Fair Grounds

Walter Olson describes the city’s new "fair-share" provisions as an invitation to myriad parochial lawsuits as well as a barrier to the "responsible" selection of sites for city facilities like libraries, halfway houses, and welfare offices ("Sue Thy Neighbor?" Spring 1991). In fact, fair share is neither of these things.

People sue the city. It does not take a couple of new Charter sections to inspire lawsuits aimed at preventing or delaying city actions. Cases against the city are heard virtually every day in the courts. By creating a structured framework for the communities to learn early on in the process what the city is planning to do in their neighborhoods, and by establishing a set of standards with which to assess these plans, fair share aims to reduce the potential for litigation.

If agency bureaucrats had attempted in some organized way to plan fairly for city facilities, fair share would not have been necessary. In reality, what governed the process of finding the site for a homeless shelter, for instance, were short-term considerations of expediency: the availability of cheap land, much of which had fallen into public hands through foreclosure, and the path of least resistance politically. As a result of this sort of "criteria," and other economic and political factors, we faced a tremendous overconcentration of city facilities like homeless shelters, transportation, and waste facilities in neighborhoods where lower-income New Yorkers reside.

Amidst the hyperbole, Mr. Olson avoids defining fair share, misrepresents my comments on the city’s initial draft of the fair-share rules, and fails to put fair share in the context of the city’s new Charter-mandated siting process.

The fair-share criteria, a set of considerations to be used in formulating and reviewing plans for new city facilities, require us to balance a number of factors, such as community needs for services, efficient and cost-effective delivery of those services, and the distribution and impacts of existing, as well as planned, city and noncity facilities.

The fair-share criteria indeed give us "the tools necessary for testing the agencies’ good faith before the (City Planning) commission and other appropriate forums." By "other appropriate forums," I did not mean, as Mr. Olson suggested, only in the courts. Fair share creates a set of standards by which the City Council, which has ultimate jurisdiction in site selections, can evaluate projects. The criteria will guide consideration of the equity of facility siting proposals in the courts of public opinion and in the press. If a community group does sue to block a project, the city will now have sufficient grounds to justify and defend what constitutes a "fair" siting and win the case. Far from encouraging lawsuits, the rules act as a deterrent.

This spring, we proposed Manhattan locations for 13 city facilities, including homeless SRO housing and residences for AIDS patients. These sites were selected after extensive consultation with community members, policy advocates, elected officials, and city agencies. In each case, the appropriate community board overwhelmingly voted to approve housing the proposed facility. These positive results stand in vivid contrast to the provincial obstructionism Mr. Olson predicts for the future.

Ruth Messinger
Manhattan Borough President
New York, N.Y.

Walter Olson predicts with great clarity the wave of litigation and consequent delay that is likely to be generated by the "fair-share" proviso in New York City’s new Charter. Would that this were the only problem to emerge from fair-sharing of the city’s blessings and burdens.

Like other slogans that bespeak sentimental egalitarianism, municipal fair-sharing between districts runs headlong into predictable aspects of human behavior. It assumes that everyone would benefit were all land in the metropolis of equal market value, instead of varying in value, as is the case in New York and other large cities, from less than $1 to more than $1,000 per square foot. The price range represents the differences in demand for diverse types of land with varying accessibility and attractiveness. To pretend that these market differences—often but not always reflective of objectively certifiable differences in usefulness—do not exist is to tamper with the mainspring of local government financing.

In short, to put a jail in the midst of a high-value residential or business district in the interest of egalitarianism is to undermine the basis of municipal finance that depends on sustaining ratable values at their highest possible level. Zoning has its abuses, as we all know, but its fundamental purpose is to prevent externalities from destroying land values and precipitating a municipal finance crisis. In that sense zoning merely replaces private covenants running with the land. Before 1916, they afforded a measure of stability to New York’s finances by assuring that unwelcome facilities necessary to municipal life were not casually sprinkled on high-value land.

If anyone seriously wanted to assure fair sharing of burdens and blessings, he might properly begin by repealing the use provisions of the zoning resolution. Since the voters generally approve those provisions, we can surmise that if they understood what the new Charter intended, they might have turned it down.

Roger Starr
Editorial Board
The New York Times
New York, N.Y.

The recent revelation of an obscure provision of the new City Charter, requiring the fiscally strapped city to spend up to $400,000 on art works for new city buildings, has led some former Charter supporters to wonder about what they bought into. But striking though such revelations are, they pale before the problems presented in Walter Olson’s article.

Self-government, outside of small, face-to-face communities, has depended on the representation of citizens, whatever their backgrounds, in the councils of government. Secure in having achieved fair representation, citizens could generally accept political defeat insofar as the decision-making proceeded fairly. But under the new Charter, as Mr. Olson points out, no decision ever need be final so long as advocates on one side decide to dispense with representation by replaying the political process in the courts. The upshot of displacing politics onto the courts is likely to be an expensive series of public policy stalemates. For example, in the case of the judicial legislation creating special education for New York City schools, plaintiffs’ lawyers are still meeting weekly, at huge expense to the city, to iron out the details of the court’s legislative pronouncements 12 years after the initial decisions. We can expect the disaster of special education to be repeated many times over as a city which already functions only fitfully finds further excuses for administrative failure.

Fred Siegel
The Cooper Union
New York, N.Y

It Takes All Kinds

We at Pacific Legal Foundation emphatically agree with Gordon Crovitz ("Taking Rent Control to Court," Spring 1991) that rent control is ripe for constitutional attack. In recent years, the U.S. Supreme Court has shown a renewed interest in applying constitutional protections to property owners. The high-water mark to date was Nollan v. California Coastal Commission, in which the Court invalidated a land-use regulation as an uncompensated taking of property in violation of the Takings Clause of the Fifth Amendment.

The Supreme Court’s new direction has been reflected in a growing number of state court decisions as well. Most dramatically, in 1989 the New York Court of Appeals applied Nollan to strike down a New York City hotel regulation in Seawall Associates v. City of New York. This was the first time the highest New York court found a property regulation to violate the Takings Clause on its face.

Pacific Legal Foundation attorneys argued Nollan before the Supreme Court and participated in Seawall as amicus curiae. These decisions were therefore very gratifying to us and provide strong encouragement to all who are working to end rent control and similar regulatory schemes. However, they highlight our one point of disagreement with Mr. Crovitz’s otherwise outstanding article.

Nollan established that regulations challenged as takings must receive closer judicial scrutiny than the "rational relationship" test applied in due process cases. This heightened scrutiny—known as the "substantial advancement" test—is what accounted for the victory in Sewall. It is a formidable weapon in any judicial defense of property rights and should be the central feature of a constitutional assault on rent control.

New York courts have routinely upheld rent control against "rational relationship" challenges. Every due process case that has ever been brought—and they are legion-has been decided against the property owner under the test that Mr. Crovitz endorses. In legalese, "rational relationship" is just another way of saying "deference to the legislature." The typical outcome is that of Benson Realty Corp. v. Beame, in which the Court of Appeals sniffed: "Whether there is a need for (rent) controls is a matter for legislative determination."

Rent control has survived for fifty years because courts have reviewed it exclusively under the "rational relationship" standard. The main reason rent control is now vulnerable is that a powerful new tool—the "substantial advancement" standard—is available to defenders of property rights. It would not be prudent to go into court without it.

Ronald A. Zumbrun
Pacific Legal Foundation
Sacramento, Calif.

Melting the Myth

A footnote to Maggie Gallagher’s piece ("The Myth of Multiculture," Spring 1991): Perhaps it is worth remembering that most of the immigrants to America over the past three and a half centuries, including the Western Europeans, have come here to get away from the societies into which they were born, not to have a new place in which to wrap themselves in the flags of the old regimes.

Tom Wolfe
New York, N.Y.

Just What the Doctor Ordered

Edwin S. Rubenstein’s article ("Emergency Surgery for Medicaid," Spring 1991) brings long-overdue attention to this single fastest-growing component of the state budget. As my office has reported in literally dozens of audits and special studies, the Medicaid program in New York State is out of control—and not just in terms of spending. This program, while consuming tens, and perhaps hundreds, of billions of dollars since its establishment in 1965, has failed to significantly improve the access of the poor to quality, managed health care services. Indeed, as the author noted, for most Medicaid recipients there is no access at all to the primary health care providers in our society—physicians. As a result, the health of our most needy citizens is nearly as at-risk today as it was 25 years ago.

In attempting to be all things to all people, the Medicaid program has, predictably, failed even while running up immense costs—both monetary and human.

Edward V. Regan
State Comptroller
Albany, N.Y.

Mr. Rubenstein’s article raises important public policy questions. Some of his conclusions have merit, particularly when he suggests that overregulation adds to medical costs.

However, in comparing New York and California Medicaid costs, not only does New York provide more benefits to a broader segment of the population, but it uses different financing mechanisms which can make comparisons misleading.

The article notes that hospital costs for Medicaid recipients are significantly higher in New York than California. This contrasts with a recent General Accounting Office report that both Medicare and Medicaid payments for similar inpatient hospital services were significantly lower in New York than in California. An earlier study by the Bigel Institute of Brandeis University concerning Medicare arrived at a similar conclusion. One explanation for these seemingly contradictory results might be that New York State Medicare patients are more severely ill and require more expensive care.

Mr. Rubenstein advocates using California’s approach of negotiated rates to lower New York’s Medicaid rates, and he decries policies which have resulted in a New York State hospital occupancy rate of 85 percent versus California’s 62 percent, pointing out that high occupancy would make the negotiation of rates difficult. But there is an even more important factor which precludes the use of negotiated rates in New York State. In New York, hospitals have to render services for all non-Medicare patients at government-set rates which often are below cost. California regulates hospital fees for Medicaid patients only. Thus California hospitals can cost-shift and operate at a profit while receiving reimbursement at below cost for Medicaid services. In New York State, hospitals do not have the ability to shift costs. Mr. Rubenstein looks at Medicaid costs in a vacuum, not at total health expenditures per capita. When total costs are considered, New York does better than California.

Daniel Sisto
Hospital Association of New York State
Albany, N.Y.

Edwin Rubenstein replies:

I agree with Mr. Sisto: Medicaid costs cannot be viewed in a vacuum. Thus when he states that "Medicaid payments for similar inpatient hospital services were significantly lower in New York than California," he should note that the mix of services required by Medicaid recipients in the two states is quite different. Because New York’s program skimps on primary physician care and avoids HMOs, our Medicaid patients are sicker and stay in the hospital longer than California’s. The average cost of Medicaid inpatient hospital services in 1989 was $7,122 per patient in New York versus $3,648 per patient in California.

California’s switch to selective hospital contracting spurred numerous cost-saving innovations, including outpatient surgery centers and new at-home services, enabling patients to leave the hospital earlier. Total health care costs were reduced; it was not simply a matter of shifting costs to non-Medicaid payoffs, as Mr. Sisto suggests.


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