By JAMES M. BANOVETZ and THOMAS W. KELTY
Home rule: renewing trust in local government
HOME RULE Part 4
Cities, villages and counties gained substantial autonomy from the 1970 Constitution's home-rule provisions. That document freed home-rule units from reliance upon statutory provisions for the powers to solve local problems (see Home Rule, Part 1 in the August/September 1985 double issue). Abuses of this broad grant of power can be controlled by action of the General Assembly, the Illinois courts and local voters. Experience to date, however, has given little cause for the use of such controls (see Home Rule, Part 2 in the October 1985 magazine.)
Particular concern has been focused on the use of home-rule powers to levy taxes and incur debt without regard to statutory or referenda restrictions. A detailed analysis of the fiscal behavior of home-rule units concluded that home rule has not had significant effects on property tax levies, has produced some shifting of tax burdens to nonproperty tax sources and to nonresidents of the government involved, has not led to increased indebtedness and has resulted in more economical forms of government borrowing (see Home Rule, Part 3 in the December 1985 magazine).
This final article in the four-part series on home rule reflects on the results of Illinois' experiment with the nation's "most liberal" local government enabling act. It concludes that home-rule governments have used their expanded powers responsibly, even sparingly, and that the home-rule record supports a further relaxation of statutory constraints on the exercise of powers by home-rule and non-home-rule municipalities alike.
This series of articles reports the results of a comprehensive study of Illinois home rule recently completed by the coauthors under the auspices of the Center for Governmental Studies at Northern Illinois University. The study was supported by a grant from the Louis Ancel Charitable Trust.
SOME THINGS change; some things stay the same. While most Illinois cities are changing their view of home-rule tax powers, Chicago remains locked into its attitude of being a home-rule island unto itself. The other home-rule communities across the state have demonstrated that local officials can operate responsibly without strict statutory constraints. State officials continue to impose such constraints anyway.
The March primary elections reflected new downstate interest in home rule. Two major downstate cities, Charleston (population 19,35) and Mount Vernon (population 17,193) asked their voters to approve home rule. At least two others, Lincoln (population 15,525) and Olney (population 9,581) were giving serious consideration to holding referenda in the future.
Most significantly, both Charleston and Mount Vernon took an entirely new approach to home-rule tax powers. Both city councils asked for homerule powers so that new taxes could be levied mainly on nonresidents to gain new revenues. The councils were upfront about their intentions on taxes.
Mount Vernon, a southern Illinois shopping nexus located at the junction of I-57 and I-64, wanted home-rule powers so it could increase its local sales tax. Without this authority, city leaders announced that a utility tax would be needed to finance expansion of the community's sewage treatment plant and the development of new sanitary landfill facilities. Voters approved home rule for Mount Vernon on March 18 by a 2-1 margin.
Charleston, a university community in Coles County in east central Illinois, wanted home-rule powers to diversify its range of options to raise new local revenues. The council's plans were less explicit than Mount Vernon's regarding its intentions for new taxes, and voters rejected home rule for Charleston by more than a 2-1 margin.
Chicago, meanwhile, continued manifesting its "DuCook McWiLake" syndrome of proceeding on its own with home-rule power experiments without apparent regard for the consequences of its actions on the surrounding suburban communities in DuPage, Cook, McHenry, Will and Lake counties, or upon governments downstate. Its on-again, off-again lease tax, proposed to be levied with home-rule powers, added another levy to irritate homerule's antitax foes. Like Mayor Jane Byrne's ill-fated services tax, the proposed lease tax, if passed, would invite another court ruling that could further limit the scope of home-rule taxing powers.
8/May 1986/Illinois Issues
The court's ruling in the services tax case set a precedent upon which the most damaging and threatening setback suffered thus far by home rule was based: The court ruled that a tax on the sale of utility services was an occupation tax and thus beyond the scope of home-rule authority. Home-rule attorney's in other communities had expressed serious concerns about the services tax to Chicago officials, but to no avail. Suburban communities using home-rule powers to extend utility taxes beyond the statutory 5 percent limit became the ultimate losers in the related court actions.
The home-rule record
These are but a part of the saga of IIlinois home rule that has developed since the 1970 Constitution took effect, The story of home rule has been a story of advances and setbacks, of gains and losses. Home rule advanced frequently when the Illinois Supreme Court respected the constitutional mandate that home-rule powers be liberally interpreted. It advanced each time voters acted to adopt or retain home rule. It lost on those four occasions when voters abandoned home rule, and it lost when the Illinois General Assembly imposed collective bargaining obligations upon home-rule municipalities. But Illinois' home-rule gains have far outweighed its losses. All of Illinois gained when home rule enabled Normal to work out intergovernmental agreements with Bloomington and McLean County to help bring the Diamond-Star auto plant to the state. Public finance throughout the state improved after Rosemont used home-rule powers to set a precedent for local use of the hotel/motel tax. Home rule was also used to pioneer the use of industrial revenue bonds and low-interest home mortgage bonds in the state. Homerule, in short, has been a critical component of the state's response to the economic crisis of the last decade. Home rule has also played a major role in addressing local problems. Oak Park, for instance, used home rule to maintain property values during the process of neighborhood racial integration and achieved racially integrated, middle-class neighborhoods for its efforts. Carbondale used home-rule powers to develop a new regional shopping center; Decatur to cut the costs of hospital construction; Peoria to establish a political campaign ethics board; Park Ridge to maintain aging neighborhoods; Woodridge to regulate condominium conversions; Lincolnshire to pass a conflict of interest ordinance for village employees; and Peru to build a hydroelectric plant outside its boundaries.
Home rule was used to pioneer the use
Home-rule powers have been used by over 100 cities and villages since the adoption of the 1970 Constitution. Some municipalities, such as Rock Island and Oak Park, have used home-rule powers intensively while others, such as Bryant, have used them little if at all. The aggregate use of home-rule powers, however, can be summarized by four statements.
• Home-rule powers have been used with moderation. Drastic changes in local government laws, procedures, policies and tax practices have not occurred. Most litigation challenging home-rule actions has produced decisions supporting those actions.
• There have been no more than two cases in which a reasonable allegation could be made that home-rule powers had been, or were about to be, used in opposition to the wishes of local citizens. In these cases, Rockford and Lisle, voters took quick and effective remedial action, removing home-rule status from their cities.
• Home-rule taxing powers have been used primarily to transfer tax burdens from residents to nonresidents. When population size and geographic locations are taken into account, there is no evidence that home-rule communities have higher property tax rates. Home-rule communities have not used their borrowing powers to increase outstanding indebtedness, but they have used them to place a higher percentage of debt in general obligation bonds which carry a lower rate of interest.
• Perhaps most importantly, local voters whose governments have operated with home-rule powers have given a strong vote of endorsement for home rule. Home rule has been retained in 84 percent of the municipalities in which it has been challenged; more than 60 percent of those voters have voted in favor of home rule.
Responsive local officials
The conclusion from such a record is clear: Locally elected city and village officials can be entrusted with broad, discretionary powers to operate their governments, solve local problems and act to improve the quality of life in their communities. There simply is no hard evidence, based upon the Illinois experience, that such officials will misuse those powers or act to impose major new tax burdens on local residents.
The evidence suggests that local officials act in responsive and responsible manner, not because they are constrained to do so by state laws, but because, like all politicians, they act in a manner calculated to gain or maintain public support. To put it in other terms, local officials seek to avoid public controversy and animosity. Actions which increase taxes, impose added regulations or interfere unnecessarily in people's daily lives provoke opposition, if not overt hostility. Elected municipal officials abhor opposition. They act in the public interest in order to avoid the problems that otherwise would confront them.
May 1986/Illinois Issues/9
Less state constraints
The most obvious implication of the conclusion that local elected officials are responsive to local public pressures is that the public no longer needs to be protected by statutory constraints against the misuse of municipal government authority. Municipal policymakers can and should be trusted with the same kind of general grants of authority under which the Illinois General Assembly itself operates. The same constraints which protect the public against the misuse of state power judicial review, public opinion and the ballot box also work effectively at the local level.
Dillon's Rule, a common-law principle that has been a cornerstone of municipal law since 1872, is no longer needed, at least insofar as cities and villages are concerned. The rule can either be abandoned by the Illinois courts or abolished by action of the General Assembly. Under Dillon's Rule, a strict or literal interpretation is used by the courts in defining the local government powers granted by the General Assembly. The principle has historically been applied by the Illinois courts to limit severely the uses which local governments can make of the powers granted to them by statute.
Other state courts have long been moving away from a strict application of Dillon's Rule. Commenting upon the interpretation to be given to the grant of municipal authority "to provide for the general welfare," the Minnesota Supreme Court held more than a quarter of a century ago that "The [city] council's estimate of the general welfare should be followed unless it is plainly erroneous" (Duluth v. Cerveny). Illinois courts finally recognized the demise of Dillon's Rule when they held it to be inapplicable to an intergovernmental contract to provide water services (Village of Sherman v. Village of Williamsville). With the evidence offered by home-rule use, it is clearly time for Illinois to follow the lead of other states and broadly relax or terminate the use of Dillon's Rule.
The Illinois home-rule experience also suggests that it is time for consideration of broadening the tax options open to local governments. It is also time to consider limiting or removing referenda requirements governing the use of general obligation debt for non-home-rule local governments and for extending some of the benefits of home rule to non-home-rule municipalities and (perhaps even to other forms of local governments). All such charges require General Assembly approval and concurrence by the governor.
The power to tax. In the eyes of home-rule proponents, home rule's inbility to ease sufficiently municipal revenue problems has been its major failing. While home rule broadened local authority to increase property and sales taxes, it did not bestow the power to levy taxes on "income, occupation, or earnings." Local use of such powers must first be authorized by the General Assembly; such authorization has not been given nor even seriously considered. Given the trend toward the elimination of federal financial aid, it is imperative that local governments be given the option to use such fiscal tools.
Even if such taxes were authorized, there is little reason to believe that they would be widely used since home-rule cities and villages have made relatively little use of the tax authority already granted to them; nearly half have made no use at all of the broader tax authority. Only 13 percent have raised property taxes above the limits imposed on non-home-rule municipalities. The failure to use these broader taxing powers can be traced to several factors, but the principal one is local political opposition to tax increases that place burdens on local residents.
. . . home rule's inability to ease
Most home-rule tax powers have been used to levy taxes that shift some of the tax load to nonresidents. Home-rule tax powers have encouraged local creativity in the search for new sources of tax revenue that impose a minimum burden on local residents. It led to the hotel/motel tax (the most commonly used home-rule tax), to amusement taxes and to real estate transfer taxes. It has enabled communities to tailor tax and fee policies to unique local circumstances, such as the severance charges on quarrying stone in Thompson.
10/May 1986/Illinois Issues
The same factors that restrain home-rule officials from hiking property tax rates would also limit home-rule use of taxes on income, occupations or earnings. The availability of these tax bases for home-rule municipalities, however, would further stimulate local creativity to find new tax revenues acceptable to local residents.
If the General Assembly needs a compromise position before allowing local access to taxes on income, occupations or earnings, it could qualify the power with sunset provisions. Local taxpayer interests could be protected by statutory stipulations that tax levies must be reauthorized by city councils and village boards at periodic intervals (e.g. four years), perhaps requiring an extraordinary majority vote of council members or perhaps requiring referenda reauthorization.
To grant home-rule municipalities the power to tax on income only with prior approval of local referenda is no better than outright denial of such taxing authority since referenda on proposed new taxes tend to be rejected automatically, with little or no consideration for the merits. If there is justification for requiring local governments to submit new tax proposals to voter approval in a referendum, that same justification would apply with equal validity to new taxes imposed by the General Assembly. Local officials are as sensitive to constituents' fears of tax increases as any legislator or congressman, yet the state and federal government can choose to impose new taxes without voter approval.
Voters do tend to give more balanced and thoughtful consideration to taxes with which they are familiar. The Rockford experience is one such case. When faced with the choice of approving or rejecting tax authority provided through home-rule powers, the voters rejected that authority. When next faced with service reductions because of cutbacks in revenue from taxes raised under earlier home-rule authority, the voters passed five of six proposals to retain tax increases and maintain service levels. When voters can weigh their desire for tax reductions against their desire to retain service levels, they still control local tax policy. Using post rather than prior referenda review by voters would give elected local officials some leeway to develop new and innovative tax policies to meet pressing revenue needs.
The power to incur debt. The statutory referenda requirements on non-home-rule cities and villages for incurring general obligation debt are serving a harmful rather than a beneficial purpose. These municipalities essentially can borrow money without referenda only by issuing revenue bonds, which carry a higher rate of interest than general obligation bonds. Such requirements, intended to prevent excessive governmental borrowing, do not apply to home-rule municipalities. The record shows that home-rule municipalities have not increased their borrowing, but they have transferred a much larger percentage of their indebtedness into low interest general obligation bonds.
In short, the referenda restriction on the use of municipal general obligation bonds has not reduced government borrowing; it has led to higher interest costs for non-home-rule municipalities. Removal of the referenda requirement for non-home-rule municipalities would make available to them the same opportunities to use the less costly general obligation bonds that are now available to home-rule units. The proposed loss of federal tax exemption on bonds issued by local governments will only increase the interest rate differential between general obligation bonds and revenue bonds, accentuating still more the financial penalties imposed on non-home-rule municipalities by the referenda requirement.
Non-home-rule powers. In general, the Illinois home-rule record demonstrates that non-home-rule cities and villages might benefit from removal of some statutory restrictions on their powers. Removing the referenda requirements for the use of general obligation bonds would cut their debt service costs. Removing the statutory restrictions on hotel/motel tax levies would enable non-home-rule communities like Oakbrook Terrace near the Oakbrook shopping center to make better use of their tax base. More liberal court interpretations of municipal regulatory power would permit non-home-rule communities to use Deerfield's home-rule approach to curbing juvenile vandalism.
Since the 100 cities and villages with home rule outside Chicago have been moderate in using their powers, the recommendation follows that non-home-rule communities should be given broader grants of authority to deal with their particular issues. The legislature could simply abolish Dillon's Rule or it could repeal specific, outmoded statutory restrictions, like the referenda requirement tied to general obligation debt. The legislature could also grant to these local governments the broad statutory authority for specific responsibilities, such as controlling juvenile delinquency.
Most home-rule tax powers have
While maintaining non-home-rule status does serve useful purposes, all existing statutory restrictions on non-home-rule municipal powers may not serve equally useful purposes. Some statutory restrictions should be removed, and a more permissive interpretation be given to remaining statutory language. The end result should be to encourage all municipalities to solve local problems with less fear of litigation over the use of their powers. (The home-rule findings apply only to cities and villages, not to school districts or other units of local government. There are important differences between municipalities and other types of local governments. Although the home-rule experience may be applicable to other units, any such conclusion would be based upon conjecture not actual experience.)
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State v. local interests
The greatest single contribution of the
The case for abolishing Dillon's Rule and extending broader powers to non-home-rule municipalities can be made, in part, because the constitutional checks on the use of home-rule power have proven extremely effective. The General Assembly has demonstrated that it will preempt home-rule powers when statewide interests come first: for instance, the statewide minimum age for purchasing alcoholic beverages. The courts have proven an effective tool in interpreting home-rule power and limiting the use of that power. The voters, too, have demonstrated that they will rescind grants of home-rule power when they disagree with the way that power was used.
Home rule's principal difficulty in its first 15 years has been the tendency of such checks to work too well, to be used without adequate justification. The General Assembly, for instance, has demonstrated an impressive level of support for home rule when statewide interests are not involved. It reacted sympathetically to Rockford's legislative needs after that city's voters voted for the abandonment of home rule. But the assembly has also shown a tendency to put the interests of statewide lobbying organizations ahead of home rule and to act in disregard for the philosophy behind home rule using local control to solve local problems. For instance, the legislature preempted regulation of occupational groups and mandated collective bargaining for local government without any evidence of improper use of home-rule authority by those governments in either area. Legislative support for the home-rule philosophy wanes as other statewide lobbies assert their interests. When these interests have been asserted strongly in the General Assembly, the legislative support for home rule decreases rapidly. Lately this has been occurring more frequently. When local control is preempted without finding fault with the home-rule system, the loser is the integrity of the system.
Home rule is also threatened by the voters. The Constitution properly assures them the authority to strip home-rule powers from their local government. This check, however, has been used without cause. In two instances, Lombard and Villa Park, anti-home-rule forces claimed that home rule had resulted in higher taxes and promised voters that taxes would be reduced if home rule were abandoned. Neither city had used home-rule powers to levy or raise taxes; the subsequent abandonment of home rule did not lower taxes in either community. Again, the integrity of the home-rule system was the loser.
Home rule's legislative problems stem only partly from the General Assembly's responsiveness to statewide lobbying organizations. They also are a product of home rule's own success.
Before home rule, municipalities were always at the Statehouse door, seeking powers to solve local problems. With home rule, the larger municipalities no longer need as much legislative help. The need for additional revenues may still rally municipalities behind a legislative agenda, but now most big city legislative efforts are directed toward protecting home rule from legislative preemption.
Without the political help of legislators from the largest cities, non-home-rule municipalities find it increasingly difficult to secure passage of legislation needed to enable them to solve their problems. While the Illinois Municipal League has worked to preserve home rule from legislative erosion, the division of municipalities into home-rule and non-home-rule categories has severely complicated its efforts to expand local control over municipal destiny.
Two cherished American political principles were lost in the 70 years following the Civil War. The idea of trusting "government at the grass roots" fell victim to the corruption and machine politics that characterized local government at the end of the 19th century. The notion that "the government governs best which governs least" was a casualty of the Great Depression and the advent of the New Deal era of U.S. politics.
Perhaps the greatest single contribution of the Illinois home-rule experiment is the evidence it offers that the grass-roots government of its cities and villages is again deserving of public trust. Those governments which have operated with home rule have carved a record in the last 15 years that shows they have used their powers individually and collectively in a moderate, tempered fashion to improve or sustain the services that add quality to community life. They have shown themselves capable of operating with the same kind of flexible, broad grant of powers that has been given historically to the national and state governments.
These Illinois cities and villages have proven themselves ready to play the larger role envisioned for local governments in the governmental decentralization schemes envisioned by the Nixon, Carter and Reagan administrations. They have shown themselves sufficiently responsible and responsive to play a more central role in serving the needs of a dynamic and changing society.
Too much of the public's image of home rule in Illinois is shaped by the actions of Chicago and Cook County whose home-rule actions are broadcast throughout the state by the metropolitan media. Too little noticed, recognized or understood has been the home rule record crafted by 100 other cities and villages across the state. That record has been constructive, and it has earned the voters' trust. That record of success needs to be acknowledged by Illinois' political leaders who, it is hoped, will accord municipal home rule the support that its record has earned.
James M. Banovetz is professor of political science and director of the Division of Public Administration at Northern Illinois University. Thomas W. Kelty is senior active partner in the Springfield law firm of Pfeifer and Kelty. He also serves as chief counsel to the Illinois Municipal League.
12/May 1986/Illinois Issues