The evolution of the municipal corporation and the innovations of local governance in California to preserve home rule and local control.

• Author: Zerunyan, Frank Vram

Introduction 217 I. History of the Municipal Corporation 220 II. California's Charter Law City and the Significance of Sovereignty in Municipal Affairs 224 III. California's General Law Cities and State Law 228 IV. Independent, Full Service, and Contract Cities 230 V. The Lakewood Plan for a Successful Contract City 232 VI. City Management Structure 238 VII. Uniform Laws Guiding Municipalities 240 VIII. Tax Matters and Infrastructure 242 Conclusion 244 INTRODUCTION

The U.S. Constitution is the fundamental law of the United States of America. Drafted at the Constitutional Convention in Philadelphia, Pennsylvania, in 1787, it is the world's oldest and still valid written constitution. (1) While it is common knowledge that the words "local government" and "home rule" do not appear in the text of the Constitution, it is incorrect to conclude that the drafters of the Constitution did not value decentralization or local governance. To this day, real American daily life at the local level is alive and well. After all, we live, work and die in cities or towns across these United States. Cities are the most networked and interconnected of our political organizations. They govern through collaboration and pragmatism to solve real public-administration problems at the local level. (2) This article reviews the evolution of municipal corporations and the innovations that make them special in the art and science of local governance.

The concept of decentralized governance finds its roots in the Articles of Confederation, which, of course, predates the U.S. Constitution and the Bill of Rights. (3) Article II of the Articles of Confederation declares that "each state retains its sovereignty, freedom and independence, and every power, jurisdiction, and right, which is not by this confederation expressly delegated to the United States, in Congress assembled." (4) Similarly, the Tenth Amendment of the Constitution states that "[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people." (5) Because the Tenth Amendment was a natural progression of that for which the Federalists had argued and advocated during the adoption of the Constitution, (6) James Madison faced no opposition in proposing it. Reading this Amendment in the context of the Age of Enlightenment provides the strongest evidence that the drafters very much intended to bring government closest to the people and away from a central form of authority. French, English, and American political philosophers, such as Montesquieu, Voltaire, John Locke, and Thomas Paine, authored many writings during this period against authoritarian government and for representative government. (7) In fact, these concerns about centralized versus decentralized powers came about mainly because of colonial America's experience in which most people interacted with their local officials. (8) This special experience was observed by Alexis De Tocqueville, who coined the term "American Exceptionalism." (9) In 2017, not much has changed. The level of government that interacts the most with citizens through municipal departments, public schools, and various special districts is still exceptional and is very much local. (10)

The drafters of the Constitution understood that a broader national authority would destroy local interests. They worked to create a functional republican structure strong enough to enforce national interests but limited enough to assure individual self-determination where citizens lived and worked. (11) Madison summarized this concept as "the necessity of providing more effectually for the security of private rights, and the steady dispensation of Justice." (12) At the Constitutional Convention, Madison unsuccessfully argued that the U.S. Congress should have power to veto state laws. Alexander Hamilton, on the other hand, concerned with the mighty power of the national government, wrote that state legislatures in such instances should "sound the alarm to the people" and serve as the "jealous guardians of the rights of citizens." (13) The controversy about the appropriate division of power between the federal government and the states still rages today, but there is no question that the drafters of the Constitution agreed on the wisdom of dividing power both among branches of government and within those branches of government. (14) That division is reflected today in the constitutions of all fifty states, where local governments find their voice in home rule, or what has generically become the concept of local control, one state constitution at a time. (15) Simply stated, home rule refers to the power of a local municipality to set up its own system or charter of self-government as opposed to receiving that charter from the state. (16)

This eight-part Article discusses the historical evolution of the municipal corporation, the nuances of self-governance, California law on municipal affairs, and California-centric innovations in governance. (17) Part I describes the historical context for local governance, which has led to home rule not only in California but also across the nation. In Part II, the Article dives right into the discussion of home rule in the context of the legal entity known in California as charter law cities. Part III distinguishes charter law cities from the overwhelming majority of city structures in California, known as general law cities, which also enjoy home rule through what is commonly referred to as police power. In Part IV, the Article defines and draws distinctions between governance models known in California as independent or contract cities. Part V focuses on the innovation in governance known in California as the Lakewood Plan, which facilitates the governance model of contract cities. Parts VI and VII provide a general discussion of guiding principles in management and uniform laws applicable to municipalities, and the Article winds down in Part VIII by examining tax matters and infrastructure finance tools unique to California.

1. HISTORY OF THE MUNICIPAL CORPORATION

   Until about the mid to late nineteenth century, the powers given to local governments through state constitutions remained untested. The general interpretation of a local government's authority in early 1800s was unchallenged in the courts and was, therefore, under a state government's discretion. State's interpretations became the subject matter of litigation in the late 1800s. Two separate rulings, one from Iowa and the other from Michigan, framed two diametrically opposed viewpoints. In 1868, Judge John F. Dillon of Iowa affirmed a narrow interpretation of a local government's authority, (18) holding that municipalities maintain a subordinate status within the state because, as a rule, they get their specific powers from the state. Therefore, in the absence of specific provisions increasing their power, municipalities are subject to state legislative control. This view became known as Dillon's Rule. In contrast, in 1871, Judge Thomas Cooley of the Michigan Supreme Court challenged Dillon's Rule, (19) holding that municipalities possess inherent rights to local self-governance. Taking a more populist view, Judge Cooley reasoned that "local governments... are either simultaneous with, or precede, the more central authority" and that, if Dillon's Rule were publicly asserted, it "would be somewhat startling to our people." (20) However, the Cooley view of local government power as an absolute right never gained much acceptance and was, in fact, discredited by the United States Supreme Court. In 1903 and again in 1923, the Court upheld Dillon's Rule. (21) In the years following those decisions, with few exceptions, state law restricted municipal powers to those "explicitly granted," "necessarily or fairly implied," or "essential" to accomplish the purposes of the municipality. (22)

   The evolution of Dillon's Rule restricted home rule, requiring states to explicitly grant power to cities through state constitutions or subsequent legislation. In practice, today Dillon's Rule is fully implemented in the overwhelming majority of states, which create through their constitutions the power for local self-governance by a local charter. (23) State provisions for home rule are specifically defined by each state's constitution or, in states like California, by additional statutes enacted by that state's legislature. In California, home rule applies to what California labels as charter law cities. (24)

   All states grant cities and counties the ability to administer their municipalities at the local level through either the state constitution or government code. These provisions set forth the powers of cities and counties to organize under the laws of the state as a municipal corporation. For example, California provides for two types of municipal corporations: charter cities and general law cities. (25) The California Constitution prescribes a uniform procedure for the formation of charter cities, while statutes in the California Government Code provide the procedure for the formation of general law cities. (26) The basic difference between general law and charter law cities is the degree of control that the state government may exercise over them. Because charter cities are granted the authority of home rule and the right to craft their own charters, they enjoy more freedom than general law cities to innovate and to pass ordinances according to local need.

   Nevertheless, in practice general law cities also have considerable choice in the management of their local affairs. Article XI, Section 7 of the current California Constitution provides a general grant of inherent local powers to every city without regard to its status as a charter or general law city. (27) Some refer to this as the police power or even home rule. (28) In fact, absent a clear indication of preemptive intent...