The subdivided city Gillette, Clayton P
The Yale law journal,
06/2024, Letnik:
133, Številka:
8
Journal Article
Subunits within a city provide different levels of public services to discrete areas. In theory, these subunits, which typically combine public and private characteristics, enhance preference ...satisfaction and opportunities for democratic participation in city governance. But they also raise issues concerning their ability to serve the interests of their constituents and of the city that hosts them. This feature addresses the extent to which those who manage subunits are likely to exhibit fidelity to their constituents and the city. Investigation of managers' incentives leads to a distinction among subunits, largely based on their function. Private-based subunits that serve purely economic interests are likely to be faithful to their constituents but demonstrate less fidelity to the city. Subunits that serve broad community needs are likely to demonstrate less fidelity to their constituents' service needs but more fidelity to the city; however, conflict with the city is more likely where these community-based subunits seek to exercise political authority. Since community-based subunits seek to raise services for their constituents to the level enjoyed elsewhere in the city, any conflict with the city implicates its obligation to provide all residents equal services on a nondiscriminatory basis. The ability of subunits to help the city perform that obligation entails a need for the city's deference to community demands for those services that the city fails to provide.
Abstract
The dramatic rise of remote work threatens the traditional source of urban growth—the unique ability of dense cities to provide a setting in which firms and employees share productive ...resources, match needs with skills, and transmit knowledge at low cost. These “agglomeration benefits” have induced cities to pursue clusters of related firms that have served as the basis for local economic development and technological innovation. Remote work reduces the necessity for related firms to co-locate, and its popularity has led commentators to predict significant decrease in city business activity, tax revenues, and services as traditional clusters dissipate. It remains unclear how cities will react to the remote work phenomenon. Prior episodes of cluster decline, however, reveal that cities have difficulty pivoting to new economic models when outmoded ones threaten local decay. Instead, cities tend to support existing clusters, notwithstanding that the impending decline is a function of external forces rather than of local policies. This article addresses the potential mismatch between cluster decline that may flow from remote work and city responses. The article theorizes that continued municipal efforts to support a declining cluster emerge from the ability of affected firms to coalesce, exercise political influence, and exploit fragmented municipal decision making to preserve the status quo, maintain or increase municipal subsidies for the cluster, and deter entry by competitors for city resources. Those strategies impede the city’s transition to a more productive economy in the face of looming cluster decline. The article then turns to the history of the garment industry in New York City to illustrate the theory. That history provides a cautionary tale about how cities should and should not respond to the threats they face from remote work.
States have traditionally offered support to their fiscally distressed municipalities. When less intrusive forms of assistance fail to bring stability, some states employ supervisory institutions ...that exercise approval authority over local budgets or, more intrusively, displace locally elected officials. These "takeover boards" are frequently accused of representing an antidemocratic form of local government and a denial of local autonomy. This Article suggests that the extent to which takeover boards are subject to an antidemocratic critique is frequently overstated. Those making efforts to revive near-insolvent localities cannot be oblivious to the causes that generated their distress. Depopulation, high unemployment, depleted municipal services, and blight do not arise spontaneously. They are frequently the consequence of long periods of local mismanagement, in which expenditures deviate substantially from those goods and services that residents prefer, inducing the most mobile among them to gravitate to more hospitable jurisdictions. Any viable response to such dysfunction must therefore address the causes of political dysfunction. By addressing the political underpinnings of fiscal distress, takeover boards may be more capable of satisfying the interests of local residents for public goods than local elected officials and may also represent the interests of nonresidents and creditors who are not considered by those officials. Moreover, this Article suggests the authority of takeover boards should be expanded to allow them to engage in restructuring of municipal governance in order to avoid the entrenched and fragmented institutions that are often associated with local fiscal distress. The temporary nature of takeover board jurisdiction means that when local governance returns to the realm of normal politics, residents will be in a more informed position to evaluate the optimal structure of local governance.
Municipalities in fiscal distress may seek to adjust debts under Chapter 9 of the Bankruptcy Code either because they are truly destitute or because they lack the political will to adopt difficult ...resource adjustments. Local officials of municipalities that enter bankruptcy proceedings nevertheless retain political authority over municipal fiscal affairs. The decision to enter bankruptcy, however, may have significant financial consequences for other municipalities or for more centralized levels of government. Those externalities induce central governments to consider bailouts for distressed municipalities. In order to avoid moral hazard problems, central governments typically impose harsh restrictions on local officials as a condition of bailout. This dual system of rescue for distressed municipalities-bailouts and bankruptcy-permits local officials to threaten to file under Chapter 9 and thus to impose costs on central governments, unless the latter modify the conditions of bailouts. In this Article, I suggest that allowing bankruptcy courts to impose resource adjustments serves to neutralize the strategic behavior of local officials and thus encourages localities to internalize the costs of their activities in a manner more consistent with the tenets of fiscal federalism.
In this Article, we explore a subset of the urban-rural divide and propose a mechanism for reducing its economic and political effects within that limited realm. Specifically, we focus on the subset ...of rural areas that lie within what the Office of Management and Budget defines as micropolitan areas. Micropolitan areas are characterized by an urban area with a population between 10,000 and 50,000, and adjacent rural counties. Data suggest that rural areas within micropolitan regions do better economically than rural areas unconnected to urban areas, though not as well as the principal city within the micropolitan area. If the objective is to reduce the economic, and perhaps also the political, divide between urban and rural areas, then micropolitan areas may represent low-hanging fruit for redress. This Article argues that micropolitan areas are an important window into understanding the relationship between urban and rural economies, explores the characteristics of those areas that are likely to generate economic success, and recommends policies that would capture those benefits. Additionally, we speculate that increased opportunities for economic interaction between the urban and rural parts of micropolitan areas could also address the political aspects of the urban-rural divide. Recognizing the complexity of the relationship between urban and rural economies, we identify various obstacles to realizing the kinds of interlocal cooperation that we believe are necessary to reduce the economic and political divide within micropolitan areas. We conclude with suggestions for a research agenda to remedy the underdeveloped study of micropolitan areas.
Recent proceedings involving large municipalities such as Detroit, Stockton, and Vallejo illustrate both the utility and limitations of using the Bankruptcy Code to adjust municipal debt. In this ...Article, we contend that, to resolve fully the distress of a substantial city, municipal bankruptcy needs to provide more than simple debt reduction. Debt adjustment alone does nothing to remedy the fragmented decision making and incentives for expanding municipal budgets that are ingrained in municipal governance structures and that often underlie municipal distress. Unless bankruptcy also addresses governance dysfunction, the city faces a return to financial distress. Indeed, this Article demonstrates that governance restructuring has long been an essential element of corporate bankruptcy and that, given the monopoly position of local governments as providers of local public goods, it is even more important in the municipal bankruptcy context. Some might argue that reducing a city's debt is the best that bankruptcy courts can offer, due to concerns that a more comprehensive approach would, among other things, interfere with state sovereignty and exceed the statutory authority that the Bankruptcy Code grants to courts. In our view, these concerns do not withstand scrutiny. Based on a careful analysis of the origins of the current municipal bankruptcy provisions, as well as an assessment of recent Supreme Court jurisprudence, we argue that governance reform is permitted even under existing law, and point out that minor adjustments to municipal bankruptcy law would make this conclusion even clearer. To be sure, the states themselves, rather than a bankruptcy court, ideally should be the ones to effect municipal governance reform.. But political factors and the imperatives of the immediate fiscal crisis make state intervention unlikely, thus underscoring the need for a more comprehensive approach to municipal bankruptcy.
The theoretical availability of an infinite number of contract types suggests that there may be an optimal quantity from which contractual parties could make a selection. In this Article, we ...emphasize the difficulty of identifying that optimal number, given information costs and other transaction costs related to the production of a contract type. We argue that standard market failures might cause markets to produce a suboptimal number of contract types. We then consider whether government should intervene to remedy any market failure. We conclude that government would generally lack the access to information necessary to identify the optimal number of contract types. Moreover, we argue that issues of political economy would impede the ability of government to achieve the optimal number of contract types, even if it were able to identify that number. Government, that is, may tend to either oversupply or undersupply contract types. Perhaps the best that government can do is to provide “soft” interventions that reflect appropriate defaults or safe harbors.
Default rules of contract law permit recovery of consequential damages for breach when the breaching party had "reason to know" of those damages at the time of contracting. It is a common observation ...that sophisticated parties systematically bargain out of these default rules, since the scope of consequential damages is highly uncertain and largely within the control of the non-breaching party. Nevertheless, some parties retain the default rules, and some contracts involving sophisticated actors contain an explicit provision allowing consequential damages, including lost profits, for breach. In effect, these parties satisfy the test that awards consequential damages only when there has been "tacit agreement" to their recovery. That test, which has been repudiated by commentators and most case law outside of New York, limits recovery of consequential damages more severely than the standard "reason to know" test. In this Article, I examine contracts that include explicit "lost profits" clauses and cases in which courts have determined whether parties either tacitly agreed to or had reason to know of prospective lost profits. I claim that the relevant contracts and cases reveal that consequential damage clauses are used to solve a contracting problem that might otherwise frustrate mutually beneficial exchange. Parties and courts have perceived that a commitment to pay lost profits can diminish the threat of opportunistic behavior that is inherent where one party must make a relationship-specific investment prior to performance by the counterparty. In transactions with those characteristics, the investing party risks holdup by its counterparty between the period when the initial investment is made and when the second party must act. I suggest that a commitment to pay lost profits in the event of breach constrains the threat of holdup, and that in these circumstances the value of the promise compensates for the efficiency loss otherwise inherent in assigning consequential damages to the party least able to avoid them. While a pledge of lost profits in the event of breach is not the exclusive response to this holdup problem, it is a plausible and perhaps superior means of avoiding it. I conclude that the combination of near-universal opt-out of the default rule for consequential damages and the explicit adoption of a broad consequential damages clause in investment cases indicates that the "tacit agreement" test may be more consistent with the preferences of commercial parties for a contract default rule than the "reason to know" test.
The traditional theory of urban finance argues against local redistribution of wealth on the assumption that such action is likely to chase away the relatively wealthy, leaving only the impoverished ...behind. Nevertheless, Clayton P. Gillette observes, local governments engage in substantial redistribution, both to the wealthy and to the poor.
In this thoughtful book, Gillette examines whether recent campaigns to enact "living wage" ordinances and other local redistributive programs represent gaps in the traditional theory or political opportunism. He then investigates the role of the courts in distinguishing between these explanations. The author argues that courts have greater capacity to review local programs than is typically assumed. He concludes that when a single interest group dominates the political process, judicial intervention to determine a program's legal validity may be appropriate. But if the political contest involves competing groups, courts should defer to local political judgments.
Who Should Authorize a Commuter Tax? Gillette, Clayton P.
The University of Chicago law review,
12/2010, Letnik:
77, Številka:
1
Journal Article
Recenzirano
The decision to impose a commuter tax — a tax on income earned within the city by nonresidents — is typically made at the state level. There are both doctrinal and economic reasons for this ...allocation of authority. Cities are creatures of the states of which they are political subdivisions, and legal doctrine requires that they receive either state legislative or constitutional approval before exercising authority. States have jealously guarded their prerogatives over the taxing power. Perhaps there is nothing surprising about this state of affairs with respect to commuter taxes. After all, the natural stopping point for the exercise of unrestricted local authority is legislation that imposes significant externalities. Since, by definition, the commuter tax falls on nonresidents, the predicate of external effects appears to be satisfied. The underlying assumption is that the state legislature, which represents both city residents and commuters, is in a better position than the levying city to determine whether, in the absence of such a tax, commuters confer benefits on the city that sufficiently offset the costs they impose. In this Article, I accept the principle that the decision to tax should be allocated to that level of government that is best positioned to balance the social costs and benefits of the proposed exaction. I argue, however, that the workplace city, not the state, plausibly occupies that position. I contend that cities have incentives to take the external costs of commuter taxes into account, but that state representatives have fewer incentives to consider the benefits, as well as the costs of such a tax. I note that the decisionmaking structure of state legislatures creates a bias against a commuter tax, and contains few mechanisms that would induce the state to consider the net benefits that a city would enjoy from the tax. Finally, I suggest that a commuter tax could be a more appropriate means of defraying costs imposed by commuters than alternative fiscal instruments. Thus, I tentatively conclude that cities should be entitled to authorize the imposition of a commuter tax without prior state authorization.
