Neighborhood empowerment and the future of the city.

• Author: Stahl, Kenneth A.
• Position: Introduction through II. Public Choice and the Jurisprudence of Neighborhood Empowerment, p. 939-969

In any given metropolitan region, scores of municipalities are locked in a zero-sum struggle for mobile sources of jobs and tax revenue. This competition appears to benefit small, homogeneous suburbs that can directly enact the uniform will of the electorate over large, diverse cities that are often ensnarled in conflict between competing interest groups. Cities can level the playing field with suburbs, however, by devolving municipal power to smaller, more homogeneous subgroups, such as neighborhoods. Indeed, many commentators have identified one such effort at neighborhood empowerment, the "business improvement district" (BID), as a key factor in the recent revitalization of many cities. The BID and the related "special assessment district" devolve the financing of infrastructure and services to landowners within a territorially designated area. Courts have widely upheld BIDs and special assessment districts against constitutional challenges.

Cities remain hamstrung in competing with suburbs, however, because courts prohibit cities from delegating what is perhaps the most coveted power of all to neighborhood groups: zoning. Since an unusual series of Supreme Court cases in the early twentieth century, it has been largely settled that cities may not constitutionally delegate the zoning power to sub-municipal groups, at least where the power is delegated specifically to landowners within a certain distance from a proposed land use change (a scheme I designate a "neighborhood zoning district").

This Article argues that the judicial prohibition on neighborhood zoning districts is inconsistent with the judiciary's permissive attitude toward BIDs and special assessment districts. As I demonstrate, the neighborhood zoning district is conceptually identical to the special assessment district~BID. Both devices are designed to enable large, diverse cities to capture some of the governance advantages of small, homogeneous suburbs by providing landowners with the direct ability to manage local externalities. This Article attempts to make sense of the disparate treatment accorded these devices by examining several grounds upon which they could potentially be, and have been, distinguished. I find, however, that the only meaningful distinction between these mechanisms is that special assessment districts/BIDs actually raise far more troubling public policy concerns than neighborhood zoning districts, thus calling into question why the judiciary has been so much more deferential toward the former than the latter. I conclude that courts should broadly defer to municipal delegations of power to sub-local groups, so that cities can work out their own strategies for surviving in an era of intense interlocal competition.

INTRODUCTION I. MANAGING LOCAL EXTERNALITIES BY DEVOLVING POWER TO LANDOWNERS A. Neighbors and Externalities B. The Neighborhood Zoning District C. The Special Assessment District D. Capitalization, Coercion, and the Public Choice Regulatory Model II. PUBLIC CHOICE AND THE JURISPRUDENCE OF NEIGHBORHOOD EMPOWERMENT A. Neighborhood Zoning and Standardless Delegation: Revisiting the Eubank-Cusack-Roberge Riddle B. Special Assessments, BIDs, and the "One Person, One Vote" Rule C. Unifying the Doctrine? III. PUBLIC POLICY AND NEIGHBORHOOD EMPOWERMENT A. The Risk of Majoritarian Exploitation 1. The Federalist No. 10 and Neighborhood Homogeneity a. The Neighborhood Zoning District b. The Special Assessment District i. Conflict Among Landowners in the BID ii. Conflict Between Landowners and Tenants in the BID iii. Conflict Between Landowners and Users in the BID iv. Other Special Assessment Districts v. Comparing the Neighborhood Zoning District and the Special Assessment District 2. Preventing Majoritarian Exploitation Through Logrolling a. The Neighborhood Zoning District b. The Special Assessment District b. "Regulation" or "Supplemental Services"? B. "Regulation" or " Supplemental Services 1. Landowner Challenges 2. Nonlandowner Challenges C. Spillovers and Comprehensive Planning 1. The Neighborhood Zoning District 2. The Special Assessment District CONCLUSION: THE NEIGHBORHOOD AND THE SUBURB INTRODUCTION

Some species evade predators by mimicking other creatures, but only one survives by imitating its own predator: the city. It is by now a familiar story that many jobs and people have fled the cities and flocked to the suburbs over the past half-century. (1) Suburbs have been more attractive than central cities as sites for settlement and investment, at least in part because their relatively smaller and more homogeneous populations have enabled suburbs to ensure that landowners' tax expenditures are concentrated on their own needs, rather than subjected to the redistributive claims of a variety of citywide interest groups. (2) Suburbs also enjoy wide latitude to use the zoning power to protect their tax bases and landowners' property values by excluding undesirable uses without interference from other stakeholders, like real estate developers, who may have divergent demands. (3)

In recent decades, however, cities have experienced something of a renaissance, which many attribute to city officials' realization that in order to entice and retain investment in the face of suburban competition, cities must somehow provide the benefits that small size and homogeneity afford the suburbs. (4) Thus, for example, many cities enable neighborhood groups to self-finance improvements and services for their areas through a "special assessment" (5) or the related "business improvement district" (BID). (6) These mechanisms typically work by enabling a percentage of landowners within a territorially bounded district to petition the city for the imposition of a mandatory charge upon all property in the district in order to fund desired amenities for the area. (7) Likewise, some municipalities have attempted to give neighborhoods the authority to directly exclude undesirable land uses, such as by enfranchising landowners within a geographically defined area to vote on the applicability of specific zoning restrictions within that area. (8) For ease of reference, I call this device a "neighborhood zoning district." The special assessment district and the neighborhood zoning district are both, fundamentally, efforts to import into the city the most attractive features of suburban governance by devolving power to the smaller scale of the neighborhood, homogenizing the voting public through the restriction of the franchise to landowners, and insulating the group's power from the politicking and vote-trading prevalent at the citywide level. (9)

Herein, however, lies the problem that this Article seeks to resolve: although neighborhood zoning districts and special assessment districts are functionally similar mechanisms through which cities can compete with suburbs, courts and scholars treat them as entirely distinct. While courts have routinely upheld the special assessment and the BID against constitutional challenges, the majority of courts have also held that the neighborhood zoning district is an unconstitutional delegation of municipal land use power. (10) The courts make no effort to reconcile the two lines of precedent, and indeed seem unaware that there may even be a relationship between them. (11) Scholars, too, have endorsed the special assessment and BID while balking at the idea of conferring zoning powers on neighborhood groups, without acknowledging the deep continuities between these two devices. (12) Major consequences for urban policy have ensued. On the one hand, neighborhood groups' inability to exercise more influence over land use decisions has caused significant disenchantment with city government, in some cases even sparking campaigns for secession from the city. (13) On the other hand, spurred by courts' permissive attitude, cities have increasingly resorted to BIDs as a default option to deal with virtually any urban problem, despite the fact that BIDs often cause troubling inequalities between wealthy and poor neighborhoods in the provision of city services. (14)

This Article argues that the judicial proclivity to uphold special assessment districts and BIDs while invalidating neighborhood zoning districts is doctrinally illogical and indefensible as a matter of public policy. Indeed, because neither the jurisprudence nor the scholarly literature acknowledge any connection between these two devices, no one to date has undertaken to defend the disparate treatment accorded them. For purposes of this Article, I read the doctrine and literature broadly in an effort to divine a basis for the divergent lines of case law. On this broad reading, it appears that courts and scholars see the special assessment and BID as essentially voluntary efforts by neighborhood landowners to provide themselves with supplemental services, while they view zoning as the coercive regulation of land use. (15) In addition, courts and commentators seem concerned that if neighborhoods are empowered to zone land, they will do so in such a way as to impose undesired impacts on surrounding areas. (16) Courts and observers exhibit much less concern about the spillover impacts of special assessment districts, perhaps because they assume that such districts merely provide one neighborhood with desired supplemental municipal services and therefore have minimal negative impacts on neighboring areas. (17)

As this Article demonstrates, however, these arguments are all seriously flawed. Initially, I show that special assessments are just as coercive and just as likely to impose undesirable spillover impacts as neighborhood zoning districts are. In addition, special assessment districts often present far more troubling public policy concerns than neighborhood zoning districts. Specifically, special assessment districts raise the classic Madisonian problem of a locally dominant majority exploiting a locally vulnerable minority, whereas...