Spotlight Vol. 7, No. 8: Once, The City Ruled its Streets

by Alex Marshall, Editor, Spotlight on the Region

As the painful memory of the state legislature snatching the tool of congestion pricing fades from New York City's hands, some might be left with the reoccurring question of why, exactly, did the city have to ask the state at all for permission to do something concerning its own streets? 

The answer lies within what is to many a boring and unappealing word: the corporation. New York City is, and essentially always has been, a corporation, meaning it has a corporate charter, granted and written by a state. The city was first part of the Dutch West India Company, then it had its own corporate charter granted by Great Britain and then New York State. But its powers as a corporation have changed over the centuries. 

A bit of history. 

From medieval times to the mid 19th century - and this is difficult for many people to get their mental hands around - there was no clear distinction between a corporation such as the city of London and a corporation such as the East India Company, or, on a smaller scale, one to build a canal or sell salt. 

"There is no difference between Google and San Francisco," said Harvard Professor Gerald Frug, an expert on this subject, in a recent interview. They are both corporations - "bodies, empowered by government, to do stuff." 

For centuries corporations had a high degree of autonomy. Similar to the church, they had certain rights and powers that even the King could not violate or take away. An important case occurred in 1682, when the King Charles II, whose own powers were being threatened by a rebellious parliament, sued the City of London and asserted he had the right to dissolve it. Although he won the case, the Glorious Revolution occurred a mere six years later in 1688, and with it the return of the old conception of the autonomous corporation. 

Things began to change after the American Revolution, both here and in other countries. In the United States, the corporation split into two: "private" corporations for profit, and "public" corporations, usually towns and cities. Both still had to be created by the state legislature, but private corporations retained a degree of autonomy that cities and towns gradually lost. 

In the famous case Trustees of Dartmouth College vs. Woodward in 1819, Supreme Court Justice John Marshall ruled that New Hampshire could not dissolve or significantly alter the corporate charter of Dartmouth College even though it was created by a monarchy, Great Britain, that the United States had successfully fought a war against. This case helped create the right of the private corporation to operate within certain limits without government interference. Eventually, in the later 19th century, courts would rule private corporations, "persons" and legislatures would allow creation of a corporation "by right." 

After this, the rights of cities and towns went in a different direction. After the American Revolution, New York City initially retained its old independent powers. It was a 'free City of itself,' - an autonomous private corporation with absolute title to its own personal 'estate,' say Edwin Burrows and Mike Wallace in Gotham: A History of New York City to 1998.

"By increments, without anyone expressly intending it to happen," say Wallace and Burrows, "the corporation [of New York City] gradually came to be recognized as primarily an agent of the state, with its 'private' personality, so jealously guarded by earlier generations, remembered, if at all, as a relic of the rapidly receding colonial past." 

Even so, according to Frug and others, cities and towns as corporate entities still retained some degree of autonomy. Judge John Dillon put an end to that, in a series of articles that was part of an internal discussion among the courts over just what were the powers of cities and towns. 

Dillon argued for his fellow judges "to require these corporations [meaning towns and cities], in all cases, to show a plain and clear grant for the authority they assume to exercise; to lean against constructive powers, and, with firm hands, to hold them and their officers within chartered limits." 

Dillon and others were observing the powerful and often corrupt but populous governments in place in New York City (Boss Tweed) and Boston (the Irish). There was the inclination to bring these cities under the control of the state legislature. Dillon also viewed as a threat to private property the apparent trend for municipalities to not only fund private railroads, something that was common, but perhaps actually to own them. 

Dillon's views did not go unchallenged. As Professor Frug lays out in his seminal 1980 Harvard Law Review article, Judge Thomas M. Cooley argued that the right to set up and operate a local government was an absolute one, similar to the right to say print a newspaper or speak freely. Another scholar of the time wrote a paper called "A Right to Local Self-Government." 

But they lost the argument. In what is a good example of how courts make law as well as weigh it, Dillon's interpretation gradually became dominant and essentially it is still the case today. Although there are "home rule" cities, autonomy is no longer the default option, as it once was. 

Was this a good or a bad thing? As with so many questions, there are advantages both ways and one's personal preferences tend to shift with the issue being fought over. New Jersey, for example, is a powerful "home rule" state, but the high degree of autonomy by towns makes coherent state land use difficult. 

Whatever side one falls on this issue, there remains the irony of the powerful private corporation versus the restrained public one. Private corporations, like Google or IBM, became in the late 19th century fictitious persons with certain rights that can't be dissolved or altered at will. Public corporations though, like New York City, became vassals of the state, hobbled, on bended knee, even as, in the case of New York City, its treasure continues to finance the very government that limits it.