Leslie A. Powell, User Fee or Tax: Does Diplomatic Immunity from Taxation Extend to New York City's Proposed Congestion Charge?

• Publication year: 2009

USER FEE OR TAX: DOES DIPLOMATIC IMMUNITY FROM TAXATION EXTEND TO NEW YORK CITY'S PROPOSED CONGESTION CHARGE?

INTRODUCTION .............................................................................................. 233

I. BACKGROUND .................................................................................... 236

A. "PlaNYC: A Greener, Greater New York" ................................ 237

B. The Traffic Commission's Plan .................................................. 237

C. Congestion Pricing Schemes Around the World ........................ 239

1. London .................................................................................. 240

2. Norway ................................................................................. 241

3. Singapore ............................................................................. 241

4. Stockholm ............................................................................. 242

II. APPLICABILITY OF THE VCDR TO TRAFFIC CONGESTION PRICING .... 243

A. Articles 34 and 23: No Immunity for "Specific Services

Rendered" .................................................................................. 244

B. History and Rationale Surrounding Immunity to Taxation in the Vienna Convention on Diplomatic Relations ....................... 246

III. ANALYSIS: CONGESTION CHARGE CONSTITUTES A USER FEE, NOT

A TAX ................................................................................................. 248

A. Which Law Governs: Local, Federal, or International? ............ 249

B. What Distinguishes a Tax from a User Fee? .............................. 251

1. New York Jurisprudence for Evaluating a Charge as a

Tax or a User Fee ................................................................. 252

a. New York Telephone Company v. City of

Amsterdam .................................................................... 253 b. State University of New York v. Patterson ................... 255 c. Kessler v. Hevesi ........................................................... 258

2. An International Perspective ................................................ 259

C. Text, Intent, and Customs Support Diplomatic Payment of

Congestion Charge ..................................................................... 263

1. The Plain Meaning of the Text Supports Diplomatic

Payment of Congestion Charge ............................................ 263

2. Drafters' Intent ..................................................................... 264

3. Customary Practices Support Congestion Pricing as User

Fees ...................................................................................... 266

D. Implications and Practical Concerns of Charging Diplomats ... 266

CONCLUSION .................................................................................................. 269

APPENDIX 1: MAPS OF NEW YORK CITY CONGESTION PRICING PLANS ........ 272

APPENDIX 2: COMPARISON CHART ................................................................ 272

INTRODUCTION

On April 22, 2007, New York City Mayor Michael Bloomberg presented his blueprint for making New York City green, called PlaNYC.¹The plan includes over 100 proposals aimed to accomplish his goal of a sustainable city.²Among these proposals is a "three-year congestion pricing pilot project" in Manhattan's central business district (CBD).³Congestion pricing is simple: it charges drivers for the use of high traffic roads during peak travel hours as a means to encourage the use of public transit and reduce the number of cars on the road.⁴This proposal has caused controversy, with critics accusing Mayor Bloomberg of imposing a new tax.⁵In response, the New York Legislature established the New York City Traffic Congestion Mitigation Commission (Traffic Commission).⁶On January 31, 2008, the Traffic Commission released its final report, recommending a modified congestion pricing scheme for New York City.⁷After much speculation and closed-door meetings, and despite the support of key public officials, Assembly Speaker Sheldon Silver announced that the Assembly would not consider the congestion pricing proposal due to "overwhelming" opposition.⁸However, recent events could make this only a temporary setback. On October 23, 2008, the City Council voted to ease term limits and allow the mayor to run for a third term.⁹Should Mayor Bloomberg serve a third term, he could revive his congestion pricing plan.

One of Mayor Bloomberg's first hurdles will be changing the way drivers view the road. After all, "Americans love their cars."¹⁰People consider cars essential to transportation, personal autonomy, and efficient business practices due to the growth patterns of most American cities in the past 30 years.¹¹

Rises in property values and social norms created a suburban culture and increased American reliance on automobiles.¹²As a result, commutes lengthened, highways filled up, and Americans spent more and more time in their cars.¹³Growth trends indicate that highway congestion will continue to grow at a rate of 2% per year, and automobile travel is expected to grow by

25% over the next five years.¹⁴

Increased road use comes at a cost to government, drivers, and society as a whole. The costs to government include expenditures for building new roads, maintaining old ones, and controlling the current use of roads.¹⁵According to the U.S. Department of Transportation, the costs borne by drivers are limited to the value of the driver's time and the vehicle operating costs.¹⁶However, drivers impose substantial costs on society, such as pollution and efficiency reduction, because of increased traffic.¹⁷

Beyond being politically unpopular, the congestion charge presents a problem unique to New York City because, as headquarters for the United Nations, it has "the largest diplomatic and consular community in the world."¹⁸

Currently, New York City is host to 192 permanent missions to the United Nations and 110 foreign country consulates.¹⁹These missions, consulates, and the officials that represent them are protected by two main international treaties: the Vienna Convention on Diplomatic Relations (VCDR)²⁰and the

Vienna Convention on Consular Relations (VCCR).²¹Both the VCDR and the VCCR provide sending states and their diplomats and consular officials certain privileges and immunities, including tax immunities.²²

While some diplomatic immunity is necessary for positive foreign relations, it sometimes results in diplomatic disregard for local laws and regulations. New York City is no stranger to diplomatic delinquency. In 2002, Mayor Bloomberg took action against diplomats who repeatedly violated traffic laws and racked up an estimated $20 million in unpaid parking tickets.²³

Mayor Bloomberg threatened to tow, boot, and even remove the license tags from diplomatic vehicles with outstanding bills.²⁴It took weeks of negotiations and the help of the U.S. Department of State to reach a settlement.²⁵But even with an agreement, the State Department revoked 185 license tags from 30 consulates in New York City.²⁶

The imposition of congestion charges in New York City would create numerous legal issues. This Comment considers whether New York City's proposed congestion charge for driving into Manhattan's CBD constitutes a tax or a user fee for purposes of the international principle of diplomatic immunity from taxation as codified in the VCDR. It also addresses, without extensive analysis, certain secondary issues. For example, if a foreign state refuses to pay, can New York City file suit?²⁷If so, what court would have jurisdiction?

Would New York City sue the diplomat individually or the state the diplomat represents? Even if New York City can sue a foreign state, if judgment is entered against the state, can the city enforce the judgment?

Part I of this Comment describes the plan proposed by Mayor Bloomberg in greater detail and contrasts the mayor's plan with the proposal offered by the Traffic Commission's final report. It also outlines congestion pricing schemes implemented around the world, specifically those in London, three Norwegian cities, Singapore, and Stockholm. Part II explains Articles 34 and 23 of the VCDR-the two provisions dealing with diplomatic immunity from taxation- and the history and rationale surrounding their inclusion in the treaty. Part III discusses the law applicable to distinguishing a user fee from a tax and explains how a New York state court would make this distinction. In addition, Part III discusses the standards and definitions applied by international bodies to congestion pricing in general and to the case of London's congestion pricing scheme in particular. It also analyzes the text, travaux préparatoires, and drafters' intent of the relevant articles in the VCDR to argue that these articles do not exempt diplomats from paying user fees such as New York City's proposed congestion charge. Part III concludes with an analysis of other articles in the VCDR that could exempt diplomats from paying New York City's congestion charge. Finally, the Conclusion addresses the legal hurdles facing New York City and suggests that the city's plan should retain certain elements to bolster the argument that the congestion charge constitutes a user fee and not a tax.

I. BACKGROUND

Mayor Bloomberg proposed an ambitious plan for improving the urban environment of New York. His plan tackles the "tangible barriers to improving [the] daily lives" of all New Yorkers.²⁸Mayor Bloomberg presented 127 initiatives to help improve New York City's land, water, air, transportation, and energy systems.²⁹One of the more controversial initiatives is the congestion pricing scheme to regulate traffic in Manhattan's CBD. In response to the mayor's plan, the New York State Legislature formed the Traffic Commission.³⁰Ultimately, the Traffic Commission released its own proposal for the creation and implementation of a congestion pricing scheme in New York City.³¹These two...