Kessler v. Grand Cent. Dist. Management Ass'n, Inc.

• Decision Date: 13 October 1998
• Docket Number: Docket No. 97-7503
• Citation: 158 F.3d 92
• Parties: Robert KESSLER, Vicki Cheikes, Plaintiffs-Appellants, v. GRAND CENTRAL DISTRICT MANAGEMENT ASSOCIATION, INC., Defendant-Appellee, Dennis C. Vacco, Attorney General of the State of New York, City of New York, Intervenors-Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

Page 92

158 F.3d 92

Robert KESSLER, Vicki Cheikes, Plaintiffs-Appellants, v. GRAND CENTRAL DISTRICT MANAGEMENT ASSOCIATION, INC.,

Defendant-Appellee,

Dennis C. Vacco, Attorney General of the State of New York,

City of New York, Intervenors-Defendants-Appellees.

Docket No. 97-7503.

United States Court of Appeals,

Second Circuit.

Argued Feb. 4, 1998.

Final Supplemental Briefs Decided Aug. 28, 1998.

Decided Oct. 13, 1998.

David J. Kennedy, New Haven, Connecticut (Robert Solomon, Jerome N. Frank Legal Services Organization, New Haven, Connecticut, Douglas Lasdon, Urban Justice Center, New York, New York, on the brief), for Plaintiffs-Appellants.

R. Hewitt Pate, Richmond, Virginia (Sarah C. Johnson, Hunton & Williams, Richmond, Virginia, Myron D. Cohen, Hunton & Williams, New York, New York, on the brief), for Defendant-Appellee.

Constantine A. Speres, Assistant Attorney General, New York, New York (Dennis C. Vacco, Attorney General of the State of New York, Thomas D. Hughes, Assistant Solicitor General, Charles F. Sanders, Assistant Attorney General, New York, New York, on the brief), for Intervenor-Defendant-Appellee Dennis C. Vacco.

Cheryl Payer, Assistant Corporation Counsel, New York, New York (Paul A. Crotty, Corporation Counsel of the City of New York, Ellen B. Fishman, Robin Binder, Assistant Corporation Counsel, New York, New York, on the brief), for Intervenor-Defendant-Appellee City of New York.

Before: KEARSE and WALKER, Circuit Judges, and WEINSTEIN, District Judge. ^* .

KEARSE, Circuit Judge:

Plaintiffs Robert Kessler and Vicki Cheikes, residents of the Grand Central Business Improvement District ("Grand Central BID" or "GCBID") in midtown Manhattan, appeal from a judgment of the United States District Court for the Southern District of New York, Shira A. Scheindlin, Judge, dismissing their complaint alleging that defendant Grand Central District Management Association, Inc. ("GCDMA"), the manager of the Grand Central BID, denies them equal voting power in the election of GCDMA's board of directors ("Board"), in violation of the Equal Protection Clause of the Fourteenth Amendment. The district court granted the summary judgment motion of GCDMA and intervenors-defendants City of New York (the "City") and Dennis C. Vacco, Attorney General of the State of New York (collectively "defendants"), on the ground that the Grand Central BID is a special, limited-purpose entity that disproportionately affects one class of GCBID constituents, and that GCDMA's system for electing Board members is thus not subject to the requirement of "one person, one vote." On appeal, plaintiffs contend principally that GCDMA's management of the Grand Central BID entails the exercise of general governmental power sufficient to require that Board

elections comply with the one-person-one-vote requirement. We affirm.

I. BACKGROUND

To promote commercial development in urban areas, the New York State ("State") legislature has authorized municipalities in the State to establish business improvement districts ("BIDs"). In a BID, owners of nonexempt real property pay a periodic assessment to the municipality, over and above their ordinary municipal taxes. That assessment money is used to fund the construction of capital improvements to land in the district and the provision of certain services intended to promote business activity in the district.

The State's Business Improvement District Act, N.Y. Gen. Mun. Law § 980 et seq. (McKinney Supp.1998) (the "Act"), which was made applicable to the City by N.Y.C. Admin. Code § 25-401 et seq. (1998), generally sets forth both the procedures for establishing a BID and the mechanics of BID operation, including the representational structure of the governing Board. The following facts with respect to the Grand Central BID and GCDMA have been stipulated by the parties.

A. Establishment and Functions of BIDs

1. The Statutory Scheme

The establishment of a BID begins with the preparation of a "district plan." N.Y. Gen. Mun. Law § 980-d(a). The district plan must set forth the geographical boundaries of the proposed BID, see id. §§ 980-a(a), (b)(1), along with "a list of the properties to be benefited," id. § 980-a(b)(8). All of the "real property benefited [must be] included within the limits of the proposed [BID]," id. § 980-f(a)(3), and all of the taxable property included in the proposed BID must benefit from the BID's establishment, see id. § 980-f(a)(2). The district plan must also, inter alia, describe any proposed capital improvements, see id. § 980-a(b)(3), and state "the proposed time for implementation and completion of the district plan," id. § 980-a(b)(6). With respect to financing, the district plan must, inter alia, specify the total cost of the proposed improvements, see § 980-a(b)(3); state the "total annual amount proposed to be expended for improvements, maintenance and operation," id. § 980-a(b)(4); explain the proposed sources of funding, see id. § 980-a(b)(5); and provide "a statement of the method or methods by which the expenses of [the] district will be imposed upon benefited real property, in proportion to the benefit received by such property," id. § 980-a(b)(8).

In a municipality with a population of one million or more, the local planning commission and various officials are given an opportunity to review the district plan and submit comments to the municipality's legislative body ("municipal council"). See id. § 980-d(c). If the municipal council wishes to proceed with the establishment of the BID, it must hold a public hearing on the subject. See id. § 980-e. Property owners are given 30 days after the hearing in which to file written objections to the formation of the BID. See id. § 980-e(b). Absent sufficient objections, the municipal council may adopt a local law providing for the BID's establishment. See id. § 980-f(c). After review by the State's comptroller for compliance with certain financial restrictions, that law will take effect. See id. § 980-g.

After a BID is established, "the legislative body [of the municipality] shall have authority," id. § 980-c, to make physical improvements to "municipally or [BID] owned or leased property which will restore or promote business activity in the district," such as the renovation of streets and sidewalks, the creation of parks and parking lots, and the installation of better lighting and signage, id. § 980-c(a). The municipality may also provide "enhanced sanitation services," "services to enhance the security of persons and property," and

other additional services required for the enjoyment and protection of the public and the promotion and enhancement of the district whether or not in conjunction with improvements authorized by this section.

Id. § 980-c(c). These services "must be in addition to or an enhancement of those provided by the municipality prior to the establishment of the [BID]." Id. § 980-j(a).

For each BID, there must be established a not-for-profit corporation called a "district management association," which is charged with "carrying out such activities as may be prescribed in the [district] plan." Id. § 980-m(a). The district management association "may make recommendations to the [municipal council] with respect to any matter involving or relating to" its BID, id. § 980-m(c), and "upon [such a] recommendation," the municipal council may amend the district plan, id. § 980-i(a). "[W]here there is no indebtedness, outstanding and unpaid, incurred to accomplish any of the purposes of the [BID]," the municipal council has the power to dissolve a BID, after giving the management association an opportunity to make a recommendation concerning dissolution. Id. § 980-n(a). A BID will also be dissolved upon the petition of a sufficient number of property owners. See id.

2. The Grand Central BID

The Grand Central BID was established in 1988, and its territory was extended in June 1995, pursuant to the procedures set forth in the Act and the corresponding City ordinances. As extended, the Grand Central BID encompasses 337 properties on sections of 75 blocks in midtown Manhattan, including the Grand Central Terminal railroad station. There are 242 owners of property within the GCBID. That property includes approximately 71 million square feet of commercial space, constituting approximately 19% of the total commercial space in Manhattan. The office space in the GCBID "exceeds the entire space inventory of the Central Business District in such cities as Houston, San Francisco, Dallas, Denver, and Boston." (District Plan, as Amended, for the Grand Central BID dated June 30, 1994 ("District Plan"), § II.B.). The GCBID also contains approximately 897,000 square feet of residential space, occupied by approximately 930 residents.

The District Plan authorizes the construction of capital improvements (the "Improvements") and the provision of additional services (the "Services") in the GCBID. The Improvements include the renovation of sidewalks and crosswalks; the planting of trees; the installation of new lighting, street signs, bus shelters, news kiosks, and trash receptacles; contributions to the renovation of Grand Central Terminal; and "the creation of a restaurant facility" on 42nd Street. (Id. § IV.A.) The Services "may include any services required for the enjoyment and protection of the public and the promotion and enhancement of the District," including

1. security

2. sanitation

3. tourist information

4. social services for homeless persons

5. special maintenance and repair

6. public events

7. retail improvements.

(Id. § III.A.)

Pursuant to a contract between the City Department of Business Services and GCDMA dated July 30, 1993 (the "Contract"), GCDMA became the Grand Central BID's management association. The original Contract was to expire on June 30, 1998, subject to renewal for a five-year term at the "sole discretion" of the City. (Id. § 1.03.) That expiration date was extended to July...