law in question was responsive to the "local" concerns of residents of the outer boroughs, who almost always play second fiddle to Manhattan-dominated interests in the City Council (when's the last time a NYC mayor came from outside Manhattan, other than Abe Beame in the 70s?)

Posted by: David Bernstein | Jun 10, 2012 11:23:09 PM

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